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Can You Recover Remodeling Costs When You Sell Your House?

30 April 2019

Cost vs. Value

You've finally decided to remodel the kitchen including ripping out cabinets and walls, installing an island down the middle, buying new stainless-steel appliances and redoing the countertops with granite or maybe quartz or quartzite.

You'll probably want to update the lighting and add new plumbing fixtures as well and certainly new flooring.

Rosie on the House Kitchen Remodel cost value

The price tag for this upscale remodel looks astonishing, but after all, when you sell, you'll get a big chunk of money back – or will you?

Every year since 2002, Remodeling magazine has done a report comparing the cost of most current remodels to how much the investment will improve a home's resale value. In other words the report estimates how much money a homeowner will get back – percentage-wise – for a remodel that was done to a house.

The report covers 136 different metropolitan areas of the United States and compares cost-to-value ratios for cities, including Phoenix and Tucson, for example. It also compares states to each other as well as regions – like the Mountain Area -- vs. the country as a whole. Realtors, contractors, suppliers and remodelers help provide the data.

Here are four factors that the report indicates about remodels:

1 | Costs of remodels are rising:

The remodeling industry has had a real comeback since the recession. As a result, costs have increased, in some cases significantly. Some upturns are due to tariffs on building materials. In fact, the report notes, lumberyards and supply houses began making cost increases just as the Cost vs. Value report was being finished. Even so, the overall percentage of return on most remodeling projects is inching up slightly when homeowners sell, though not as much as it has in the past.

The overall cost-to-value ratio for 2019 is 66.1 percent, only slightly ahead of 2018. But it has been much higher – 71.2 percent in 2014 – and much lower -- 61.9 percent in 2011 and 2012.

2 | Exterior improvements with curb appeal = better return on investment:

"Almost all the top projects in rates of return are exterior projects," according to Clayton DeKorne, chief editor for the JLC Group, publisher of Remodeling and other magazines.

Rosie on the House New Garage Door

In Phoenix, for example, the cost of replacing a garage door could be recouped 102.8 percent when you sell your house; meanwhile in Tucson, that new door would recoup 138.1 percent of its cost. On the other hand, that upscale major kitchen remodel would recoup 60.5 percent in Phoenix and 63.9 percent in Tucson.

"It's all about first impressions," DeKorne said. "If a driver pulls up in front of your home and gets a positive impression, he or she may be more likely to get more interested in your home and then pay more for your house. A new steel garage door will last a long time and help make a good impression as compared to a door that is deteriorating."

Other exterior improvements with selling power are a new entry door; creating a grand entrance with a wider door that has sidelights and a new lockset; a new roof and new windows.

3 | Less can sometimes be more when you sell:

Take that high-end kitchen remodel you were planning as an example. The report estimates it might cost $128,442 in Phoenix and will bring in 60.5 percent or $77,741 of that when you sell.

Rosie on the House Refinishing Cabinets Meanwhile, a minor remodel that includes refacing the cabinets, replacing appliances and countertops combined with fresh painting and new flooring would cost only $21,818. Yet you can recoup 73.5 percent ($16,038) when you sell.

"What that seems to indicate about buyers," DeKorne said, "is that when a potential buyer walks in and sees a kitchen that is acceptable, that person might think, 'Can I live with that kitchen for two or three years until I build up some equity and then do a major remodel?'"

However, that doesn't mean you shouldn't fund the kitchen of your dreams especially if you're planning to live in your house for a long, long time. If you're not going to stay, you might want to rethink your planning.

4 | Cost vs Value studies are not about trends and popularity:

They don't indicate what you should do in your remodel. If you're torn between granite and quartz in your countertop choice, it can't tell you what to choose. It doesn't talk about specific trends like kitchen islands.

However, DeKorne noted, the study does try to look at the projects that people are currently most interested in doing. For example, the 2019 study includes analysis of cost and value in doing a universal design remodel to improve safety and ease of use in a bathroom.

Looking for More Facts & Figures?

You're probably going to want to see more of these facts and figures. If so, check out www.costvsvalue.com.

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Rosie on the House