A: Many homeowners believe that renovations – such as finishing an attic or replacing a water heater – can improve the equity of their home. Many experts say, don’t bank on it. But by comparing lists on ways to improve your chances of getting a good appraisal, you can find some consensus on what might work.
For example, needed repairs that cost more than $500 and are left undone will lower your home’s value. Other popular ideas for enhancing your appraisal include:
Other than that you really have to look at each improvement based on its potential return on investment.
For example, turning a basement into an extra room may give back only 66%1 of what you invested.
However, because it’s above ground and therefore considered a square-footage increase in living space, turning an attic into a bedroom can earn back as much as 73%2 – but that’s still less than what you invested.
The fact is, most full-scale renovations end up costing more than what you get back. For example, a bathroom remodel only gives back about 62%,2 and a kitchen remodel gives back 66%2 if you’re lucky.
Another thing you need to be careful about is pricing your home out of the market by spending too much on renovating.
If your home value is $200,000 (based on other homes in your neighborhood), putting $50,000 into a renovation could make your home the most expensive on the block and price it out of the market.
So before investing in any renovations, be aware that simpler, less elaborate efforts like painting and installing new faucets and light fixtures might be all you need to improve the equity of your home.
1 Mariner Finance Blog, 5 Home Improvement Projects that Add Value to Your Home, accessed March 2014.
2 U.S. News and World Report, Money, Renovations that Yield the Best Return on Investment, October 2012.