5 Proven Ways to Increase Home Value
By Beth Buczynski | NerdWallet.com
Some factors that determine what a house is worth are out of your control, like its location and the popularity of that market. But you can keep up with repairs and make smart improvements, both proven ways to increase home value.
When thinking about how to increase home value, root your expectations in reality. Updates rarely recoup 100% of their cost, but they can make your family more comfortable and even help your home sell faster.
Whether you want to build equity faster or get top dollar when you sell, use the tips below to raise the value of your home.
1. Make it more attractive
Curb appeal — how your home looks from the street — is your first chance to make a good impression, says James Murrett, president of the Appraisal Institute, a professional association for real estate appraisers. A home’s exterior needs to make a prospective buyer want to walk through the front door.
Make sure existing landscaping is well-maintained. If your yard seems dull in comparison with your neighbors, consider planting flowers or repainting the front door.
Once the exterior looks good, focus on the kitchen and bathroom. When these two rooms are outdated, they can keep a property from reaching its highest valuation, Lori Noble, a senior residential appraiser (SRA) in Charleston, West Virginia, said in an email.
And you don’t have to spring for heated towel racks or marble floors, either. A minor kitchen remodel recoups 81% of its cost in added value on average, versus 53% for an upscale kitchen remodel with stone countertops, custom cabinets and commercial-grade appliances, according to Remodeling magazine’s “2018 Cost vs. Value Report.”
The same is true for bathrooms; a midrange remodel — new flooring and a few updated fixtures — delivers a 70% return on investment, while an upscale bathroom remodel — heated flooring, custom cabinets and designer fixtures — sees 56% on average.
2. Make it low-maintenance
Since many home buyers worry about buying a home that will need constant maintenance, replacing a major component before putting it up for sale — like the furnace, water heater or even the roof — may calm fears of an emergency repair in the near future and help get you a higher price.
Improvements that make things easy to clean and maintain may also increase home value. Consider replacing easily stained carpet with hardwood floors or replace high-maintenance wood siding with vinyl siding.
3. Make it more efficient
Energy conservation features can have a significant impact on home value, depending on what area of the country you’re in, Joanne Theunissen, chair of the National Association of Home Builders Remodelers, said in an email. Energy-efficient mortgages (EEMs) allow borrowers to take on additional debt to cover both the purchase of the home as well as energy-efficient upgrades. EEMs can also offer lower mortgage rates to increase purchasing power, according to Energy.gov.
Consider double-paned windows, enhanced attic insulation, LED lighting and efficient appliances as a way to increase home value and entice energy-conscious buyers.
If you’re willing to go bigger, put solar panels on the roof. Thirty-nine percent of agents surveyed recently by the National Association of Realtors said solar panels increased perceived property value. But since solar panels are a big financial and structural commitment, they only make sense if you’re hoping to increase value over the long term, not looking for a quick boost in resale value.
Schedule an assessment with a certified energy auditor or your utility company to determine where your home is wasting energy and which upgrades will save you the most money.
4. Make it bigger
“Square footage has a huge impact on value,” Angie Martin, director of operations at Hales and Associates in Overland Park, Kansas, said in an email. Price per square foot is one way she helps clients compare homes that are similar in style and upgrades.
Bigger homes often command higher values, and even if an appraiser doesn’t officially acknowledge the full value of added space, a buyer will likely notice.
Adding a room is the obvious way to make your house bigger, but you can also create additional living space by finishing the basement or building a deck.
5. Make it smarter
Safety-enhancing gadgets top the list of “smart” technologies buyers want in their new homes, according to a 2018 survey by Coldwell Banker. These safe and smart devices include thermostats, fire detectors, carbon monoxide detectors, security cameras, door locks and lighting.
While smart tech doesn’t always increase home value, it does add appeal, Tavia Galvin, a licensed Realtor in Arvada, Colorado, said in an email.
Those who see themselves as “techies” are more likely to pay more for these items, Martin said.
Unlike replacing the roof or renovating the bathroom, you can usually install these devices yourself for about $1,000 or less.
How to pay for improvements that increase value
If you can’t pay for home improvements in cash, be sure to choose the right method of financing.
Credit card: Putting home renovations on a credit card may be OK as long as you’ll be able to pay off the entire balance in a short amount of time.
Personal loan: If you don’t have enough equity for a home equity loan or HELOC, consider a personal loan. The interest rate will be higher than home-equity-based financing, but lower than a credit card in most cases.
Home equity loan or line of credit: These second mortgages turn your home’s equity into easily accessible funds. Home equity loans pay out in a lump sum while home equity lines of credit, or HELOCs, are a line of financing you can borrow against over time. Both home equity loans and HELOCs have interest rates, fees, monthly payments and tax advantages to consider.
Cash-out refinance: If you’ve built up equity but don’t want a second mortgage, consider a cash-out refinance. You’ll take out a new home loan for more than your current mortgage balance and, after closing, the proceeds will be paid to you in cash. A cash-out refinance won’t make sense if your equity is limited or current mortgage rates are higher than your rate.