A recent release by the Appraisal Institute advises homeowners to choose upgrades instead of major remodeling projects to see the greatest potential return on investment.
“In general, simpler, less expensive projects have the best cost-to-value ratio,” says Appraisal Institute President M. Lance Coyle, MAI, SRA. “With the spring home buying season around the corner, homeowners should invest in projects that are most likely to preserve the value of their homes.”
According to Remodeling magazine’s most recent Cost vs. Value report, only five projects saw their cost-to-value ratios rise in 2014: roofing replacement, garage door replacement, 20-gauge steel entry door replacement, vinyl siding replacement and fiberglass entry door replacement. Among projects with the biggest declines were two-story additions, composite deck additions, master suite and kitchen remodels.
Other minor projects with potential major payoffs, says the Cost vs. Value report, are mid-range and upscale garage door replacements, manufactured stone veneer, mid-range window replacements and minor kitchen remodels.
Coyle says that some homeowners might choose to fund home upgrades with tax refunds. Before calling a contractor or heading for the home improvement store, however, he says they should consider if the improvement is in keeping within community norms.
“It’s possible that consumers won’t be able to recoup the cost of the upgrade when the home is sold, so it’s important to meet, not exceed, what’s standard for the neighborhood, and to also consider expected length of time in the property,” Coyle says.
He also says that making routine home repairs is essential to maintaining a home’s value. A house that has been well maintained likely will have a higher value than a similar house that is in disrepair, Coyle says. For example, replacing worn out trim boards may in certain situations not add any additional value to the home, other than to preserve the value that would be likely as evidenced by sales of similar homes in the area that do not have worn-out trim boards.
For an unbiased analysis of what their home would be worth both before and after an improvement project, a homeowner can work with a qualified real estate appraiser to conduct a feasibility study.
During a feasibility study, the appraiser will analyze the homeowner’s property, weigh the cost of rehabilitation and provide an estimate of the property’s value before and after the improvement.
Some green and energy-efficient renovations – such as adding Energy Star appliances and extra insulation – are likely to pay the homeowner back in lowered utility bills relatively quickly. Lower utility costs also are a draw for potential homebuyers. When valuing a home, the appraiser evaluates local supply and demand for green and energy-efficient properties and features.
For more information, visit www.appraisalinstitute.org.
The Lake Norman Homes Team
Southern Homes of The Carolinas
By Keith Loria
As the spring home-buying season approaches, now’s the time to make sure you have everything in order so that you can hit the ground running once the warm weather arrives. To ensure the process is as simple and painless as possible, take the following advice to heart as you search for your new home.
1. Be Willing to Walk Away. You may have found the home of your dreams, but that doesn’t mean you should pay way over asking price or make concessions that you don’t want to make. If the negotiations begin to head in a direction you’re not comfortable with, take a step back and really consider the deal. Always keep an open mind and remember that there are other homes out there—some that might even fit your needs better. Plus, when a buyer walks away from a deal, more often than not, the seller’s agent is more inclined to reach back out and be more willing to work with you.
2. Set Reasonable Expectations. Everyone has an image of the perfect house in their mind, but depending on budget, location and many other factors, finding a home with everything you’re looking for may be impossible. Therefore, it’s always a good idea to make a list of the things you desire in a new home and arrange them from most important to least.
3. Look at Homes You Can Afford. This may seem like a no-brainer, but prospective buyers often house hunt and bid on properties that are way out of their price range. While it’s okay to look at a wide range of homes, including some that may be just above your price range, don’t waste your time looking at homes that are priced anywhere from 25 – 50 percent over what you can afford.
4. Know Your Budget. Before you get too invested in the home search process, figure out exactly what you can afford by making a list of all your expenses, including taxes and insurance. It’s also a good idea to get pre-approved on a loan before you even begin looking at homes. A pre-approval will not only be instrumental in determining the amount you’ll be loaned, it may also help you get a leg up on any competition for the home if there’s a bidding war.
5. Understand Your Financing Options. There are many different types of mortgages available for those looking to buy a home, including several special loans one may qualify for. With so many financing options out there, it’s crucial that you do your homework to ensure you’re getting the best rate. The last thing you want to do is jump at the first offer from a mortgage lender.
Contact our office today for more home-buying tips.
The Lake Norman Homes Team
Southern Homes Elite