As Canadians we are spending more on renovations than ever before. TD recently released their renovation spending report. According to TD, "At 7% per year since 2003, spending gains in this area have outshone other components of household spending. During the 1990s, outlays for home renovations accounted for just over 25% of total residential investment. Currently, that share is almost 40%."
Many of us renovate for our own use and to add features we wish to have such as upgraded mud rooms and laundry rooms, media rooms, new fireplaces, spas, modern kitchens, high end showers, basement bars and rec rooms, new exterior finishes, sunrooms and even pools.
So when it is time to sell, are your renovations going to increase the market value of your home?
Well, it depends.
1. What did you renovate?
Typically a kitchen or bathroom renovation can see an increase up to 75% to 100% of the money spent, but it depends on what existed before and what was put in. The answer comes only from a review of other comparables homes in your area. If you have a 30 year old kitchen in disrepair you will see a large return on investment if you modernize to current standards. If you however, have a well maintained relatively new maple kitchen and you replace it with a different style or layout of a similar standard you won't see much change. As well, a poor installation of expensive materials will not be well received by buyers.
Replacing old carpet and worn wallpaper and paint with more new can have a huge impact on a home, but choose colours carefully. Pink carpet or paint is not popular no matter how new or expensive it was to install.
When already renovating, attention to future homeowners needs are well worth the planning and additional attention to detail. For example, changes to a bungalow that remove stairs, open up flow in the home and improve access to sinks, laundry and kitchen appliances will remain in high demand as will lot and home design that reduces maintenance and allows for easier access during the winter.
2. Where is the property?
Especially in some parts of Calgary, older homes are being torn down and replaced with new construction (infills). Putting money into smaller renovation projects in these homes requires careful review as it is builders and not home buyers that are buying these properties. A builder will not pay a premium for improvements that are just going to be demolished.
Depending on the community, holding the budget to stay within typical sales patterns in the area is key. If you add a $40,000 custom kitchen to a home worth $260,000 you will not see a $40,000 return on your investment. Each community and style of home has a ceiling of sorts as a 1600 sq ft two storey home will only sell up to a certain value before buyers start looking at larger homes or homes in more desirable areas no matter the finishings.
The recent flood events need to be acknowledged. Homes in flood fringe areas now require special attention to flood proofing and acknowledgement of potential future buyer fears.
3. Do you have your paperwork in order?
Buyers are asking more and more questions about renovations and permits than ever before. They are checking for asbestos in older homes as part of home inspection. Insurance companies and lenders are also asking more questions especially related to major renovations so ensure you have the required permits before you start your renovation. As of February 2014, the new home warranty rules will come into effect. Major renovations that require a building permit will also require a home warranty so even handy home owners will require documentation, permits and warranty to sell their homes.
At the end of the day, if you are making a substantial investment in renovations, do your homework. Very often sellers believe their home is worth more due to the actual cost of renovations and can be disappointed when it comes time to sell. At the same time, well thought our designs have fetched sellers sizeable increases in sale price.