Remodel Before Selling?

Bob and Angela had just embarked on a major remodel of their older home in a highly desirable bedroom community outside of New York City when Bob had the opportunity to relocate back to Oregon, which was the couple’s dream. Since they’d already started the project — including a new master suite, new kitchen, two full bathrooms, a playroom, and a big deck — they completed it before putting the house on the market. The house sold the first day for $85,000 over the asking price.

Sounds good, right? The numbers penciled out in the end and they made a tidy profit. But, if Angela and Bob had realized they were going to relocate, she says they likely would not have undertaken the two-year remodel, which like virtually every remodel in the history of the universe, came with plenty of headaches. They had to fire the original architect and spend more than a year getting their plans approved by the local municipal review board. Oh, and there was that one winter with the attic windows covered by boards …

Can You Recoup the Cost?

Angela and Bob’s remodel worked out for them, but that was partly because their home was in an excellent location and because the market was hot, hot, hot. In general, sellers should think long and hard before undertaking major remodels that will mean hiking the sales price of the home considerably in order to try to recoup remodeling expenses.

Remodeling Magazine has found that very few remodeling projects actually recoup 100 percent of the cost of the project, though those figures vary from city to city. And if you’ve ever been house hunting and been shown "newly remodeled” homes with "decorator touches,” you know exactly why major remodeling is sometimes not the best sales strategy.

To Each His Own

The "remodeled” home you tour may indeed have a fancy new kitchen. But what if you dislike the kitchen’s high-tech, stainless steel, industrial look, or if steel cabinet doors remind you of a science lab? And did you really want an additional "vegetable” sink in the kitchen island?

"Designer” bathrooms can be even more off-putting, with some featuring his-and-her’s marble sinks, gaudy fixtures and big, space-eating, whirlpool-style bathtubs. If you’re not the type to spend all evening lounging in the bathtub/spa you aren’t going to be inclined to pay the elevated sales price the seller is asking for this remodeled home with its Hugh Hefner-style master bathroom.

What works? According to Remodeling Magazine , the two best investments when it comes to remodeling are replacing worn siding and upgrading an older bathroom in modest, not Hugh Hefner, style.

But even those remodels barely recoup costs. The magazine says that replacing siding on average recoups 103.6 percent of the cost of the project. Upgrading an older master bathroom with a standard toilet, porcelain tub, and double sink recoups 102.2 percent of the cost of the project, on a national average.

So, is it worth the pain and suffering to make a "profit" of 2 to 4 percent on those remodels? That’s up to you. But here’s food for thought: A major, upscale kitchen remodel recoups only 84.4 percent of the cost of the project. And even if you’re having the pros do the work, don’t forget to factor in the cost of your time when you pencil out the real cost of a big remodel.

Remodeling is rarely easy, so be sure you are ready for the time, money, and irritation involved if you decide to dive in.

Tips on Making the Remodel Decision

1. Go to open houses for "remodeled homes.” Think about the asking price and try to imagine how much less the sales price would be without the remodels. Remember that the idea is to sell your house as quickly as possible at the highest possible price. And the point is to make a profit! If all your profits are eaten up in remodeling costs, you’ve missed the opportunity to make money on your home.

2. In general, it’s a bad idea to go into significant debt to remodel, especially if you’re about to buy another home. If you take out a large loan to remodel it may hurt your credit rating and your ability to borrow for your new home.

3. Some remodels may be necessary just to make your house competitive in your market. If you own an older home that was built with only one bathroom, consider adding a small powder room. Other older homes in your price bracket that are on the market are likely to have added bathrooms.

4. If you do any remodeling at all, make it modest, and stylistically neutral. Select standard white porcelain toilets and sinks, and stick with faucets and towel racks that are nicely designed but not flashy. And of course, paint the room off-white. Remember, you want to appeal as many people as possible who tour your home.

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