INSIDE REAL ESTATE: Adding up the costs vs. the value of a home remodel
According to the cost vs. value report published by Hanley Wood LLC, in 2014, mid-range remodeling projects vary greatly when comparing actual job cost to resale value.
One project where owners can expect a 100 percent return, particularly in Alaska’s cold climate, is the addition of a garage. That job cost is estimated at $55,120 and has a resale value of $57,500 that, interestingly enough, is significantly more than an appraisal gives for a garage.
Other remodeling projects which come close to recouping their job cost, according to the report available online at www.costvsvalue.com, include an attic bedroom remodel, basement remodel, bathroom addition and wood deck additions.
Costs recouped tend to best occur when useable square footage is added or completed, such as finishing a basement or attic.
However, the kitchen remodel, which is ever so popular as it is the heart of every home, does not recoup job cost. A major kitchen remodel, including cabinets, countertops, lighting and flooring, has an estimated cost of $62,069 while only increasing the resale value by $20,000 or returning only 32.2 percent of its job cost.
Minor kitchen remodel at $21,398 only increases resale value by $5,000 or 23.4 percent. Upscale remodeling has even less return on all jobs. That’s when personal preference takes over and owners order Italian marble, Miele appliances. custom wall paint with multiple applications and made to order light fixtures.
It’s hard to say “no” to that $500 kitchen faucet but just don’t think you will receive any value for it when it’s time to sell. Although considered part of remodeling, window, roof, garage door replacement are really maintenance issues and have less than 50 percent return on job cost.
So why do remodeling costs not return dollar-for-dollar value? Demolition and inconvenience can add 20 to 25 percent to the cost of any job. The tear out or tear down has labor and permitting costs.
Plus, there is the unknown and unexpected as to what’s behind that sheetrock. Frequently, plumbing and electrical have to be moved which requires the hiring and coordination with subcontractors.
Most owners continue to live in their home while being remodeled which frequently creates confusion and delays over scheduling. A day lost is also a day’s worth of costs. Licensed, bonded and insured remodelers have the same overhead and administrative costs as homebuilders with a residential endorsement.
By state law, subcontractors are only allowed to work in their licensed field. They should not be used as a general contractor. Nor should your friendly handyman be used for any significant remodeling.
Remodeling a home versus buying new is a personal lifestyle choice. Most homeowners simply pay cash for any remodeling whether it’s $18,000 for a midrange bathroom redo or a quarter middle for an upscale master suite addition.
Just don’t think you will recoup those dollars when it comes time to sell.