Do Home Renovations Increase Home Appraisal Values?

Homeowners acquiring home renovations to increase appraisal values

Home renovations are a popular way to enhance both the comfort and aesthetic appeal of a house, but do they actually increase home appraisal values? The answer isn’t always straightforward. While upgrades like modern kitchens, additional bathrooms, or fresh siding often raise property values, not all renovations have the same effect. In some cases, certain projects can even lower appraisal value. Mischa Fisher, a data scientist and former chief economist at Angi, notes, “Some home projects can actually decrease your home value.”

The key to understanding the impact of renovations lies in differentiating between market value and return on investment (ROI). Market value reflects your home’s worth in the real estate market, while ROI measures how much of your renovation costs are recovered through an increased appraisal value. For example, a garage door replacement with an 88% ROI might significantly enhance value, whereas highly personalized or unconventional features may have the opposite effect. Ultimately, not all home improvements are created equal when it comes to influencing home appraisal value. To ensure your efforts are worthwhile, it’s important to choose renovations that align with market trends, appeal to a wide range of buyers, and deliver a strong return on your investment. By striking the right balance, you can enhance your home’s comfort and aesthetics while making meaningful contributions to its home appraisal value.

Kitchen renovations to boost home appraisal values

Home Improvements That Add Home Appraisal Values

Some home renovations are proven to deliver strong returns on investment (ROI), making them a smart choice for homeowners looking to increase the value of their property. According to Remodeling’s 2023 Cost vs. Value Report and insights from industry experts, these upgrades consistently rank among the top performers:

Kitchen Renovations: Boosting Appeal and Value

The kitchen is often the heart of the home, making it one of the most impactful areas to remodel. Modern, updated kitchens not only enhance daily living but also significantly attract potential buyers, boosting your home’s overall appeal. However, the return on investment (ROI) of a kitchen renovation depends greatly on the scale and approach to the remodel.

Minor Kitchen Remodels

A minor kitchen update offers an excellent ROI, often recovering a significant portion of the cost. These projects focus on practical and aesthetic improvements, such as:

  • Upgrading cabinet fronts, countertops, flooring, and appliances with midrange materials.
  • Refreshing the space with a fresh coat of paint on the walls and ceiling.

Keeping updates modest and avoiding extravagant spending ensures you maximize the value added.

Major Kitchen Remodels

Larger kitchen renovations, while attractive, tend to recover a smaller percentage of the costs. This may involve:

  • Adding new cabinets, an island, extra appliances, and upgraded lighting for a complete transformation.
  • Incorporating high-end appliances, luxury materials, and custom-built features in upscale remodels.

While these projects create a luxurious kitchen, their appeal can be limited to a smaller pool of buyers, which impacts the overall resale value.

Maximizing ROI on Kitchen Renovations

To get the most value from your kitchen remodel:

  • Prioritize practical updates that enhance functionality and appeal to a broad range of buyers.
  • Opt for cost-effective materials and finishes to balance style with affordability.
  • Avoid over-customizing the design, which can reduce the space’s universal appeal.

By focusing on updates that balance personal enjoyment with broad marketability, a kitchen renovation can enhance both your living experience and your home’s value.

Bathroom Remodeling: Does It Add Value to Your Home?

Bathrooms, like kitchens, are key spaces that can significantly impact your home’s market value. Buyers closely evaluate bathroom condition and style, making renovations a popular way to enhance appeal. However, the return on investment (ROI) often depends on the project’s scope and budget. Larger, more expensive renovations typically yield lower returns compared to modest updates.

Midrange Bathroom Remodels

A modest bathroom renovation offers a solid ROI, often recouping a good portion of the investment. These projects typically involve:

  • Replacing outdated fixtures like the bathtub, toilet, and vanity with modern designs.
  • Upgrading finishes such as flooring, tiles, and lighting to refresh the space.

By keeping the updates simple and cost-effective, this approach maximizes the value added without overspending.

Upscale Bathroom Remodels

For larger and more luxurious bathroom remodels, the returns tend to diminish. These projects may involve:

  • Expanding the bathroom, moving plumbing fixtures, and incorporating high-end features such as walk-in showers or soaking tubs.
  • Adding luxury elements, such as advanced toilets or custom cabinetry, which may appeal to a smaller group of buyers.

While upscale renovations can enhance the space dramatically, they are among the most expensive projects and rarely recover their full cost.

Tips for Maximizing ROI on Bathroom Renovations

  • Focus on functionality and modern updates that appeal to a broad audience.
  • Avoid over-customizing with luxury or specialized features that may not resonate with most buyers.
  • Keep the space clean, organized, and visually appealing to highlight its usability.

A well-planned bathroom renovation can improve both the utility and marketability of your home. Prioritizing thoughtful, cost-conscious updates ensures your investment enhances value without overextending your budget.

Energy-Efficient Improvements: A Smart Way to Add Value to Your Home

Energy-efficient upgrades have become a top priority for many homeowners and buyers. These improvements not only lower utility bills but also align with growing preferences for sustainability. Homes with energy-efficient features often stand out in the market, making these upgrades a wise investment.

High-Impact Energy Upgrades

A great example of a high-impact energy improvement is converting an outdated heating and cooling system to an energy-efficient option like an electric heat pump. While this upgrade comes with an upfront cost, it often provides a strong return on investment (ROI), potentially paying for itself over time while increasing resale value.

Why Energy Efficiency Matters

  1. Lower Utility Costs
    Energy-efficient homes are more affordable to maintain, which is a significant selling point for prospective buyers.
  2. Environmental Benefits
    Sustainable features reduce the home’s environmental footprint, appealing to buyers who prioritize green living.
  3. Market Appeal
    Energy-efficient upgrades can make your home more attractive in competitive markets, especially as interest in clean energy solutions grows.

Popular Energy-Efficient Upgrades

  • Installing solar panels to generate renewable energy.
  • Upgrading to smart thermostats for precise energy management.
  • Improving insulation and sealing to reduce heating and cooling loss.
  • Replacing windows with energy-efficient models that enhance thermal performance.

By investing in these energy-efficient improvements, you not only save on energy costs but also create a home that resonates with environmentally-conscious buyers. These upgrades are a win-win for your household budget and your property’s resale value.

Outdoor Enhancements: High-Value Renovations That Deliver

When it comes to renovations with the best return on investment (ROI), outdoor enhancements consistently outperform interior upgrades. For decades, exterior projects have ranked at the top of ROI studies, and recent data confirms this trend. Four of the top five projects with ROI exceeding 100% involve outdoor upgrades, making them some of the smartest investments for homeowners.

Top Outdoor Upgrades

Garage Door Replacement

This upgrade boasts an impressive ROI of over 100%. With a relatively low average cost, it enhances curb appeal and adds substantial value to your home.

Steel Front Door Replacement

A cost-effective improvement that offers a ROI of around 100%, replacing your front door is a simple yet impactful way to elevate your home’s exterior.

Manufactured Stone Veneer

Adding stone veneer to your home’s exterior transforms its appearance while delivering an exceptional ROI of over 100%, often repaying more than its cost at resale.

Vinyl Siding Replacement

Replacing outdated siding improves your home’s aesthetics and insulation, with vinyl siding offering an ROI near 95% and fiber-cement siding close behind.

Fresh Paint and Landscaping

Even smaller updates like repainting the exterior or refreshing landscaping can significantly boost curb appeal without breaking the bank.

Why Outdoor Upgrades Excel

  • First Impressions Matter
    A well-maintained exterior immediately attracts buyers and sets your home apart from the competition.
  • Cost-Effective Improvements
    Many outdoor projects are affordable while delivering substantial resale value, making them a smart investment.
  • Broad Buyer Appeal
    Neutral, high-quality exterior improvements resonate with a wide audience, increasing the likelihood of a quicker sale at a higher price.

Maximizing Value with Outdoor Projects

Focusing on strategic outdoor upgrades can enhance your home’s curb appeal and marketability. Whether it’s a complete overhaul or simple updates, these projects ensure you get the best bang for your renovation buck.

Basement Conversions: Expand Living Space and Increase Home Value

Converting an unused basement into a functional living space is a renovation project that adds both utility and value to your home. By transforming this often-overlooked area, you enhance your property’s appeal without increasing its overall footprint. Finished basements offer flexibility and versatility, making them a desirable feature for modern buyers.

Why Basement Conversions Add Value

  1. Additional Living Space
    A finished basement provides valuable square footage, turning an underutilized area into functional living quarters. This added space can be a game-changer for larger families or those needing extra room.
  2. Flexible Usage Options
    In today’s work-from-home environment, a basement can serve as an office, home gym, media room, or guest suite. These flexible uses align with current lifestyle trends and make your home more appealing to buyers.
  3. Increased Marketability
    A well-designed basement conversion can help your home stand out in the market. Offering potential buyers extra, customizable living space boosts your property’s overall attractiveness.

Key Considerations for a Successful Basement Conversion

  • Permitting and Compliance
    Ensure the renovation complies with local building codes, including requirements for ceiling height, egress windows, and ventilation.
  • Waterproofing
    Address any moisture or water intrusion issues before finishing the basement. This step is critical for creating a durable, comfortable, and healthy living space.
  • Lighting and Design
    To counteract the naturally darker environment of basements, focus on bright finishes, ample lighting, and an open layout. These design elements make the space feel inviting and less confined.

The ROI of Basement Conversions

A well-executed basement conversion can deliver an ROI of up to 86%, adding valuable living space that appeals to modern buyers. Thoughtful planning ensures this upgrade enhances functionality, marketability, and home value.

Careful planning for home renovations to avoid changes that could lower appraisal values

What Home Renovations Might Decrease Your Home’s Value?

Not every home improvement boosts your property’s value. In fact, certain renovations can decrease it, especially if they’re overly customized, eliminate key features, or create maintenance burdens for future buyers. Understanding which projects may hurt your home’s marketability can help you make smarter renovation decisions.

Common Renovations That Could Hurt Your Home’s Value

Highly Personalized Customizations

Unique or overly specific changes, such as custom-built decor or bold paint colors, may suit your preferences but make it harder for buyers to see the space as their own.

Converting a Bedroom to Another Space

Repurposing a bedroom into a walk-in closet, gym, or office may reduce your home’s bedroom count—a critical selling point for many buyers—thereby lowering its value.

Lavish Lighting Fixtures

Installing expensive or ornate lighting that clashes with the home’s style or feels excessive can be off-putting. Buyers often prefer adaptable, understated lighting options.

In-Ground Pools or High-Maintenance Features

Pools and other high-maintenance additions, while appealing to some, can deter buyers who see them as costly or time-consuming to maintain.

Extremely High-End Kitchens

While updated kitchens are a selling point, overly luxurious appliances, finishes, or layouts may not provide a good return, particularly in mid-range homes where buyers aren’t seeking such high-end features.

Bright or Bold Paint Colors

Dramatic paint colors can make it harder for buyers to envision themselves in the space. Neutral tones, on the other hand, appeal to a wider audience and make a home feel move-in ready.

Why These Changes Can Lower Value

  • High Maintenance: Features requiring significant upkeep can deter buyers seeking low-maintenance properties.
  • Reduced Functionality: Eliminating practical spaces, like bedrooms, diminishes usability and appeal.
  • Narrow Buyer Appeal: Overly personalized designs may not resonate with a broad range of potential buyers, leading to lower offers.

What to Do Instead

  • Plan with Resale in Mind: If you intend to sell in the near future, focus on neutral, universally appealing updates that enhance functionality.
  • Avoid Over-Customization: Stick to designs and features that align with your home’s overall style and the expectations of your local market.
  • Keep Maintenance Low: Opt for upgrades that add value without increasing the buyer’s long-term responsibility.

While personalizing your home is part of enjoying it, keeping future resale value in mind ensures your investments add rather than detract from its market appeal.

How to Avoid Renovations That Decrease Your Home’s Value

Renovating your home can be rewarding, but not all upgrades enhance its value. To avoid decreasing your home’s worth, follow these guidelines:

1. Choose Projects with Proven ROI

Focus on renovations known to attract buyers and boost value, such as garage door replacements, minor kitchen remodels, and exterior updates like siding or stone veneer. Avoid overly personalized or niche upgrades that appeal to a narrow audience.

2. Maintain Consistency

Ensure renovations align with your home’s architectural style and the character of your neighborhood. Mismatched designs can make your home feel disjointed and reduce appeal. For example, match exterior updates to nearby homes and maintain harmony with the house’s original design.

3. Modernize Without Overdoing It

Stick to timeless upgrades that won’t quickly date your home. Choose durable, attractive materials and practical fixtures. In kitchens, opt for midrange finishes over ultra-luxury options. For bathrooms, prioritize versatile features over expensive, specialized equipment.

4. Avoid Over-Customization

Highly personalized features, like bold paint colors or converting bedrooms into custom spaces, can alienate buyers. Neutral tones and versatile spaces appeal to a broader audience, preserving your home’s functionality and marketability.

5. Consult the Experts

Before major renovations, consult real estate professionals to understand trends and comparable homes in your area. Their insights can help you identify upgrades worth pursuing and those that could hurt resale value.

By focusing on functional, universally appealing updates consistent with your home’s character, you’ll create a more desirable property that retains its value while enhancing your living experience. Thoughtful planning ensures your renovations are a smart investment and resonate with future buyers.

Should You Renovate Based on Your Home’s Value?

Renovations should primarily focus on creating a comfortable and functional living space for you and your family. However, if selling is in your future, your home’s value, market conditions, and the broader economic condition should guide your decisions to ensure the best return on investment (ROI).

Key Considerations for Value-Based Renovations

Avoid Overbuilding

Renovations that push your home’s value far above the neighborhood average can make it harder to sell. For instance, if most homes in your area are valued at $300,000, transforming your home into a $500,000 property may limit its buyer pool.

Align with Market Standards

  • Updating Kitchens and Bathrooms: Modernize finishes and fixtures to meet buyer preferences.
  • Energy-Efficient Features: Install efficient windows, smart thermostats, or improved insulation.
  • Exterior Enhancements: Refresh siding, replace garage doors, or add stone veneer to boost curb appeal.

Projects that bring your home in line with local expectations are more likely to provide a solid ROI, such as:

Think Long-Term

Housing market trends change, so consider how your renovations will hold value over time. Focus on timeless designs and practical improvements that remain relevant, such as energy efficiency or adding functional living space.

Prioritize High-ROI Projects

Some upgrades consistently deliver strong returns, including:

  • Curb Appeal Upgrades: Exterior improvements that enhance first impressions.
  • Functional Changes: Finishing a basement or creating a home office adds utility and resale appeal.

While your home’s value shouldn’t dictate every renovation, it’s wise to consider it when planning major projects. Aim for upgrades that balance personal enjoyment with market appeal, avoid overbuilding beyond neighborhood standards, and focus on improvements that ensure long-term value. This strategic approach helps you enjoy your home now while safeguarding its resale potential.

Conclusion

Maximizing your home’s appraisal value through renovations requires thoughtful planning and strategic choices, often guided by insights from a real estate appraiser. Prioritize upgrades with proven ROI, such as energy-efficient improvements, kitchen and bathroom updates, or curb appeal enhancements. Balance personal preferences with broader market appeal to ensure your investment enhances both your living experience and resale potential. Avoid over-customization or projects that might deter future buyers. By focusing on functionality, durability, and timeless designs, your renovations can add significant value, making your home more comfortable, marketable, and appealing. Whether you’re improving for your enjoyment or planning to sell, these smart renovation strategies ensure your efforts yield lasting benefits.

FAQs

Do all home renovations increase appraisal value?

No, some renovations may not add value or could even decrease it if they lack broad appeal.

Which renovations have the highest ROI?

Outdoor upgrades like garage doors, minor kitchen remodels, and energy-efficient improvements often yield the best ROI.

Can highly personalized renovations hurt resale value?

Yes, overly customized features may reduce buyer interest and limit your home’s marketability.

Are energy-efficient upgrades worth the investment?

Yes, they lower utility costs, appeal to eco-conscious buyers, and often provide a strong ROI.

What should I avoid when renovating for resale?

Avoid over-customization, bold paint colors, and eliminating practical spaces like bedrooms to maintain broad buyer appeal.

Users Also Say:

Thoughts on whether home renovations can increase home appraisal values

User 1: miranD****

It should definitely appraise higher, but it depends on what renovations you choose to make—that’s what everyone is trying to say. Investing in kitchens, bathrooms, and flooring usually increases value. However, adding unusual or overly specific features might not have the same effect. For example, I once had a client (back when I was a realtor) who painted her entire house a terrible shade of purple and installed unattractive marble countertops. Unfortunately, those renovations didn’t add value. I’m sure your renovation will turn out great, though!

User 2: chelo*****

Here’s a simpler breakdown:

Land is usually 25% to 35% of the total property value, depending on the market. In a tertiary market like Augusta, Georgia, it’s probably around 25%. So, if the property is worth $100:

  • The land would be worth $25.
  • The improvements (buildings/structures) would be worth $75.

Now, if the property is 1/3 depreciated, the improvements’ value drops to $50, but the land stays the same at $25, making the total value $75.

Renovating the property to a “like-new” condition would restore the improvements’ value to $75, adding $25. That’s a 33% increase in the overall value. Renovating can definitely pay off in this scenario!

User 3: yuri*******

To get a better idea of your property’s potential value, start by looking at the market around you. The dated house next door might give you an idea of a “floor” value, but to figure out your “ceiling,” check out recent sales of similar homes that have been updated to the same level you’re considering. The closer they match and the more recent the sales, the better. Also, look at how long they were on the market and the difference between their list price and final sale price.

If you’re planning renovations, think about the demand for updated or partially updated homes in your area. That’ll help you decide whether your investment will pay off, especially when factoring in market trends and how long it’ll take to finish the work.

In some cases, simple cosmetic upgrades might give you the best bang for your buck. But if your property has hidden potential, like a “diamond in the rough,” a full remodel could bring the highest value. At the end of the day, it depends on the property and the local market.

A professional appraiser in his office
Articles

What Does The Appraiser Do?

Buying a house, securing a loan, settling an estate – amidst life’s pivotal moments, a shadowy figure emerges: the appraiser. Their verdict, scrawled across an

Learn More »