Boulder Home Improvement Projects | Cost of Home Remodeling Projects vs. Value Increase

Home Improvement Projects: Are They Worth the Cost?

home remodeling projects, home improvement, cost vs value It's been a passion and even a career for some people in the last few years: remodeling houses. It's not difficult to walk through most any home and come up with a list of home improvement projects that could be done: remodeling the basement, making over the home office, modernize the kitchen, spruce up the bathrooms, etc. Many homeowners simply tackle the most obvious of these and feel comfortable that they are enhancing the value of their property. While it's true that in most cases they are, what many times goes unnoticed is the inherent relationship between cost vs. value.

Real estate appraisers are taught 3 fundamental approaches to value: the cost approach, the market approach, and the income approach. The cost of reproducing the property is only balanced against its value (using the other approaches) in order to quantify either profit or depreciation – not value per se. So, even the appraisal process itself is based on the fact that cost may not equal value.

Cost vs. Value Trend According to Remodeling Magazine's 2009-10 Cost vs. Value Report, the 7-year trend in return on project cost has been declining, from an average of 82.5% in 2003 to 63.8% (see chart). These results suggest that homeowners should consider at least part of a home improvement project’s cost as enjoyment and use of the property - not purely value enhancement. If you're selling your home, this is why tackling a large construction or home improvement project like finishing a basement or remodeling a kitchen, is usually not profitable. Curing a defect or functional flaw in the property is always a possible exception, i.e. expanding and remodeling an otherwise functionally obsolete kitchen, but typically the market is not going to recognize 100% of the cost as added value.

The following links will allow you to review the referenced Cost vs. Value report, click on results for different regions of the country, click on individual remodeling projects for a detailed summary, read past-years' reports, and more. One of the results of the national decline in the real estate market in the past few years is that the cost vs. value "spread" has gotten wider, as costs have risen and home values have declined. This should sharped the focus on this issue.

For over 20 years now Remodeling Magazine has published this report on cost vs. value, breaking down home remodeling projects, their cost and estimated value increase by region. Review the 2009-2010 Mt. Region report here, but with the one exception of a front door replacement returning over 100% of the cost, it's critical to note that all other home improvement projects returned less than their cost. If you look at the numbers for the Denver real estate market vs the Mt. Region as a whole, these trends are consistent.

Under the right circumstances and without expecting to spend $500 to "enhance" the value of your home by $5,000 overnight, home improvement projects can be very rewarding. They can make your home more comfortable, more functional and even more inviting. In fact, it's possible to significantly reduce your property's time on the market (increasing your net profit), by making some minor improvements or taking care of deferred maintenance. Remodeling Magazine's Cost vs. Value report is not intended to be specific to any one house or neighborhood, but even on a regional level it has consistently demonstrated a very important point about the cost vs. value relationship in home remodeling projects.

home remodeling projects, cost vs. value Here's our free offer: If you're considering any kind of significant home improvement project or if you just want to have us evaluate the most cost-effective way to "spruce up" your home for eventual sale, please submit the following form to us and we'll provide a free analysis that we hope will help.