Remodeling? Kitchens and Bathrooms Still Count

by Steve CookJanuary 21, 2016

Homeowners upgrade their homes for three reasons: to increase the home’s value when it is sold, to make it easier to sell, and to improve their quality of life during the time they live in their home before it is sold.

Since 2002, Remodeling Magazine has conducted an annual study to help homeowners estimate how much of the cost of a project will be recouped when sold. The study, which consists of localized estimates from contractors and a survey of Realtors to determine the impact of each project on home value, has surprised many professionals and consumers alike. Projects have rarely paid for themselves in the value they will recoup at the sale and the few that have were generally small, inexpensive fixes.
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For example, in the 2015 edition of the cost vs. value study, only one project, replacing a steel entry door, recouped its cost. The $1,230 project increased the home’s value by $1252. The next closest project dealt with replacing 300 square feet of vinyl siding from the bottom third of a house with manufactured stone veneer at a cost of $7150. This upgrade added a resale value of $6594 which is a 92.2 percent cost value ratio. The third best project was removing and replacing a 16×7-foot garage door and tracks. Cost was $1595 and the resale value was $1410.

All very interesting but what about the big projects that Realtors say make the sale with buyers—kitchens and bathrooms?
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A major kitchen remodel to include: 30 linear feet of semi-custom wood cabinets; a 3-by-5-foot island; laminate countertops; a standard double-tub stainless-steel sink with standard single-lever faucet; an energy-efficient wall oven with a cooktop, ventilation system, and built-in microwave; a dishwasher; a garbage disposal; custom lighting; new resilient flooring; and finished with painted walls, trim, and ceiling runs $56,768 and returns $38,485. This upgrade makes for a 67.8 percent return on investment.

A minor kitchen remodel that includes: replacing cabinet fronts with new raised-panel wood doors, drawers, and hardware; replacing wall oven and cooktop with new energy-efficient model; replacing laminate countertops; installing mid-priced sink and faucet; repainting trim; adding wall covering; and removing and replacing resilient flooring costs $19,226 and increases a home’s value by $15,255, making a return on investment of 79.3 percent.
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Bathrooms are cheaper. A cheaper remodel that includes replacing all fixtures to include a 30-by-60-inch porcelain-on-steel tub with 4-by-4-inch ceramic tile surround; a new single-lever temperature and pressure-balanced shower control; a standard white toilet; a solid-surface vanity counter with integral sink; a recessed medicine cabinet with light; a ceramic tile floor; and vinyl wallpaper runs $16,724 and returns $11,707 at sale for an ROI of 70 percent.

This past year the National Association of Realtors research department initiated its own remodeling study and announced the results in early December. Interestingly, the percent of value recovered from remodeling a kitchen, 67 percent, and a bathroom, 58 percent, were comparable or lower than the Remodeling Magazine study. NAR added rankings of each project by its appeal to buyers as estimated by Realtors and a “Joy” score from a survey of owners to measure their happiness with each renovation.

A complete kitchen upgrade ranked a 9.8 on the Joy Score and 17 percent of Realtors have suggested that sellers do a complete kitchen remodel before attempting to sell. In addition, 12 percent said the project most recently helped cinch a deal for them, resulting in a closed sale.

Bathroom renovations earned a Joy Score of 9.3 and 45 percent of Realtors have suggested sellers complete a bathroom renovation before attempting to sell, but only 6 percent said the project most recently helped cinch a deal for them, resulting in a closed sale.

When all three reasons for remodeling are addressed, it’s easier to justify the lower return on investment of kitchens and bathrooms by improving the house’s appeal to buyers.

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About The Author
Steve Cook
Steve Cook is editor and co-publisher of Real Estate Economy Watch. He is a member of the board of the National Association of Real Estate Editors and writes for several leading Web sites, including Inman News. From 1999 to 2007 he was vice president for public affairs at the National Association of Realtors.
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