The Appraisal Institute, the nation's largest professional association of real estate appraisers, today encouraged homeowners to carefully choose renovation projects in order to maximize their return on investment.
"Home improvement projects are not necessarily investments in which a homeowner should expect a dollar-for-dollar return," said Appraisal Institute President Scott Robinson, MAI, SRA, AI-GRS. "Rather, these projects can increase the likelihood of a sale, or that a property will be comparable to other properties in a neighborhood."
According to Remodeling magazine's most recent Cost vs. Value report, the projects with the highest expected return on investment are attic insulation, manufactured stone veneer and garage door replacement. Other projects with potential payoffs, according to the report, are entry door replacement (steel and fiberglass) and minor kitchen remodel.
View a video of Robinson addressing home improvement tips.
Robinson advised homeowners considering renovation projects to consider if the improvement is in keeping within what's standard in the community.
"Projects that take a home significantly beyond community norms are often not worth the cost when the owner sells the home. If the improvements don't match what's standard in a community, they'll be considered excessive," Robinson said.
He also noted that homeowners may find it best to hold off on big renovations if they're unsure 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, Robinson said.
For an unbiased analysis of what their home would be worth both before and after an improvement project, a homeowner can work with a qualified 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. By purchasing an energy-efficient product or renewable energy system for a home, the owner may be eligible for a federal tax credit based on EPA-established guidelines. (See thecomplete list of eligible products, including program expiration dates.)
The Appraisal Institute offers a free, informative brochure titled "Remodeling & Rehabbing," which provides consumers with valuable advice on home improvement projects.
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