Napa Valley Valuation BLOG

By Leon Brauning, ASA

When sellers make some improvements and dress up their property it is clear that the property will sell faster and for a higher price. When buyers purchase, they don’t want to do all that painting and remodeling – they want to open the door and have everything complete. When a buyer finds a property that needs improvement they will either pass on it altogether or they will tick off the repairs and make a low offer to cover the costs. The question becomes, “Just what repairs, improvements, remodeling and upgrading should be done and what will be the percentage return on the investment at the time of sale”?

In the dynamic markets we have now there are cases where property is not selling regardless of the condition. In other cases only REO property is selling and most of them are in need of repairs. One question that a homeowner has is, “What can or should be done to make a home more appealing to buyers”? Another question is, “What will be the return on my costs if I make an investment in upgrading my home”? Another question is, “Suppose I want to improve my home for my own enjoyment and needs and will my improvements appeal to a buyer when I sell in the future”?

Clearly one’s residence is their most solid investment over the long term and it is smart to invest in the upgrading of your home. The investment offers the homeowner a better life and it offers a likelihood of a faster sale and better price at the time of sale. As real estate professionals we all get these questions. We thought it would be informative to look at the analysis and the answers.

We refer to the National Association of Realtors which publishes a Remodeling Cost Vs. Value Report each December (Website REALTOR.org/realtormag). The following are national averages from 2002 through 2008:

-Kitchen midrange quality remodel: Costs have risen by 30% and the cost recouped has increased by 16%.

-Bathroom midrange quality remodel: Costs have risen by 62% and the cost recouped has decreased by 15%.

-Bathroom Addition midrange quality: Costs have increased by 153% and the cost recouped has decreased by 32%

-Window replacement midrange quality: Costs have increased by 1% and the cost recouped has increased by 4%.

From this data it appears that kitchen remodeling and window replacement costs have increased and the percentage of the cost recouped have also increased making them an investment to consider. Bathroom remodeling and addition costs have increased and cost recouped has decreased making them a disinvestment. And, a remodeling project that converts the use of a space such as a garage should be checked for the creation of functional obsolescence.