by Elle Hardy
September 17, 2020
by Elle Hardy
September 17, 2020
The average American holds the majority of their wealth in their home, according to 2019 data published by researchers at the US Census Bureau, but at the same time mortgages comprise some 68% of American household debt, The Brookings Institution reported in the same year.
With many real estate forecasters estimating that the COVID-19 pandemic will make for an uncertain housing market, with prices expected to fall 6.6% on average, according to a report by CoreLogic, it's a good time to look at increasing the value of your largest asset.
Whether you're looking for some DIY fixes to occupy your time or want to get maximum bang for your buck when selling or refinancing, we've spoken to four leading property experts for advice on the best ways to increase your home's value.
Dan DiClerico, home expert for maintenance marketplace HomeAdvisor, said that when it comes to real estate return on investment, less is more.
"If you do a full gut renovation of your kitchen shortly before selling, you're never going to make that money back. But a smart, cosmetic makeover is guaranteed to pay for itself, and then some," he told Business Insider.
DiClerico said that the rule of thumb on kitchen remodels is that they should cost five to 15% of the home's total value.
So let's say your home is worth $300,000 — you're looking at spending between $15,000 and $45,000 on the kitchen renovation. But DiClerico cautions that if you think you might be selling in the next few years, you want the budget on any kitchen project to be much closer to $15,000.
"Even spending as little as $5,000 on a small-scale remodel — say, updated appliances, an inexpensive new countertop, and freshly painted cabinets and walls — could raise the home's sale price by up to 5%. In that scenario, you're spending $5,000 to make an extra $15,000. And if the upgrades help the home sell faster, there's added savings there," he said.
A little change goes a long way, agrees Zillow's home trends expert Amanda Pendleton. But she warns homeowners to "get real about your DIY skills" — a Zillow survey found that minor repairs were the most common projects that started as DIY, but were completed by a professional.
"Firstly, paint your front door! A glossy coat of exterior paint can amp up your home's curb appeal — but you'll want to be strategic about the color you select," she said. She cited 2018 Zillow research that found that homes with black front doors can sell for up to $6,000 more than similar homes.
The listing company's research also shows that among the most common projects homeowners take on to boost value, painting a house inside and out will cost you around $4,115 — less than the cost of most renovations.
"We found that yellow homes sell for $3,600 less than similar homes, while homes with blue bathrooms sell for nearly $2,800 more," Pendleton added.
On average, home owners make 2.7 improvements before selling, and it appears to pay off: Zillow also found that those who make at least one improvement are more likely to sell above their list price than sellers who don't make any improvements.
DiClerico believes that life under lockdown is making smartly-designed living spaces even more valuable.
"Decks aren't just for barbecues anymore. With the right furnishings and shade protection, it might be another spot for kids to do their homeschooling. Or maybe there's a wellness corner with room to roll out a yoga mat or put down a meditation cushion," he said.
While this is sure to get creative minds racing, he advises keeping the scope of the project in check.
"The average deck build is around $7,500, but you can do it for a couple grand if you choose a simple design and inexpensive material, like pressure-treated lumber," he added.
Biophilic design has become a real estate buzzword, meaning living spaces that connect occupants more closely to nature. In a working-from-home world, this is only expected to become more sought after.
"At the high end, we're seeing homes with expansive walls of glass affording views of carefully manicured landscapes — but you don't have to go those lengths," DiClerico said. "A cozy window seat overlooking the back garden can foster the same connection to nature. House plants are another easy way to bring nature indoors."
Another smart strategy is to look for ways to increase the home's usable living space as an office or study room.
"Finishing the basement is a great example, especially if you limit the scope of the project," DiClerico said. "While the average cost of a full-blown basement remodel is $20,000, according to HomeAdvisor's True Cost Guide, for around $7,500 you can turn the raw space into a living area with the addition of drywall, paint, flooring, lighting, and electricals."
One of the most cost-effective but important ways to ensure your house lives up to its full value potential is to ensure that it smells as new as possible, said Steve Moses, home services manager at real estate broker Redfin.
Moses is in charge of renovating homes that RedfinNow purchases in Los Angeles. He said that he's spent countless hours crawling on hands and knees and standing on ladders to attempt to isolate unidentifiable smells.
"Buyers' senses are heightened when it involves spending a large amount of money, so making sure the house smells as good as it looks is important," he said.
Moses noted we often don't notice slight odors in our homes — and that this is especially important in houses with pets.
"Make sure you get your air ducts, rugs, and floors professionally cleaned and use air fresheners if necessary to neutralize odors. And consider recruiting an honest friend to play the role of a potential buyer and do a sniff test for you," he added.
Decluttering and using pops of color are extremely important to make smaller spaces feel inviting, Moses said.
"When it comes time to show your home to potential buyers, create as much light as possible by keeping window coverings open. Consider getting a storage unit to hide away larger items and keep things simple," he said.
Moses also recommended that those living in a complex with common areas should get to know their neighbors if they don't already.
"Let them know the apartment is being shown and kindly ask them to do their best to help by keeping any common hallways clear," he said.
Angie Hicks, co-founder of online hub Angie's List, added that people looking to sell or improve the value of an apartment or small home should think about adding storage.
"This is less about providing a ton of storage for potential buyers — though that is important — but more about establishing an organized atmosphere. You don't need to fill every open spot with cabinets and shelving, but there are probably a few simple additions you can make that will tie a room together," she said. To this end, Hicks believes that the best place to start your project is in the kitchen.
Finally, one small thing that all of our experts suggested is ensuring that your house is smart.
"Consider adding some smart-home features like WiFi-enabled thermostats or home security cameras," Moses said. "Not only do these trendy items add to the 'wow factor' for tech-savvy buyers, they increase the usability and energy efficiency of the home, which are big selling points that can add value."
The typical American home buyer today is a millennial — 25- to 39-year-olds — representing 39% percent of the total market. Not only are they accustomed to managing their life digitally, but they're more likely to be concerned about minimizing power and water use than older generations.
"Replace your light bulbs and switches to smart lighting controlled by an app," Pendleton added. "Mention smart lights in your home's listing description and your home could sell seven days faster than expected."
While you're busy improving your home's worth, it's important to ensure that you're not losing any value that will offset your gains.
Hicks said that if you're looking to sell or have your home revalued, the first thing that needs to happen is a professional inspection.
"If unwanted surprises are uncovered — such as mold or water damage — this will cost time and money," she said.
Homeowners can avoid this problem by inspecting their house regularly, focusing on key hot spots where damage is likely to arise.
"A few important areas to check are your basement, roof, attic, and bathrooms," Hicks said.
Are you looking to buy a house? Before you start going on showings, contact the loan officers at Wintrust Mortgage to discuss your options.