Thanks to do-it-yourself and inspirational sites like Pinterest and Instagram, hundreds of thousands of Canadians are getting the renovation bug and upgrading their homes for either personal or financial reasons. If you\’re in the market to sell, you may think a few changes here and there will raise the value of your home and land you a better price. While a dated home or worn out fixtures can really hurt your resale value, the saying doesn\’t go “too much of a good thing” for no reason.
It\’s common for homeowners to start renovation projects that will improve their quality of life or add a little luxury to their living space, but if you are planning on selling in at least the next five to ten years, pouring a whole pile of money into fancy upgrades is not the way to go. Will a pool or patio raise the value of your home? Do your research before putting them in – what you find might surprise you.
Through their yearly survey, the Appraisal Institute of Canada (AIC) has compiled a list of renovations that yield the best return on investment, and they\’ve found that year after year, refurbished kitchens and bathrooms head the list, with 75 to 100 per cent of the initial cost recovered upon resale.
Research suggest that most buyers make up their minds within the first two minutes of entering a home, so concentrate your renovation efforts on the things that will catch (and win over) their eye, like the entry way, kitchen, and main floor bath are them.
Keep Up With The Jonses\’ But Don\’t Go Overboard
While there\’s no real calculator to tell you how much you should spend, a good rule of thumb: the amount spent on renovation projects should be relative to the value of the home. A $50,000 bathroom may be a beautiful retreat but it has no business in a $160,000 home.
Here\’s another tip. Steer clear of projects that will noticeably set your house apart from other properties in the neighbourhood. The AIC posts this warning on their site: “If the value of your house exceeds the average market value in your neighbourhood, your renovations will not yield much return. But if your house value is below the average, you can recover a larger part of the renovation costs.” Ideally, you\’ll be able to recoup the cost of your renovations when you sell, not be further out of pocket.
Most moderate renovations tend to hold better value than those that are over the top, so just renovate to modernize. If you have a relatively new bathroom that is perfectly serviceable but you just don\’t like it, you can leave the decision to renovate up to the new homeowners. But if the counters are ancient or the tile\’s scream vintage (and not in a good way) you might want to upgrade.
Here are a few other things to take into consideration:
How old is the reno? If it\’s new, the buyer should be willing to pay full price for it, especially if it\’s something they would have done anyway.
What was there before? If you remove something that has value (say, marble counter tops or hardwood floors), subtract that amount from the transaction. I.e. If your original laminate counter cost $600 and you put in a marble counter for $2000, the renovation value is $1200.
Will the buyers appreciate it? A new homeowner doesn\’t necessarily appreciate having to foot the bill for the cost and hassle of a reno, especially if they wouldn\’t have done it themselves.
All in all, when the goal is to add value to your home, you want to keep your renovations moderate, simple, and clean. Buyers want to be able to imagine themselves in the home, so it\’s not the time to show off your eclectic personal style or design prowess. If you must renovate, try to keep the changes functional as apposed to aesthetic, and hire professionals to get the job done right.