August 24, 2000

Fix-up, remodel or move

Remodeling, especially during the warmer months, seems to become a larger part of the real estate umbrella. The guidelines underneath that billion-dollar cover continue to be the same - location, location, location. Unless you are staying put or simply have the cash to make your place as comfortable as you wish, one of the primary considerations often is return. Will the cash spent on the remodel be recovered when you eventually decide to sell?

Outdoor swimming pools rarely fly in Fairbanks. And, in the Puget Sound area where telecommuting often comes with the rain, home offices often post one of the highest returns in the country.

Remodeling magazine is one of the many publications that conduct an annual survey that conducts a cost versus return survey for projects done in homes that were resold a year later. The results were not surprising  - consumers chose minor kitchen remodels and bathroom additions as the two most popular projects for 1999-2000.

According to the survey (www.remodeling.hw.net), the national average outlay for a minor kitchen remodel was $8,655 with an average return of $7,041 or approximately 81 percent of the original investment. The return percentage varied depending upon the housing market with San Francisco(142), Minneapolis-St. Paul  (134), Indianapolis (100) and Seattle (98) showing far greater returns than the national numbers.

The bathroom addition showed a national average cost of $13,918 with an average return of $10,000 or approximately 72 percent of the cost. The return again varied depending upon location with Seattle leading the way (122 percent), San Francisco (115), Minneapolis-St. Paul (70) and Indianapolis (60) checking in above, and below, the national gauge.

If return is the prime objective, one option is to put major remodeling decisions into the hands of the new buyer, particularly if you are going to be moving in fewer than 48 months and the rate of return on the work shows an amount less than the initial outlay. That idea makes a lot of sense, especially when you consider the number of homes now being purchased and then "gutted" or "scraped" by the new owner as soon as the ink dries on the deal. Clearly, individuals have their own ideas of how places and spaces should be used.

A new type of survey was recently released by HomeGain (www.homegain.com), an online consumer resource that matches home buyers and sellers with competent agents. HomeGain's Home Sale Maximizer tool was based on responses from 2000 real estate professionals regarding  10 moderately priced, best-return projects. The projects ranged in price from $80 ("lighten and brighten") to $2,767 (replacing the carpet).

According to the Home Sale Maximizer, less is more.

"Forget about remodeling the kitchen or building a deck out in the backyard just before you sell," said Bradley Inman, chief executive officer of HomeGain. "It sometimes takes years for those things to pay off.

"It's the little things that help homeowners yield top dollar and improve the salability of their home. Agents know what pays off and what doesn't, so their advice on how to spend wisely and get the biggest bank for the buck carries a lot of weight."

Some of the cheapest suggestions are glorified cleaning procedures that some consumers - often landlords - don't spend the time and effort to complete. For example: "Lighten & Brighten - Buyers look for space and comfort. Bright light can make a small home appear larger while soft light provides a warm, cozy atmosphere.

Top tips: Clean all windows, inside and out; keep curtains open, using natural light; use the brightest light bulbs possible (with correct wattage); install dimmer switches and create lighting for different occasions."

The approximate costs to lighten & brighten are listed as $86-$110, netting an increase in sales price of $768-$935, for an average return of 769 percent.

If you intend to make improvements - for comfort or return  - consider how it will fit in with the neighborhood scheme. Veteran agents suggest you ask yourself the following questions:

• What kind of rooms do the homes near you contain?

• Will your new look significantly alter the exterior?

• What are the values and/or the recent sale prices in the immediate area?

• Is yours the only small, or large, house in the area?

Big or small, don't forget heavy elbow grease is worth its weight in gold, inside and out.

Previous columns:

• Limiting renters in condos, 08-17-2000
• New mantra: location, location and wired, 08-10-2000
• Tips on buying property in Canada, 08-03-2000
• Manufactured homes are improved and so is financing, 07-27-2000
• New wrinkle in reverse mortgages, 07-20-2000
• Referrals offer risks, rewards, 07-13-2000
• Vacation is no time for worrying about escrow, 07-06-2000
• AIRD will mean big changes for appraisers, 06-29-2000