Renovations

• Renovations that add the most value to a home are remodeled kitchens and bathrooms, returning from 75 to 100 percent of the investment at the time of sale.
• No return is guaranteed, however.  It all depends on the quality of the remodeling and the materials used.  Granite, tile, or Corian kitchen countertops, for instance, will fetch a higher price than Formica.
• Another key element is how well the remodeling fits in with the overall style of the home and neighborhood.  One that’s out of place can actually diminish a property’s value.
• A third bedroom addition to a two-bedroom home is another valuable investment.  So will the addition of a second bathroom to a one-bathroom home.  But additions beyond that tend to have diminishing returns.
• Renovations that improve the indoor/outdoor living of a home usually have a high return value, such as adding French doors or a deck off the kitchen of a home that has no direct yard access.  Master bedroom suite renovations and family room additions are also usually good investments.
• A swimming pool or spa addition might return only half of what it costs.  Many buyers with small children don’t want pools.  Some buyers will actually fill in a pool to create a larger, more usable yard.  In these cases, a pool will detract from the property’s value.  Naturally, pools in hotter climates will tend to have greater value.
• How much you pay for the seller’s improvements is ultimately determined by the market value of the property.  It’s possible that the seller’s improvements could increase the property’s value above the original cost plus the cost of improvements.  This would be the case, for instance, if a functionally obsolete property were turned in to a high-demand home.
• Make sure you’re getting your money’s worth on improvements:

1. Ask for copies of city building permits, architectural plans, and invoices, if available.
2. Work done without permits might cause problems, such as not being appraised as full value.
3. If the appraisal comes in lower than the purchase price, you might not get the full loan that’s needed. 
4. It’s usually possible to get a permit after the fact, although penalties might be charged and walls might have to be opened for city inspectors.

• The best buys are usually remodeled houses where the sellers did a top-notch job for themselves, as opposed to renovations completed by a developer.  Contractors who buy a property to fix up and resell will include a profit margin to the list price, and they often use cheaper materials.