Home Renovations: Vanity Versus Value

After an unsustainable housing market that embodied “more, more, more,” there is now a move toward pragmatism and modesty. More homeowners are actually living in the homes they own and there is less talk of investments and flipping those houses.

“I’ve been renovating houses or writing about them for almost 40 years, and I am seeing a definite shift towards a greater insistence on value in the renovation projects people are taking on,” says Michael Litchfield, author of In-Laws, Outlaws, and Granny Flats, adding, “Looks to me like the Age of McMansions is giving way to the Era of McModesty.”

Before renovating, homeowners may want to realistically assess their home, and decide whether future homebuyers will one day value these renovations. As contractor Dave Dillon puts it, “Sure, someone may want [your home] ‘as is,’ but they are the exception. The trouble is, everyone is looking for the exception when it comes time to sell their home.”

With that in mind, click ahead to see what renovations are working out well on the market, and which ones are not.

By Colleen Kane
Posted 22 Mar 2011

Wait a minute—a home office isn’t practical? This seems counter-intuitive. What could be unappealing to homebuyers about an office?

Each year, Remodeling magazine’s Cost vs Value report,compiled in consultation with more than 150,000 Realtors, compares the cost of popular remodeling projects with the values they retain at resale. In the 25 years of the report’s existence, the home office remodel has been near the bottom of the list for about 10, notes Sal Alfano, editorial director for Remodeling. “We expected it to do better than it has because of [the rise of] telecommuting. But it’s too specialized a use.”

With home offices, some potential buyers say, “I’d rather have a bedroom.” Alfano points out that converting a room to an office is not a cheap project to take on, with the national average $28,888, and at resale it retains less than half its value—$13,235.

“More families are starting to figure out that adding solar is one of the smartest home improvements you can make, even in a weak housing market,” says Lynn Jurich, president and co-founder of SunRun,which uses a unique business model for solar panels—the company owns and installs solar panels, then the users pay a controlled amount for power. “A guaranteed low and fixed monthly power bill will make your home more marketable,” she says.

Statistics support this claim: a report on solar powerfrom the Department of Energy’s Office of Energy Efficiency and Renewable Energy says a solar home will sell up to twice as fast as a home without. The same report states that all 257 solar homes in one Clarum Homes development sold two years faster than planned – these homes were priced between $379,000 and 499,000, but some sold for as much as $600,000.

As far as other green renovations, some green improvements, like the new tankless water heaters, can have a lot more impact on the homeowners’ bottom line than the more cosmetic sustainable choices—such as installing recycled glass tiles.

It’s one of the cheapest ways to add living space to a house without making an addition, with a national average cost of $64,519 and 70% of that recouped at resale time. (We’re not talking about a six-figure multimedia home-theater renovation, but a more versatile midrange, mixed-use basement space.)

And yet, people who want to sell their homes do not always address the issue of their unfinished basement. Dave Dillon, author of Homeowners, It’s Time to Think Like a General Contractor raises the example of a gorgeous $3.5 million house that’s been on the market for three years even after a $500K price reduction because, he says, the owners didn’t finish the basement.

“If everything is a perfect 10 but the basement, in the Chicago metropolitan area, it’s very important. That’s where they have their parties, their home theaters—at least in that price range,” observes Dillon. “You can never underestimate the emotional and financial deterrent that having to take on a remodeling project today represents to a buyer. Does anyone really want to hire a contractor these days? Is that generally pleasant?”

Now is the time in the slideshow to speak of the weird stuff—the esoteric projects for which we don’t have data, but we do have the anecdotes.

Take, for example, one homeowner’s custom-built meat cellar, as beheld by Litchfield: “I kid you not. It was about the size of a large walk-in closet, refrigerated, and had numerous hooks on which to age expensive cuts of beef. The gentleman, as best I recall, was an avid griller and frequently hosted business clients. I could think only of Hannibal Lector.”

How about a rooftop pool that’s kept heated year-round—in the Chicago area? Robert Berg of Foster Design Buildsays that the family who built it now drains it in the winter to avoid those $600 electric bills. And a commonly cited example of outrageous home renovations and additions is the personal bowling alley.

Do projects like these pay back when selling the home? “In general, if you’re trying to come up with the rationale behind projects that add value and projects that don’t—If it’s a specialized use like a lap pool or a basketball court, those sound wonderful but only to some people,” says Alfano. “Some say ‘wow,’ some say ‘headache.’”

As a more practical example of an unusual project, Berg installed a ball court in a client’s large back yard that can be used for more than one game over different seasons.

Unless you are a professional film director who is screening dailies at home for a cast of Hollywood actors, there’s no longer much justification for putting six figures into a home theater.

“If you look at all of this, it’s good in some ways,” muses Berg. “You’ve gotten back to some of the values that really matter. Keeping up with the Joneses versus spending time with family entertaining in your own home. Instead of wow and dazzle it’s more about a functional, useful, open floor plan.”

Outdoor kitchens are great as a fantasy home feature—but so are infinity pools and other luxury installations. “Everybody wanted an outdoor kitchen—with stainless steel, a wine steward, marble, granite…” says Berg. “We do still see some of that but that’s taken a significant hit. It was nothing for someone to drop 100K [on one], now a barbecue grill is just fine.”

As mentioned earlier, going over the top is not realistic—after 2007 it was like somebody just turned the faucet off on features like this, says Berg.

Believe it or not, not so long ago double appliances were a big trend, says Berg. He once saw homeowners outfitting high-end kitchens with two refrigerators, or two stoves, or a pair of warming drawers, or freezer drawers, or a pair of dishwashers. But don’t worry—that’s all over now: “I haven’t done those in years.”

Now, a non-excessive kitchen renovation on average recouped 68.7% of its cost, while upscale ones have a national average recouped cost of 59.7%.

In today’s kitchen renovations, Berg cites a more wholesome trend of the kitchen workstation for mom or dad to pay bills while cooking or where kids can sit for supervised Internet time or while doing their homework. This also ties in with scaling back, says Berg, as homeowners are no longer putting in TVs, computers, and docking stations in every room, but having less screens located in central locations.

Another part of the new kitchens are space-saving appliances, says Litchfield, “Compact dishwashers that clean a half-load are very popular with folks who don’t cook so often, and these appliances are very frugal with water and energy.”

A thoughtfully updated bath is a solid move, because Berg says It’s a perfect place to create a luxury home environment with a smaller budget because they typically cost less and still provide a worthwhile return on investment. It’s one of the easiest spaces update select features, rather than an entire room.”

But again—we’re talking about updates within reason. Berg gives the example of a computerized shower that remembered each family member’s preferred temperature, timing for different body area water sprays, their preferring lighting color scheme, and played their iPod playlist.

Litchfield recalls seeing $6000 steam showers, and one model that cost more than $10K that looked like a horizontal phone booth, in which the user reclined, and could experience different “environments”—rainforest and so on.

“Those things have gone away substantially. Master bath consumers have significantly cut down on [this]. Some master baths were bigger than master bedroom!”

Although it costs on average $51,428, the attic remodel was a big project on the Cost vs. Value report this year because like a basement remodel, it’s still one of the cheapest ways to add living space to an existing house.

Breaking ground and making an addition is much more expensive; these projects make better use of the space you already have. Recouped price for this project averages 72.2% nationwide.

For an attic bedroom, the Cost vs. Value report considered something a bit more finished than Greg Brady’s teen attic bachelor pad: popping part of the roof off and adding a dormer, plus bath and closets. It’s a finished living space. Alfano says that homeowners who add attic bedrooms are using these places for their kids who may have graduated college but have no job yet, or for elderly parents.

“In the last four years since the economy went haywire, the replacement projects went to the top,” says Alfano. Exterior projects like vinyl siding, new roofing, new entry door, and new garage doors have consistently ranked high on the Cost vs. Value report in the past few years.

The reason? “They’re inexpensive. For entry doors midrange is $1200 if you get a steel or fiberglass with glass. For upscale, a grand entrance more like $3500. Compared to a kitchen addition. It’s peanuts, and it affects curb appeal.”

Dillon recalls the extremes of a homeowner he worked with who put $800,000 into a home that was purchased for $1 million. “They put the most expensive natural stone into their kids’ bathrooms, more than most people put into their master bath. This lady went ballistic in her children’s bath—white marble counters, floors, surrounds in the tub, ridiculously expensive fixtures. This is not the kind of thing that creates value, it just creates excess.”

Litchfield concurs. “Marble is a marvelous surface to roll dough and make pastry on, I’m told, but like many natural stones, it’s relatively fragile. Decidedly not a great surface for, say, a foyer.” Installing extraneous marble surfaces doesn’t make sense given the current emphasis on durability.