Effect of Home Improvements on Appraisal

Remodeling

• In most cases, a remodeled kitchen will yield the greatest return on investment for appraisal purposes. Remodeled bathrooms come in second. Replacing windows and floor coverings do not generate much in the way of additional value, but can be aesthetically pleasing.

Additions

• Most additions require a building permit and must conform to the original structure. The extent of the addition will determine how much value is added. For example, an in-law set-up will generate more value than the addition of a family or recreation room.

Geography

• Geography plays a large part in determining how much value is gained by specific home improvements. For example, in cold weather climates, the addition of a two-car garage would probably yield more value than in more temperate climates such as Southern California.

Type and Quality

• Generally speaking, a more extensive and costly remodel/addition does not necessarily equate to commensurate value in an appraisal. A high-end kitchen remodel might cost $50,000 to $100,000 in some cases. However, the local real estate market may only recognize a value of $15,000 to $25,000 for such a remodel. It is best to stay within the parameters of your neighborhood or market when considering making improvements.

Relevance

• Again, work within the scope of your environment. In a new subdivision, it obviously makes more sense to focus on landscaping and outdoor amenities, such as a pool, than it does to remodel the kitchen. Conversely, in an older home, it is probably more prudent to update the kitchen and bathrooms.