Looking to Improve Home Value? Avoid These Projects With Terrible ROI

Celebrities who perform dramatic home makeovers on TV and the average homeowner on Main Street live in two very different worlds. One has the budget of a reality show to foot the bill for materials and labor, and the other has whatever’s in their bank account and tight profit margins.

So halt your plans for a $50,000 chef’s kitchen and luxurious master suite inspired by Fixer Upper until you know all the facts: When the purpose of your project is to improve home value and boost asking price at resale, it’s smart to spend less on several smaller cosmetic improvements rather than one or two major room overhauls. Then, you’ll need to remove your personal bias from the design decisions, or risk turning off buyers from your custom taste.

“When a seller updates the home based on personal preferences, there’s probably a 70% or 80% chance you’re going to make the wrong decisions,” advises Cleve Gaddis, a top-selling agent in Johns Creek, Georgia. “A professional agent has a complete understanding of what current buyer preferences are, so they can tell you where to spend money to appeal to the largest number of buyers.”

Let’s take a look at some of the most popular pricey projects that have the lowest ROI and the wiser, low-cost upgrades that offer a bigger bang for your buck.

Start with what HomeLight’s data says about home renovation project ROI

In the first and second quarter of 2019, HomeLight surveyed a total of 1,300 top performing real estate agents across the country about the average returns on common home renovation projects.

To do so we provided respondents with an estimated average cost for completing that project based on data collected from HomeAdvisor.

We then asked respondents to provide an estimate of the likely dollar value they believed the project would add to a house at resale. In comparing the average cost to top agent estimations, we then calculated the estimated ROI for each projects. 

What we found is that in general, you’re better off spending less money on smaller scale projects than trying to recoup your spend on bigger renovations.

For example:

• Cleaning and decluttering no doubt help your home show better, but top agents also say these simple tasks literally add to your bottom line.
• If you spend $167 on a deep clean, you’ll recoup on average $1,728, a 935% ROI.
• Drop $486 on decluttering, and you can add $2,584 to your bottom line, a 432% ROI. Pass up these easy tasks and you’ll leave thousands of dollars on the table.
• Kitchen and bathroom upgrades are essentially a wash. There’s a greater chance of losing money on these huge projects.
• As for the outside, your top two projects will be basic yard care (352% ROI) and fresh mulch (126% ROI). Skip the high-end landscape, which has a -9% ROI.

Check out a summary of the results below in our custom infographic:

Using our own data and other credible sourcing from the National Association of Realtors and top real estate agents in the HomeLight network, we also put together this list of basic do’s and don’ts when it comes to home renovations.

1. DON’T: Drop big bucks on a full kitchen renovation

If you’re in a house built more than a decade ago that’s never been remodeled, you’re living with an outdated kitchen. And if you’ve spent any time cooking in it, chances are you’ve imagined ripping it out more than once.

Prepping to sell the place may seem like the perfect time to invest in finally making that dream kitchen come true, but it may shock you how much that dream will cost.

In a 2017 Remodeling Impact Report, the National Association of Realtors (NAR) found that on average, homeowners spend around $65,000 on a full kitchen renovation, but only see around a $40,000 ROI—that’s only a 62% return.

According to data from HomeLight, top real estate professionals estimate that on the average smaller-scale $23,140 kitchen upgrade, sellers would recoup $23,122 at resale, for a -0.08% ROI. So… better, but you still don’t break even.

And if you make that major kitchen renovation without consulting an agent, you’ll likely spend more money than necessary on the wrong design choices.

“One of my clients chose all of her own upgrades, and the combination of the countertop with the backsplash couldn’t have been worse if she had intended to pick the worst,” recalls Gaddis.“It took an extra three months to sell the home, we wound up having to change out the backsplash, and she spent twice as much on the upgrades as she should’ve in the first place.”

2. DO: Give the kitchen a less than $5,000 makeover

The truth is, Gaddis’ client could have achieved the look of a fully remodeled kitchen by spending just a few thousand dollars on the right items.

“If you’re improving the kitchen, you’ll never get your money back by changing out the cabinets,” advises Gaddis. “Instead, just do cosmetic fixes like painting the existing cabinets, changing out the cabinet hardware, and replacing the countertops with granite.”

At an average of just under $3,000 nationwide, replacing those countertops is the most expensive part of this minor kitchen makeover. The final cost depends on the material, edging, and backsplash options you chose.

Install those countertops, repaint the cabinets for as little as $600 to $1,000—plus invest as little as $500 in replacing the sink, faucet, and cabinet hardware—and the kitchen will look like a full remodel for less than $5,000.

3. DON’T: Completely renovate the bathroom

As arguably the grungiest place in the house, on the one hand completely remodeling the bathroom makes sense. And at an average cost of $30,000, it’s cheaper than redoing the kitchen.

Unfortunately, while it’s technically cheaper, the ROI for a bathroom model is worse. You’ll be lucky to get a $15,000 return, which is only 50%.

As for a less intensive bathroom upgrade? HomeLight’s survey data indicates that if you spent smaller-scale $10,284 bathroom upgrade, you’d get back $10,180, for a -1.00 % ROI.

4. DO: Replace outdated fixtures

Want to know what shows the age of your bathroom the most? It’s the fixtures—both faucets and lighting. Luckily, you can achieve a “brand-new bathroom” look by swapping them out without spending a whole lot.

“In the bathrooms, it’s all about the mirrors and the fixtures,” explains Gaddis. “Light and faucet fixtures just need to be current. And if you have old mirrors, you can add a framed border, or install smaller mirrors over his and hers sinks.”

On the surface, replacing fixtures sounds pricey, at almost $500 per faucet—but remember a big chunk of that is labor costs. You can reduce that labor cost a bit by having all plumbing fixtures at once, including all shower, tub and sink faucets in both the kitchen and bathrooms.

The same is true of replacing outdated light fixtures in the bathroom.

Instead of paying an electrician around $500 to install one light fixture, negotiate a deal to replace lighting throughout the house.

Keep costs low by purchasing mid-range priced faucets and light fixtures in advance—with advice on style and finishes from your real estate agent. Then place each one in the room where you want it installed to insure each fixture gets put in the right place.

You can save even more if you DIY these projects—but only if you can guarantee a professional-grade finished look. The last thing you want is to pay for a fixture twice, because your DIY attempts resulted in fixtures installed sloppily or incorrectly.

Also keep in mind that DIY installations aren’t as easy in the bathroom because of cramped quarters and hard-to-reach nooks and crannies.

For example, maybe your successful installation of new tile flooring in the squared-off floorspace of a bedroom has your confidence up. Unfortunately, in the bathroom you’ll need to make finicky cuts (and countless recuts) to fit square tiles in awkward angles around the sink, toilet, and tub.

5. DON’T: Finish the basement

“The bigger the house, the higher the price.” This sounds right, but it’s only true in the broadest terms.

It is true that a 2003 NAR study found that each additional 1,000 square feet of living space increases the selling price by around 3.3%. However, where you add that extra square footage matters.

Unless you’re adding a ground-floor bonus room (which can also have a negative impact by shrinking your yard space), you’re not going to see that high of a return simply by finishing your basement into additional living space.

“Some clients think they can finish the basement area in a home and make a good return,” says Gaddis. “The fact is, basement square footage in the Metro Atlanta area is probably only worth about one-third per square foot compared to the rest of the house. So you’ll never get your money back.”

On average, you’ll spend around $40,000 getting your basement up to code to be counted as additional living space, and only get $25,000 back for your trouble—that’s just a 63% ROI.

And that’s if you don’t run into any trouble. Finishing a basement isn’t as simple as remodeling an above-ground room.

For starters, you’ll need specialty drywall that can stand up to damp, mold-prone basement conditions. Then there’s all the work it takes to build up accessible facades to hide your home’s systems, like the water heater, furnace, plumbing, or laundry room.

In other words, the extra work and expense it takes to make a basement livable simply isn’t worth the investment if all you want to do is increase your home’s value.

6. DO: Repaint and replace carpeting in existing living spaces

Rather than pouring money into adding a few extra square-feet of living space, it’s smarter to make the existing living spaces more inviting and livable—with fresh paint and new flooring.

Fresh paint is kind of like the “new car” smell for houses—which is why most agents advise clients to get the home interior repainted, even if that’s the only upgrade they can afford to make.

Having the whole home interior painted costs a national average of $6,900, but chances are you can get your home painted for less than that.

A lot of figures factor into painting costs: the square footage, the brand of paint you use, how many colors you choose for the rooms and walls, whether or not you paint the baseboards and trim a second color. The choices are endless.

Who you choose to do the job also makes a difference. Unless you have the time and talent to go DIY, it’s smarter to pay a professional to do the job right—and faster, too.

The situation is the same when it comes to flooring. According to the 2017 NAR report, installing new wood flooring offers a 91% ROI, while refinishing existing hardwood floors provides a 100% ROI.

This is a modest estimate when you consider how turned off buyers can get by old, stained, heavily-trafficked carpeting. While there’s no guarantee that you’ll get make money on your home by installing new flooring, you won’t lose money on that investment.

And most agents will tell you that new interior paint and flooring will go a long way toward selling your home faster—which will save you money in the long run.

If you do decide to go with a pro to replace the floors and the walls, make sure to check with your agent first.

Not only can they help you pick the colors and materials, they’ll likely have connections to pro painters and flooring guys who’ll cut you a deal based on their referral.

7. DON’T: Install a new HVAC (unless it’s 100% broken)

Is your HVAC old, less-than-efficient, and potentially on its last legs? Even if all of that’s true, that doesn’t mean you should spend $4,000 to $15,000 to replace it before selling the house.

“Home sellers have to be very careful upgrading the systems, like the HVAC. It needs to be in good repair, but it doesn’t need to be new,” advises Gaddis.

“Expensive upgrades that buyers can’t see and get excited about won’t add nearly as much value as cosmetic improvements. If you spend up to $8,000 on replacing it, you’d have a very hard time getting your money back. Buyers won’t pay an extra $10,000 for an HVAC, but they’ll pay $20,000 more for a nice kitchen all day long.”

The only time you need to completely replace the HVAC is if it’s totally broken and can’t be repaired—and even then the buyer may be able to work the replacement cost into the home sale so they can buy the HVAC they want.

8. DO: Replace the thermostat

The smarter play is to simply pay $70 to $150 for servicing so a qualified technician can get your existing H-VAC into the best possible shape.

Quite frankly, most buyers aren’t thinking about the age of your home’s inner workings—unless they’re not working. The only thing that’ll get them wondering about your HVAC’s condition is an outdated, mechanical thermostat.

The truth is, you can actually install a new digital thermostat to control your old H-VAC. Even the fanciest, smart thermostats that can be controlled via phone apps can work on most HVACs.

So for the low cost of $20 to $300 (depending on the thermostat you choose), you’ve got the bells-and-whistles look of a state-of-the-art H-VAC that’ll appeal to tech-savvy buyers—without the big expense of replacing the whole unit.

And if you have that smart thermostat ready to install when you get your HVAC serviced, the technician may be willing to install it for you for a small additional fee, or even for free.

Spend less on renovations to make more money back

The cost of selling a house (plus moving expenses) is enough strain on your wallet—there’s no need to spend big bucks on one major renovation when a handful of minor upgrades throughout the home will actually net you a bigger ROI.

“A good agent will not let a seller spend $20,000 to get $20,000 back, because that doesn’t make any sense. You’re better off just selling the house as-is,” says Gaddis.  “The best agents work to help clients get two to three dollars back for every dollar spent. And those agents won’t be guessing. When you sell a lot of houses, you get pretty good at the science behind ROI.”

So when you’re prepping your home for sale, pick up the phone and consult with your real estate agent before you spend a single penny on home improvements.

Article Image Source: (Annie Spratt/ Unsplash)