To Remodel or Not to Remodel
May 23rd, 2012 by John Bruce and Craig Reed

That is the question homeowners may ask themselves as they try to wait out an anemic housing market

Workers install siding on the exterior of a home. Exterior enhancements, such as fiber-cement and vinyl siding, add to a home’s value because they are the first thing potential buyers see. Upgrading entry and garage doors also adds value to the exterior of a home.

Workers install siding on the exterior of a home. Exterior enhancements, such as fiber-cement and vinyl siding, add to a home’s value because they are the first thing potential buyers see. Upgrading entry and garage doors also adds value to the exterior of a home.

Americans are staying put. A down economy is driving most people to hunker down in their homes instead of moving. Many wonder whether to finish that attic or replace the front door as they try to wait out hard times.

Only 10 percent of the public feels now is the time to sell their home, according to Fannie Mae’s National Housing Survey released in November 2011. The survey reveals 75 percent of Americans believe the economy is on the wrong track.

It stands to reason that long-term homeowners want to make their property as livable as possible. How can they get the most bang for their home improvements bucks during a down economy? What home improvements are shown to deliver the most value, according to the experts? On the flip side, can a home improvement actually reduce property value?

Value-Added Projects
Exterior home improvements typically deliver the most value for homeowners. A cost-versus-value report from the National Association of Realtors (NAR) ranks exterior improvements among the best home investments on HouseLogic.com, the organization’s consumer website. The report “shows the value of putting your home’s best façade forward, so to speak,” says NAR President Moe Veissi, broker-owner of Veissi & Associates Inc. in Miami.

Exterior projects are important to a home’s regular upkeep and are expected to recoup far more than many other improvements. Plus, they add instant curb appeal when times are finally right to sell a home.

A home’s attractiveness—the indicator of initial appeal—makes a big difference. Exterior elements covering large areas, such as siding, entry and garage doors, have the greatest visual impact. Updated exteriors give sellers an edge because buyers are attracted to a home before entering.

According to NAR, seven of the top 10 most cost-effective projects nationally in terms of value recouped are exterior projects. An upscale fiber-cement siding is judged as the No. 1 improvement, with an estimated 78 percent of costs recouped upon resale.

A steel entry-door replacement, the least-expensive project in the report, averages little more than $1,200 and is expected to recoup 73 percent of its cost.
Garage door replacement, a wood deck addition and vinyl window replacement all are expected to recoup around 70 percent of costs.

What’s Inside Counts, Too
Good deals are not limited to the exterior. Conversion of existing space, such as a minor kitchen remodel, turning an attic into a bedroom or finishing a basement, is more likely to bring a better return than an addition.

On the interior, NAR considers attic and kitchen remodeling projects worthwhile investments. The least expensive way to add a bedroom and bathroom within a home’s existing footprint is an attic bedroom, expected to return 72.5 percent of costs. A minor kitchen remodel is expected to return 72 percent of costs.

Least-return improvements are a sunroom addition and a home office remodel, both estimated to recoup less than 46 percent of costs. An in-ground pool can add to a home’s value, but there’s little chance of recovering the money spent on upkeep, and NAR advises that an above-ground pool can actually reduce a home’s resale value. Many people don’t want pools because of the high upkeep.

All homes can benefit from increased insulation and sealing, regardless of climate. Older homes usually are under-insulated compared to new homes. Adding more can help you cut energy use and realize a return on your investment.

Call in the Professionals
Jim Kitchin, president of the Oregon Remodelers Association, says more homeowners are doing small projects around their houses. Many are doing the work themselves to save money during this tough economy, but he warns homeowners about getting in over their heads.

“It’s based on the complexity of the projects, the difficulty of the tasks,” he says of a homeowner deciding on whether to do the job or to hire a professional. “You’re assuming a lot more risk if you’re doing it yourself.”

Jim, co-owner of Interworks of Portland, Oregon, explains that some projects need coordination. If a homeowner doesn’t have the time to make sure the work is done in an orderly and correct fashion, problems can arise. For example, he says a roofing job may need to be coordinated with installing gutters, siding and possibly dealing with a chimney.

“Do you have the time to take on a project and follow it through?” Jim asks.

If you decide to get multiple bids from reputable contractors, make sure you ask for and get the same information from all the contractors, so you are comparing apples-to-apples bids, he adds. Jim says if a licensed contractor is hired, then that person should educate the homeowner about the impact of the remodeling choices being made about the home. He advises homeowners to be aware of unknown conditions in a project that are not revealed until the job is under way. He says an estimate can be given to begin a job, and then when it’s easier to see potential problems, reassess the project and its cost.

Asking contractors the right questions makes all the difference, according to Denny Kruse, a real estate broker in the G. Stiles Realty office in Roseburg, Oregon.

Some of the questions Denny would ask include:

  • Are you licensed and bonded, and may I have a copy of those documents?
  • How long have you been in the contracting business?
  • What training have you had?
  • Have you had any disputes or complaints filed against you?
  • Can you provide me with at least three projects you worked on with names and phones numbers of the people who hired you?

Denny says the homeowner also can call the local homebuilders association and check to see if the contractor is a member in good standing. With a license number, the state contractors board can be contacted to see if any complaints have been filed against that number.

That is the question homeowners may ask themselves as they try to wait out an anemic housing market

Denny also notes that a young or new contractor shouldn’t necessarily be eliminated from bidding on a job because they haven’t yet built up a list of references. With those contractors, he suggests checking their training.

“There are capable people who are just starting out, in the business” he says. “They have to start somewhere.”

Denny says communication between contractor and homeowner is most important, whether during the bidding process or on the job. He says any job will have issues pop up that are out of the contractor’s control, but he must still explain those to the homeowner.

“When you talk about it in the first place, problems are eliminated,” Denny says. “It’s when there’s an extra bill or something not up to standard that makes people upset.”

Denny says the number of contractors has been thinned by the slumping economy. He says a lot of the bad contractors haven’t survived the past five years of economic struggle, so the chance of hiring a good contractor is much better today.

“It’s a good time to build a new home or to remodel right now,” Denny says. “People are very competitive on their bids. Finance rates are down.”

There’s a lot to be gained through home improvement, such as increased functionality, new appliances, efficient systems, updated décor and additional living space. Following expert advice helps you realize the pure enjoyment of making a home really “your own.”