Before shelling out big bucks on a home renovation project, consider what is standard in your community. 
Tom: Well, Sandy, what is new?
Sandy: Oh Tom, I have a new favorite snack from Trader Joe’s. Sweet & Salty Umami Crunchies Rice Crackers. These little crunchie munchies are the best.
Tom: Nice! With the increased costs in construction materials and the remodeling taking place, I thought we could talk about the insured value of your home versus the cost to replace.
Sandy: Tom, I totally agree. The discrepancy in cost to replace versus insured value is huge, and as you said, with the rising construction costs, people need to be aware of the necessity to increase their insured values.
Tom: I agree. I know we have chatted about this in the past and I recently took a look at our insurance and reached out to our carrier to discuss coverage. I made a few modifications and I feel much better about our coverage.
Sandy: That is a relevant topic, given today’s volatile markets. Housing costs are skyrocketing and selling your home has become so much easier.
Tom: Remodeling Magazine publishes a “Cost vs. Value” report each year. They study about 150 U.S. markets to obtain information for different remodeling projects that folks undertake.
Sandy: I am familiar with this report. They divide the U.S. into nine different regions that are geographically and economically connected. There is always a lot of great information there.
Tom: We use that study to approximate the cost of various projects, from deck additions to master bath remodels. There are 22 typical projects in the report.
Sandy: I have read the report and remodeling just to increase your home’s investment does not seem to be the smartest route in our region. That region spans from Idaho through Colorado, Utah and Arizona.
Tom: Yes, it covers a lot of territory and the markets in this area are consistent with each other. Our material and labor costs are similar, and the availability of product is equal as well.
Sandy: The data collected also suggest that. Also, you can click on any of the listed cities to get a drill down on that specific market. How cool is that for all us data nerds! You will have to register to get it, though.
Tom: Yes, and they will send you emails on occasion. You can always opt out of them, though. I have found the data between cities in a region are remarkably close.
Sandy: The cost of jobs that are depicted can also fluctuate depending upon the design and finishes chosen by the homeowner.
Tom: Very true. The real question this report answers is not so much what a project costs, it really addresses whether a project will add value to your home and if so, how much.
Sandy: That is important to a lot of people. Most people think it is a dollar-for-dollar add to their home’s value and it is not.
Tom: I have talked us out of work on many occasions. We will get a call from someone wanting to sell their home and think they will get a better price if they remodel the kitchen or bathroom.
Sandy: I understand that. This report, however, tells a much different story. By way of example, a modest bath remodel costing about $25,000 will only increase the home’s value by $15,000. That is only a 60% recoup of the cost.
Tom: That is the case for most projects. According to this report, the most value comes from replacing the garage doors. That comes in at almost a 94% return.
Sandy: That does not surprise me. I have heard realtor after realtor talk about “curb appeal” when staging an existing home for sale. It is the simple things that count the most.
Tom: So true. I usually advise people to fix that which is broken, but not to replace the flooring unless the carpet is in terrible condition.
Sandy: So, you really do talk yourself out of work!
Tom: Yup, I do. Trying to second guess what a potential buyer would want to see is a bad gamble. I have said it before, we have torn out new countertops and whole kitchens that are less than a year old because the sellers thought they needed to do that to sell.
Sandy: We both have always talked about the reasons to remodel. A remodel project should be one that people want to do to enhance their lives and improve their comfort level.
So, Tom, we will end our column with this question: Should you remodel your home to sell for a higher price?
Tom: If you are remodeling to sell your property for a higher price, you must think about the return on your investment. Again, according to Remodeling Magazine’s “Cost vs. Value” report, most ROIs are not actually all that great. I suggest we ask our readers: “Will the renovation help your house sell faster?”
Sandy: And I want to chime in: make sure to spend your money on remodels that will help it sell, not just things you like. Spend money on remodels that offer unique and popular home features, because many people move when their physical needs change or when they are looking for newer technology. For example, if you are redoing the bathroom, add features like a walk-in shower with a bench and handrails to appeal to buyers concerned with limited mobility. Or, you could add home automation features for buyers who want to control their thermostat or lights when they are away.
Tom: That is a great point, Sandy. Should you remodel your home and if you do, make sure you look at revising your insurance coverage.
Before shelling out big bucks on a home renovation project, consider what is standard in your community. Talk to a real estate professional or contractor if you are primarily concerned with whether a home renovation will add value to your house and help it sell more quickly. After all, different trends are popular in different places; a pool might be a valuable addition in Arizona but a poor investment in Minnesota.
Thanks for stopping in to read “At Home with Tom and Sandy.” You’re in good company and we love sharing educational, fun and important information with you. QCBN
Tom Reilly, Architect, 928-445-8506
Sandy Griffis, Executive Director, Yavapai County Contractors Association. 928-778-0040.
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