I’m in the middle of a bathroom remodel, so things have been hectic in my world. But beyond the noise and dirty house, how much value is this going to add? If I spend $15,000, my home will be worth $15,000 more, right? Let’s talk about it.
Dollar for dollar: It’s rare in real estate to spend a dollar and get a dollar back in value. It seems like it should be easy to increase value like it is on HGTV, but even if you look at the Remodeling 2018 Cost vs. Value Report, hardly any items on the list give close to a 100% return compared to the cost. For instance, a bathroom remodel is said to only add 68.2% of the cost to the value, and an upscale kitchen remodel is said to only recoup 46.5% of the cost in the resale market. Yikes. That’s pretty far from 100%.
Tub example: Here’s an example about cost vs value. Tubs like this can easily run $3,000 to $5,000 for just the tub alone, and based on conversations I’ve had with owners it’s not uncommon for someone to have spent $6,000 to $15,000 for a set-up like this. The tub is wonderful for someone who needs it, but in terms of value it might add very little if anything (classic functional obsolescence). In fact, many buyers might count it as a negative because it’s something they’ll likely tear out. Thanks Gail Robards for the photo.
Big point: I’m actually not a huge fan of published cost vs value lists because I wonder where the data comes from. Also, do the numbers make sense in every neighborhood and price range? Probably not. Yet I find these lists are still useful in conversations. An owner might say, “I spent $22,000 on a bathroom remodel, so my home is worth $22,000 more now.” Well, firstly let’s realize the remodeling lists don’t even give you $22,000 in value, so it’s probably a good idea to lower expectations (before the appraiser gets out there especially). Most of all, let’s look to the comps with similar features. Are they selling for $22,000 more? That’s what matters most because real estate value is about what buyers are willing to pay for something – not the cost. Thus an owner might have spent $70,000 on a remodel, but what are buyers paying for similar remodeled homes in the neighborhood? That’s the most relevant question, and one which appraisers will focus on when coming up with a value.
My bathroom remodel: Here are some progress shots for my bathroom remodel. We went with a tile floor that looks like wood, subway tile in the shower (classic look in my mind), and a white quartz counter. This bathroom only had a stand-up 1950s shower, so part of the remodel involves moving the shower to the existing tub. This left a huge space, so I’m building out shelves in the old shower. Eventually these shelves will be stained a darker brown to match everything. And this is Ollie, our rescue dog.
I hope that was interesting or helpful.
Questions: What types of conversations do you tend to have about cost vs value? Have you ever used actual cost vs value figures like this to help conversation flow? I’d love to hear your take or any stories.
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The market has continued to soften, though it’s not really all that soft. Inventory is up, price reductions have increased, sales volume has been dropping, it took three days longer to sell last month in the region, and price metrics are down about 1% from the height of summer. Overall the market is clearly slowing down for the season, though it’s not painfully dull like it was in 2013 or 2014 during the fall. This is a key to understand because when saying values are “softening” some interpret that to mean the market is really slow or crashing. But that’s not what I’m saying.
