3 ms·

> not justified as some sort of nebulous "investment". I can never understand on these HGTV shows how someone does $X work to a house, then they get appraised

> not justified as some sort of nebulous "investment". I can never understand on these HGTV shows how someone does $X work to a house, then they get appraised and someone says "you increased the value of the house by Y%". There's even a whole show based around it which I can't think of, where they appraise your upgrades and how much value it added. Strictly speaking, I'd think that the moment the construction workers walked out, you had increased the value by $X, i.e. whatever it just cost you to get them to do the work, and from that moment on it's depreciating. Maybe there is some "convenience" factor if you sold right then as the next person wouldn't have to bother with the upgrade; but they're also not getting new renovations (and presumably warranty, etc). Why is your house suddenly worth so much more when all you did was get a kitchen guy to come in an do his thing?

mindslight 15y ago
Fundamentally they're goading people to spend money on themselves and call it "investment". Sure, some improvements can certainly make a buyer value a house higher than the cost of doing the improvement (for example, one busted-up room or lots of peeling paint could cast the whole house in a bad light regardless of the rest). But your $20K new kitchen is most likely never going to specifically be worth $20K to someone else (especially after time passes). However, another large part of the problem is that a bank will deny/scrutinize giving a new homeowner an additional loan to remodel their kitchen, but an already-done kitchen will be included in the appraisal for the mortgage.
cpher 14y ago
That's not the whole story, though. Sometimes you need to remodel just so you can sell your home, i.e. make it competitive with the neighborhood. We're a couple of months away from rehabbing our master bathroom because it's so bad that it would be hard to resell it in this market. So, I think you're looking at it from the wrong perspective. It's not a strictly calculable amount when you re-hab a home--part of the subjective monetary value is what a future owner doesn't have to do after making a purchase.
Lazare 14y ago
Increased the value by $X? Oh heavens no, that's far too optimistic. You see, one of the joys of being a homeowner is that you have the option of improving your house so it's better to live in...for you. That might mean granite countertops, or that shade of fuchsia you LOVE on the bathroom walls, or a hot and cold running Pepsi, or a built in movie theatre, or a library, or...well, whatever it is you, personally, like. We can assume that - unless you screwed up or got ripped off - that you personally value whatever improvements you make at more than their cost. "Wow, the main hallway is a halfpipe so I can practice my skate moves! I'd have paid $50k for that, but it only cost me $30k to have it built! SCORE!" But, human taste being what it is, the next guy probably doesn't value whatever you built as highly as you do. Pretty much everyone likes stuff like having a closet in every bedroom; that's why houses tend to have them. But not everyone really cares about having a mirrored ceiling in the kitchen (perfect for cake decoration!). The fact that every house doesn't have them is a good sign that most people value this "wonderful" feature as being less valuable than the cost to install it. Which is why, as a general rule, and with a few very specific exceptions, any improvement you make will always add less than $X to the market value. There's a few areas where you might be able to break even or even gain on the deal. If there's a gaping hole in the lounge, fixing that is probably worth it. Sure the next owner could fix it too, but you're going to have a hard time selling it like that. If you have vintage 1970s shag carpets and avacado wallapper, this might also be a good candidate. (Although you might luck into finding a buyer who'll pay more for the nostalgia value, I guess...) But everything else (and especially any remodelling of an otherwise perfectly functional kitchen or bathroom just to add nicer fittings, which is stupidly common mistake) is almost certainly going to lose you money if you're just looking to sell the house. If it costs $X, it will (almost) always add much less than $X to the market value.

mindslight 15y ago

Fundamentally they're goading people to spend money on themselves and call it "investment". Sure, some improvements can certainly make a buyer value a house higher than the cost of doing the improvement (for example, one busted-up room or lots of peeling paint could cast the whole house in a bad light regardless of the rest). But your $20K new kitchen is most likely never going to specifically be worth $20K to someone else (especially after time passes). However, another large part of the problem is that a bank will deny/scrutinize giving a new homeowner an additional loan to remodel their kitchen, but an already-done kitchen will be included in the appraisal for the mortgage.

cpher 14y ago

That's not the whole story, though. Sometimes you need to remodel just so you can sell your home, i.e. make it competitive with the neighborhood. We're a couple of months away from rehabbing our master bathroom because it's so bad that it would be hard to resell it in this market. So, I think you're looking at it from the wrong perspective. It's not a strictly calculable amount when you re-hab a home--part of the subjective monetary value is what a future owner doesn't have to do after making a purchase.

Lazare 14y ago

Increased the value by $X? Oh heavens no, that's far too optimistic. You see, one of the joys of being a homeowner is that you have the option of improving your house so it's better to live in...for you. That might mean granite countertops, or that shade of fuchsia you LOVE on the bathroom walls, or a hot and cold running Pepsi, or a built in movie theatre, or a library, or...well, whatever it is you, personally, like. We can assume that - unless you screwed up or got ripped off - that you personally value whatever improvements you make at more than their cost. "Wow, the main hallway is a halfpipe so I can practice my skate moves! I'd have paid $50k for that, but it only cost me $30k to have it built! SCORE!" But, human taste being what it is, the next guy probably doesn't value whatever you built as highly as you do. Pretty much everyone likes stuff like having a closet in every bedroom; that's why houses tend to have them. But not everyone really cares about having a mirrored ceiling in the kitchen (perfect for cake decoration!). The fact that every house doesn't have them is a good sign that most people value this "wonderful" feature as being less valuable than the cost to install it. Which is why, as a general rule, and with a few very specific exceptions, any improvement you make will always add less than $X to the market value. There's a few areas where you might be able to break even or even gain on the deal. If there's a gaping hole in the lounge, fixing that is probably worth it. Sure the next owner could fix it too, but you're going to have a hard time selling it like that. If you have vintage 1970s shag carpets and avacado wallapper, this might also be a good candidate. (Although you might luck into finding a buyer who'll pay more for the nostalgia value, I guess...) But everything else (and especially any remodelling of an otherwise perfectly functional kitchen or bathroom just to add nicer fittings, which is stupidly common mistake) is almost certainly going to lose you money if you're just looking to sell the house. If it costs $X, it will (almost) always add much less than $X to the market value.