Many homeowners undertake renovations in the fall before winter sets in. Market research company IBISWorld estimates that home remodeling is a $52 billion market that grew 3.8 percent between 2009 and 2014. Still, not all home improvements are created equal. Many homeowners assume they'll recoup their investment in renovations when they sell the property, but that's not always the case.
Here's a look at home renovation blunders you may live to regret.
1. Hiring the first contractor you can find. Before undertaking renovations, get quotes from several contractors – and dig beyond the surface to make sure you're choosing one you can trust. "When searching for contractors, homeowners often turn to contractor referral or user review sites," says Monica Higgins, founder of California construction management firm Renovation Planners and RemodelEinstein.com, an online remodeling resource. "However, they need to keep in mind that these sites are in the business of charging contractors for homeowner referrals. They are not in the business of carefully assessing contractors’ competence or screening the contractors they refer beyond licensing, insurance and bonding." She recommends that homeowners conduct criminal, financial and legal background checks and check customer and trade references – steps that many people just don't take. Organizations like the League of California Homeowners can assist homeowners with a background check for a fee. Also contact the Better Business Bureau or a local consumer affairs agency to check for complaints. If the professional is a member of a trade organization like the National Association of the Remodeling Industry, that can also be a positive sign.
[Read: How to Deal With a Bad Contractor.]
2. Failing to get permits. Filing the necessary paperwork for building permits may be a nuisance for your contractor, but it's often necessary. "A remodel project of any consequence requires a building permit," says Rick Goldstein, an architect and co-owner of MOSAIC, a design and building company in Atlanta. "Typically, city inspectors will inspect the work of each trade at both rough-in and finish stages of the project, [checking] that the work was installed safely." Goldstein cautions against contractors who say permits and inspections aren't necessary. "This could result in steep fines and reopening of walls and ceilings," he adds.
3. Setting an unrealistic budget. Run out of money mid-renovation, and you may have to live with a half-finished kitchen for the foreseeable future. Set a reasonable budget, and build in extra money for the inevitable surprises. "Remodeling always costs more than expected," Goldstein says. "Costs will vary significantly based on the size, complexity and quality of a particular project." He suggests keeping an extra 10 percent in reserve in case issues pop up along the way and expecting to spend at least $200 to $300 per square foot for a high-end kitchen or master bathroom. "Understand that there will be trade-offs, and you may even consider phasing the project to meet your budget needs," he adds.
4. Overimproving for the neighborhood. If most homes in your neighborhood are under 2,500 square feet with basic fixtures, putting in a 1,000 square-foot addition won't necessarily pay off when it's time to sell. "A home's value is limited to the median home price value of the neighborhood," says Mark Attarha, broker and owner of East Bay Sotheby's International Realty in Oakland, California. "Look at the neighborhood's median home price levels. The statistic will provide you a good idea of what similar homes are selling for and help you determine how much money should be invested to help ensure positive return on investment."
5. Getting too personal. If you plan to stay in the property for a long time, you'll have time to enjoy unusual choices like purple wall-to-wall carpeting (most buyers prefer hardwood nowadays) or a large, climate-controlled wine cellar with built-in storage. Just don't expect prospective buyers to love those same things. "Whether it's a specific paint color or shrine to your favorite sports team, it's best to keep improvements neutral to help appeal to a wider audience," Attarha says. "A neutral space lets the buyer envision their preferred living space … [and] they will not have to waste time and money repairing the home to their liking."
6. Expecting a return on hidden renovations. Buyers love upgrades they can see: granite countertops, high-end appliances, crown molding. "The cosmetic upgrades are the eye candy that people go for," Higgins says. Redoing your home's plumbing or electrical wiring or improving insulation aren't visible upgrades that buyers expect to pay for. That said, if your home does have serious structural or other problems, address them before putting your house on the market if you can. "If you have mold, you've got to take care of that issue," Higgins says. Many buyers would rather pay for a home that's move-in ready than subtract the cost of renovations and live through the process themselves.