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To Upgrade or Not to Upgrade: Do Home Upgrades Really Pay Off?

To upgrade or not to upgrade. That’s a common question for the average homeowner when the time comes to sell. The two rooms that get the headlines are the kitchen and master bathroom. But if you do not realize greater than a 100% payback, then the investment was not worth it, right? Maybe, maybe not. An upgrade normally does two things to your home:

  • Makes the home more appealing physically to buyers
  • Generally, makes the home sell faster

Each of these has a dollar value. If your home sat on the market two extra months because the kitchen was not upgraded like similar, nearby homes, you may be paying an extra $4,000 in mortgage interest for those two months because your home didn’t sell quicker. So right off the bat, you’re in the hole $4,000 for having an outdated kitchen. For any upgrade, the time it takes to complete the upgrade and any mortgage interest you are paying during that period should both be considered, unless the upgrade is made without the intent to sell the home immediately.

If you’re ready to sell your home, but want to upgrade the bathroom, it may take one month for the upgrade. But, remember, you may be paying $2,000 in mortgage interest during that one month, so effectively you may be in the hole $2,000 immediately; for a home that takes two months for a kitchen rehab, that’s potentially a $5,000 mistake. And what about the hassle of having your bathroom or kitchen out of service for a month or more? So, to avoid paying extra mortgage interest, it may be best to not perform upgrades just before you want to sell your home (especially if you have already moved out), but rather during the middle of your home ownership period, when you will have ample opportunity for your investment to repay itself due to overall home value appreciation and you are not paying a second housing expense.

But, what if the upgrade actually pays off by 110%, as advertised on numerous home shows and websites? On a $10,000 bathroom upgrade, that would be $1,000 extra in your pocket. Right? First, any return on investment is only an estimate by home professionals because the same home cannot sell at the same time with an un-rehabbed kitchen vs. a rehabbed kitchen. Still, let’s do a little math.

But then comes the wildcard: the DIYer. If you can legitimately do the upgrades yourself, you will likely experience a return on most upgrades. If you can paint a wall or roll out attic insulation, you may see a return on your investment of materials and supplies. If you can install kitchen cabinets, lay tile, replace a vanity sink, build a deck, or patch/install drywall, you may have discovered a new career: rehabbing homes. This type of DIYer commonly makes significant profit by flipping homes, and you can experience part of their success with your own home.

NOTE: DIYers should always consider local permitting and building code requirements.

Before you do any home improvements, consider your neighborhood, review and visit similar homes, and understand your target buyer. If most homes nearby have tidy, neat kitchens with Formica or laminate countertops, then your kitchen should too. If nearby homes have master bathrooms with marble, granite and designer showers, hopefully yours will too. Just be careful: over-improving your home compared to similar homes typically results in less payback for home buyers. Nashville Discount Realtor Home Sense kitchen photo

In summary, it’s hard to justify any major home improvement solely for the purpose of selling the home, unless you’re a seasoned DIYer and can save on the labor expense. Any time you must pay a professional at a professional labor rate and install new materials/fixtures/etc., you will likely not see a 100%+ return on your investment. What if your major upgrade was done to your taste, costs $20,000, was done professionally, but does not appeal to the typical homebuyer? And what if you install a $2,000 farmhouse sink, but it doesn’t match the rest of your kitchen’s décor or the buyers do not value a farmhouse sink at $2,000? Just be careful with big-ticket upgrades. And consider hiring a competent interior designer.

Here’s the solution we offer:

Upgrades that can be quickly done by the homeowner to appeal to the typical home buyer stand the best chance of returning more money than invested. So, what are the most likely upgrades that will pay off before selling a home?

Smart Upgrades

Paint

A fresh coat of paint on your walls makes a splash. It’s an opportunity to cover up marks, stains, discoloration, etc. And if you choose a modern, neutral, lighter color, fresh paint can easily impress buyers. Look at homes online to see what colors are trending. Don’t assume your favorite color is everyone’s favorite color. Here are a few things to keep in mind when painting:

You don’t have to use the most expensive paint available; just be prepared for a second coat for inexpensive paints.
When using a lighter color over a darker color, it may require multiple coats.
Most trim, if it’s white, can easily be cleaned instead of having to repaint it. This is because trim normally has a glossier finish, allowing stains to be removed easier than flat finishes, such as on the walls.
A flatter paint finish for the walls will tend to hide wall imperfections much more than glossier finishes. But attempting to clean a flat-finished wall will normally cause the sheen to change, leaving an obvious mark.
Use water-based paints (latex) indoors and oil-based paints outdoors.
Consider buying your paint and supplies at a local second-hand outlet, such as Habitat Restore.
Prune/trim landscape

You don’t have to plant new shrubs or create an elaborate landscaping scheme, just make sure what you do have looks tidy. For trees and bushes located near the front of the home, ensure they are attractively trimmed and shaped. Spreading mulch can greatly enhance your landscape (check your local brush collection service; they may sell inexpensive mulch). For less than $150, you can create an inviting exterior that will maintain a buyer’s interest once they walk from their car to your front door. Finally, always make sure the grass is cut.

Front door

Just like the landscape, the front door needs to maintain the buyer’s interest. This is likely the first feature of your home the buyer will see up close. So, consider repainting the door and the surrounding trim. If your door is beyond repair, consider spending $150 to $300 on a new door. Even if you can’t replace it yourself, the labor for a professional installer will be relatively inexpensive. You may even find a deal at the hardware store that combines the door purchase with a free, or almost free, installation. Or you may find the right sized door at a second-hand store for $50.

Faucet/doorknob/drawer pulls/light fixture upgrades

Gold light fixtures are long outdated, and brass is less popular than brushed nickel, unless dealing with a historic home. Replacing outdated ceiling fixtures and bathroom faucets can give your home a modern touch for a minimal investment. The same goes for drawer and cabinet pulls in the kitchen.

Kitchen appliances

Here’s an important concept to remember: a home’s market value increases or decreases primarily due to the value of the property on which the home sits, not the home itself. Just like the new car depreciation concept, once you spend $1,000 on a new range, it does not automatically increase the value of your home by $1,000 because now it is a used range. If your kitchen appliances are outdated or not working properly, now might be a good time for a replacement. But, just don’t buy a new appliance! Search for a scratch and dent model at a home furnishing store; they may even deliver it for free and charge a nominal fee for installation. Or, search craigslist.com and borrow a friend and truck. There are numerous lightly used or even unused appliances for sale locally that are far less expensive than a new model at a home furnishing store. Just keep in mind how you will dispose of your old appliance.

Paint or re-surface the kitchen cabinets

A fresh coat of paint and even a new color on your kitchen cabinets can change the tone of your entire kitchen. You’ll probably need to remove all the cabinet doors and drawers and this effort may take a weekend or two. If doing this upgrade, consider replacing the drawer pulls as well.

A second-hand outlet can supply you with new or lightly used paints and drawer pulls.

Upgrades for Seasoned DIYers

The Kitchen

Remodeling the kitchen to introduce more light and openness will normally appeal to new buyers. Consider removing a wall between the kitchen and dining or living area, remove extra overhead cabinets that block the view, or convert a full-height wall into a half-height wall with columns between the kitchen and the adjoining living or dining area.

Modern families spend much of their time in the kitchen, and so an investment to improve the look and functionality of this popular room is typically a good one. The key: buy good quality appliances (preferably, barely used ones) and solid kitchen cabinets. But don’t go overboard. While the special wine cooler, high-tech trash compactor and supersize refrigerator may seem very special, few home buyers actually want to pay for them, especially if they are new. Most under-counter wine coolers cost $1,000 to $2,000 new, but a home buyer will not automatically value the home price at $2,000 more.

The Bathroom

If your home has several bathrooms, and you spend significant money to remodel the least-used one, you may not get the return you expect. A significant bathroom remodel works best on the master bath and/or the half bath used for guests.

New Windows

Upgrading your windows offers a solid payback for the same reasons as replacing a front door – new windows brighten up your home and improve insulation, cutting down on drafts and saving utility costs.

Exterior Finish

New siding not only makes your house look better, but it also promises to cut down on future maintenance issues. Modern vinyl siding is fade resistant and typically comes with 10-year+ warranties. Fiber cement siding and manufactured stone veneer are more expensive, but offer a high-quality look that many future buyers will appreciate. Buyers will be delighted to see a fresh coat of exterior paint on a painted brick house.

New Garage Door

A bright new garage door, for a relatively modest cost, gives your garage a brand new face to the world, especially it is viewable from the street.