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Not All Renovations Positively Impact Property Values: Appraisal Institute

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The Appraisal Institute advised homeowners to use discretion when deciding which home improvement projects to take on, saying that not all renovations positively impact property values. “Projects that take a home significantly beyond community norms are often not worth the cost when the owner sells the home,” said Appraisal Institute president Richard L. Borges II, MAI, SRA. “If they don’t match what’s standard in a community, they’ll be considered excessive.”

According to Remodeling magazine’s most recent Cost vs. Value report, some of the projects with the highest expected return on investment are siding replacement, entry door replacement, attic bedroom addition, minor kitchen remodel and garage door replacement. Other renovations with high expected pay-offs include basement remodel, deck addition and window replacement.

Borges advised homeowners that it may be best to hold off on big renovations if a homeowner isn’t sure how long they will be in their home. The longer a homeowner stays in a property, the greater the opportunity for a return on investment, he said.

“Consumers should be aware that cost does not necessarily equal value,” Borges added.

For an unbiased analysis of what their home would be worth both before and after an improvement project, a homeowner can work with a professional real estate appraiser – such as a Designated member of the Appraisal Institute – to conduct a feasibility study.

During a feasibility study, the appraiser will analyze the homeowner’s property, weigh the cost of rehabilitation and provide an estimate of the property's value before and after the improvement.

Some green and energy-efficient renovations, such as adding Energy Star appliances and extra insulation, are likely to pay the homeowner back in lowered utility bills relatively quickly. Lower utility costs also are a draw for potential homebuyers. When appraising a home, the appraiser evaluates local supply and demand for green and energy-efficient properties and features.

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