Why You Should Rethink Your Kitchen or Bathroom Remodel

Making major upgrades to your big-ticket rooms before you sell may not yield the return on investment you're hoping for.

U.S. News & World Report

Why You Should Rethink Your Kitchen or Bathroom Remodel

Mature man using a spirit level and marking the wall with a pencil in his kitchen.

To get the most value, you should update your kitchen for yourself rather to boost your home's appeal to potential buyers.(Getty Images)

You’re ready to sell your house this year, but your real estate agent has pointed out a few areas you need to address before your home is ready to hit the market. First and second on the list are your kitchen and master bathroom. Admittedly, both have an alarming amount of oak, and that laminate countertop isn’t doing you any favors.

But before you overhaul your kitchen and master bath to fit with all the current trends, make sure you’re aware of the reality of the cost and what you’ll get back. An $80,000 kitchen upgrade isn’t going to add $80,000 or more to the value of your house.

Remodeling Magazine released its annual Cost vs. Value report in early January, which compares the cost of 21 major home renovation projects in 100 major markets throughout the U.S. to the value increase of those homes. The report notes the cost of all tracked home improvement projects in the report, but only two-thirds of the projects saw home values rise at the same time.

While they're common choices for remodeling, upscale kitchen and bathroom renovations were among those projects with an increase in cost but either no increase or even a decline in value added to the property.

Before you jump into plans for an overhaul of your kitchen to catch a buyer’s eye, consider the current market for renovations and proceed with a realistic expectation for your return on investment.

Who’s Remodeling? You and Everybody Else

Whether it’s to sell your home or to give your kitchen or bathroom an updated look, remodeling is the name of the game for many homeowners in 2018 – and that's been the case in recent years as well.

Holly Tachovsky, CEO of BuildFax, which operates a database of property conditions and histories, says renovations became a significant focus for homeowners in the aftermath of the recession.

“Remodeling has just gone off the charts and it remains off the charts. … People want to live in urban centers, and they want to live in a modern house,” Tachovsky says. More than 3.8 million residential remodels took place in 2017, according to BuildFax data, compared to just over 2.9 million residential remodels in 2013.

There’s more than one explanation for why people are opting to renovate rather than put their home on the market. It’s to stay in the neighborhood in many cases, and in others it’s helping to keep homeowners from having to dive into a tough market for buyers.

“With as tight of a housing market as we’re seeing today, switching homes is just not an option for many of us,” says Nino Sitchinava, principal economist at Houzz, a home remodeling and design information company.

Of course, interest in renovating kitchens and bathrooms came about before the housing market fully recovered. Whether it was for themselves or in hopes of attracting potential buyers in search of move-in ready conditions, homeowners have focused on the potential value in those major parts of the house.

“When it comes to kitchens and bathrooms – which are sort of the projects you put on hold when the bottom falls out – when things finally recover … those are the priority projects,” Sitchinava says.

However, confidence in the upscale kitchen and master suite renovation appears to be waning. Remodeling Magazine’s Cost vs. Value report notes real estate professionals surveyed put some of the highest gains in these parts of the house in 2017, only to see a negative shift for the same renovations for 2018. Minor and midrange remodels in kitchens and bathrooms still see a greater increase in value over cost. It may be that the market’s so hot that an upscale remodel is unnecessary, or it could be that renovations aren’t the big drivers to drum up buyer interest as they have been previously.

Re-evaluate Your Motivation

This isn’t to say kitchen or bathroom renovation is always fruitless. A complete makeover to your 1998 kitchen would certainly be worth it if you’re doing it for your own benefit. Upgrade the white appliances from the previous owner not because you’ll get that all that money back when you eventually sell (and you won’t), but because you’ll enjoy better efficiency and a sharper look with a fridge and dishwasher from this decade.

In the 2018 U.S. Houzz Kitchen Trends Study, just 6 percent of respondents reported planning to renovate their kitchen to improve resale value for an upcoming sale. The leading motivators for renovating homeowners, according to the study: “Can no longer stand the old kitchen” (41 percent) and “Want to do it all along and finally have the means” (36 percent).

“Over the course of the last five years, what we’ve seen in our research is that resale value is just not as big a consideration,” Sitchinava says. Homeowners are more motivated to invest the money in a remodel when they'll be able to use the space for some time.

What’s Best for ROI?

If you’re looking to make updates to have an easier time selling your home – and for a higher price – consider a smaller renovation or only minor updates. The Cost vs. Value report notes that more markets see renovation costs recouped completely for minor kitchen remodels and midrange bathroom remodels. Still, that’s only 12 markets in the U.S. where homeowners get 100 percent or more back on a minor kitchen remodel and only seven markets for the midrange bathroom remodel.

Which projects see the best return on investment? An upscale garage door replacement – as unexpected as it may sound – recoups 98.3 percent of the cost throughout the U.S., on average, according to the Cost vs. Value report. You’re not only ensuring a functional, safe entrance to the home and space for storage, but replacing a garage door can do a lot for your house’s curb appeal. Adding a wood deck to your home recoups 82.8 percent of the cost throughout the U.S., on average, and helps appeal to buyers' desire for outdoor living options.

Regardless of the updates you invest in, keep in mind that any construction is continuing to increase in cost as time goes on. Your best bet is to thoroughly research your options for materials to stay in your budget and plan ahead to avoid a higher price for a short time frame. Always inquire with three or more contractors to discuss your options and the cost of your planned upgrades, and check referrals to get feedback on those contractors' ability to finish work on time and stay within budget.

“Materials are not getting less expensive in general,” Tachovsky says. “And then with this many people doing projects, general contractors – especially the really good ones – are very hard to find and very expensive, because they’re in such high demand.”

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