Thinking about renovating before you sell? You might want to think again.
17 June 2019
Having been a renovation contractor in Edmonton for over 30 years, our customer base expects us to deliver value in a variety of ways. When we are called on to provide a lasting home improvement solution—we know we can deliver. In this way we consider renovations a long-term investment.
But what happens when we are asked to provide improvements in preparation for the sale of a home? Customers in this case are often concerned the current condition of the property will not fetch its highest potential price. Are we able to deliver a return on investment on this kind of renovation?
This is a challenging question to address, in part because of the emotional connection a customer may have to their house, and because each property is unique. But as they say, the numbers don’t lie. Consider the following recent studies on the subject.
The Appraisal Institute of Canada estimates the following ROI for renovations:
Kitchen: 75 – 100%
Bathroom: 75 – 100%
Floors: 50 – 75%
Energy Upgrades: 50 – 75%
Although these percentages are broad ranges, they do not provide a strong case to renovate prior to resale.
Another source of data comes from the American 2019 Cost Versus Value Report which compares renovation projects with the value these projects retain at resale. The data provides even stronger evidence that homeowners should be cautious in renovating prior to resale (Floors and Energy Upgrades not available in this study).
Value of renovation cost retained at resale:
Kitchen: 59.7 – 62.1%
Bathroom: 60.2 – 67.2%
Some customers have commented that even though a complete renovation may not provide a clear return on investment, it may help them sell a home faster. They believe the market prefers a move-in-ready home. Other customers have commented their home has been extensively updated and only has a room or two left in need of attention to make the house consistent. Are these valid reasons to renovate prior to listing?
Although we acknowledge there are exceptions to every rule, we would encourage customers who want to proceed with improvements prior to selling their home to be conservative with their approach and realistic about the benefit the work will bring them in terms of resale value.
Low Cost & Partial Updates
There are of course things you can do to increase the saleability of a home, that are no cost or low cost, including: decluttering, cleaning the home and yard, a coat of paint and in some cases staging the rooms if the house is empty.
Partial or lower cost renovations might also be a solution as an alternative to a complete redo as well. Examples include: leaving a tub or shower untouched (saves half the cost compared with completely renovating a smaller 3 piece bathroom); leaving kitchen or bathroom cabinets in place and updating them by painting or refacing; replacing countertops and fixtures only instead of cabinetry, focusing on exterior or curb appeal updates only, etc.
Based on the evidence, larger renovations may not be the best path prior to resale. We are always happy to brainstorm your needs with you. Chances are though your next big project might best be saved for the place you will call home for many years to come.
Chamber Member blog submission by Camillo Esposito, Owner of Independent Bath & Renovations: https://www.independentbath.com/