According to Harvard’s Joint Center for Housing Studies, homeowners in the Boston area spent $5.2 billion on home improvement projects in 2017, and it’s no wonder why. Our housing stock, for one, is old, so about half of that money was spent on replacement projects as opposed to voluntary upgrades. But with home values rising for almost seven straight years and many buyers willing to pay a premium for a move-in-ready home, remodelers are sometimes rewarded with a higher resale price, making renovations seem like a sound investment.
But not every project leads to a corresponding increase in the value of your property. “Investing dollars in a home doesn’t always mean spending dollars,” said Dana Bull, a real estate investor and broker at Sagan Harborside Sotheby’s International Realty in Marblehead.
That’s especially true if the money is being spent on fixing structural issues or other fundamental features that buyers generally take for granted, Bull said. Such updates are certainly important, but they only get you back where you started. “Buyers expect a home that is structurally sound and free from security issues,” she said. “Just because you put money into fixing a rotten rocker doesn’t necessarily mean you’ll make that money back from a sale.”
But even discretionary upgrades can fail. Pools are a notorious example; Many buyers are turned off by the maintenance, liability, or loss of a backyard — especially in New England, where swim season feels like a dot on the calendar. “This new $65,000 in-ground pool is likely to be worth approximately $8,000 to $12,000 at sundown on the day it is completed,” said Adam Wiener, chief executive and principal assessor at Aladdin Appraisal in Newton. “This isn’t Santa Barbara.”
Reducing the number of bedrooms in a home can be another mistake, at least in terms of resale value, said Jonathan Parker, owner/broker at RE/Max Encore in Wilmington. He has seen many vendors remove walls to build larger master suites in capes and ranches that originally had three bedrooms. “They might do a two bedroom, which they think is great because the Cape has traditionally had smaller bedrooms on the second floor,” Parker said. “But it’s easier to sell a three-bedroom house in the long run than a two-bedroom or one-bedroom house.”
Another feature to keep for future buyers is a bathtub, as families with young children generally want at least one, as Parker recently explained to friends looking to remodel. “They have two full baths, and they want to remove both tubs and just do walk-in showers,” Parker said. “I said you should keep at least one tub for resale.”
In other cases, an improvement can add value to the home, but not nearly as much as the homeowner expects. “I had a seller who thought his sauna was worth an extra $20,000,” said Adam Rosenbaum, a real estate agent at Century 21 Adams KC in Arlington. “It was nice, but it didn’t convince buyers it was worth paying extra for.”
“There’s often a mismatch between how sellers value items in their home and how a buyer perceives them,” Bull added, especially when it comes to bespoke pieces. In fact, anything useful or personal can be hit-or-miss. “Either it resonates with the buyer or it doesn’t,” she said. “The same goes for unusual design – bright colors, bold wallpaper, unique surfaces.”
Parker loves wallpaper. “I think it can be really fun and unconventional if you have a powder room or something like that on the main level,” he said, “but it’s so individual and so specific that you won’t necessarily get anything out of it.” ”
And the price may be right, but unless you’re really handy, don’t count on potential buyers to be as impressed with your home improvement as you are. “The owner installed fixtures, moldings, doors and windows and other joinery that is of poor craftsmanship is a difficult matter,” Wiener said. “They are so happy and proud, and yet the workmanship is so poor.”
Parker said DIY tile installations look very amateurish and can hurt a home’s value. “I see the worst tile work out there,” he said. “The tiles are uneven, the grout is horrible, they’re not level, they’re not even, they’re gross and they fall out… and it’s just obvious the salesperson put that splashback or half the bathroom floor in place.”
Depending on the area and the home, it may also cost you to remove historical features during a remodel. “In very historic areas like ‘Old-Town’ Marblehead or near the monument in Charlestown, some buyers expect period details and are disappointed when houses have been gutted without retaining the original charm,” Bull said However, buyers tend to be the exception. “Unfortunately, many people don’t appreciate historical elements. I’ve seen painted mahogany paneling that buyers love — I cringe,” she said.
For further guidance, we looked at two major annual surveys that attempt to identify which home improvement jobs offer the best return on investment on resale and which don’t. The National Association of Realtors surveyed hundreds of contractors, homeowners, and real estate agents for its 2019 Remodeling Impact Report, which compares homeowner satisfaction with cost and recovery estimates for 20 collaborative projects. Meanwhile, Remodeling magazine surveyed contractors and brokers for its 2019 Cost vs. Value report to come to its own conclusions, including Boston-area specific data.
In the NAR study, a closet renovation provided the worst return on investment, with real estate agents estimating it would recoup only 40 percent of project costs. A new bathroom and a new master suite had the next lowest recovery rates at 50 percent. And while real estate agents expected a modest kitchen upgrade to return just 52 percent of the project’s cost on resale, 1 in 5 said the project at least helped close a recent sale.
Of the 22 projects analyzed in Remodeling’s report, an “upscale” master suite delivered the worst value in the Boston area, yielding just 53.9 percent of the cost. Adding a patio scored a similarly low 55.5 percent. However, your idea of a new backyard patio may be significantly more elaborate than yours. The magazine challenged contractors to price out a 400-square-foot flagstone patio with a cedar pergola and sliding glass door — but also underground gas and power connections for a fire pit and a full outdoor kitchen. Realtors expected such an improvement would increase the value of a Boston home by nearly $40,000, but builders estimated it would cost more than $68,000 to build.
That’s another point: it can be harder to recoup the cost of expensive or ultra-high-end projects because there’s more expense to recoup and the market for such features is inherently limited. “There is no shortage of luxury homes and only a small subset of potential buyers,” Bull said.
Whether a luxury renovation resonates with buyers can depend on the home and the community it’s in, Parker said. “If I only spent $75,000 on shrubs and everyone else in my neighborhood just has plain vinyl fences, I probably won’t get a return on it,” he said. “Market expectations vary by location, even within a city,” Wiener said. “It is advisable to stay within the lane of your house. Don’t remodel your slab ranch home to the luxury level.”
Geographical differences can also determine whether a particular home improvement move will pay off and delight buyers. While the nationwide NAR survey found that completing an attic or basement recoups only 56 percent and 64 percent of costs, respectively, capturing more living space in tight neighborhoods can be a game changer. “In the city, adding square meters [by] Finishing off a basement or attic, or finding a place to add a bathroom, can really add value to a home, Bull said.
A smart renovation also uses common sense to improve the home’s utility, said Weiner, who was a home remodeler for 16 years before taking up estimates. “If a third floor has three bedrooms but no bathroom, adding a bathroom on the third floor is worth more than building it on the second floor,” he said.
Of course, resale value isn’t the only consideration when converting, or even the most important. Many people who tackle renovations do so to improve the function or comfort of their home — and that matters when Americans are staying in their homes nearly twice as long as they were a decade ago. In the second quarter, the average seller had lived in their home for more than eight years, compared to an average of just over four years in the 2000s, according to ATTOM Data Solutions. In the Boston area, the average seller bought their home more than 10.5 years ago.
And while a closet makeover might not recoup even half the estimated cost when it’s resold, it could make your life a whole lot easier every morning. Perhaps that’s why a closet makeover was one of only two projects (along with a total kitchen makeover) to earn a perfect “Joy Score” of 10 in the NAR survey of satisfied homeowners.
The truth is, Weiner said, “almost anything you do to improve your home won’t make dollar for dollar. People should do what is comfortable for their family lifestyle but not expect a positive return on investment.”
When it comes to selling, Wiener adds, the home improvements that add value to your home are far less glamorous or expensive. “Cleanup, staging, paint, ammonia and elbow grease give the best return on investment,” he said. “And that’s not in the cost-value report.”
Jon Gorey blogs about houses at HouseandHammer.com. Send comments to [email protected]. Follow him on Twitter at @jongorey. Subscribe to our free real estate newsletter at pages.email.bostonglobe.com/AddressSignUp.
