Real Estate Values: How do I know if it’s beneficial to add onto my home?

19 May

When making a decision about a major home improvement project such as adding new space, it’s important that you ask yourself the following three questions:

Will the addition improve my family’s quality of life?

First and foremost, make sure that your investment will pay off in terms of your quality of like for the remaining years that you will live in your house.

Will the improvement make it significantly easier to sell the house?

Some improvements may not recoup every dollar they cost. However, when the time comes to sell your house, you may find that certain improvements increase demand for your house. For example, today’s buyers may shy away from smaller, old-fashioned kitchens and bathroom. Though remodeling these rooms in can be expensive and you probably will not recoup their costs dollar for dollar, updated kitchens and bathrooms will probably reduce the time it takes to sell your house and make it easier for you to get the price you want.

Will the improvement recoup the money it will cost?

In fact, very few improvements return dollar for dollar regarding increasing the value of your house. For years, Remodelingmagazine has conducted an annual survey of large and small home improvements that includes a survey of real estate agents to determine how each improvement affects the sale price. In the 2016 survey, only one of the 27 improvements they reviewed—adding fiberglass attic insulation—would recoup its cost. Additions — whether bathrooms, family rooms, master suites, decks or even a second story — were among the improvements that are least likely to pay for themselves. In fact, all additions except adding a deck or a family room would return less than 60% of their cost when the house is sold. Decks recouped either 75% for a wood deck or 67.5% for a deck made of a composite material. Family rooms recouped 67.9% of their cost. For more information, read more about Remodeling magazine’s cost vs. value study.

Despite the results of the study, homes are more than investments. You should always consider the lifestyle benefits for your family over the time you plan to live in your home. Spread the cost of the addition over the years you will spend in the home – will the addition improve your family’s lifestyle over a sufficient period to make it worthwhile? Talk to a real estate agent or an appraiser about whether the addition you are considering will make it easier to sell your home in your market. Weigh all three factors — family lifestyle, saleability, and cost vs. value — before making your decision.

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