Splurging to Impress Buyers

Renovations Help a Home Sell, but They Rarely Recoup Their Cost

Linda and Jose Rahona created a master bathroom with floor-to-ceiling tile, custom glass shower doors and sleek fixtures. It took three months of dust, tilers, electricians, plumbers and glaziers -- and $25,000 -- to finish.

Now it's "drop-dead gorgeous," Linda boasts. "It's a spa." And that's just the bathroom. The couple also put new appliances and lighting in their kitchen.

They love what they've done to their two-bedroom condominium in Cathedral Heights in Northwest Washington. But they don't want to keep living there. Rather, they renovated so they could improve their chances of selling the unit and moving to Vermont to be near their 3-year-old twin granddaughters.

To make a sale in this sluggish market, some real estate agents are urging their clients to make major -- and costly -- changes to their homes, in addition to the standard cosmetic touches of a fresh coat of neutral paint, removal of clutter and kitsch, and a top-to-bottom cleaning. There is debate, however, over how cost-effective such renovations are just before a sale.

The general rule is that it takes at least five years for a major renovation to amortize, or make the money back, appraisers say -- and even longer now, when values aren't increasing much.

Most renovations won't recoup the job cost, according to Remodeling magazine's annual Cost vs. Value Report. On average, a homeowner will get back about 70 percent of the cost of a project completed close to the time of sale. That's down from more than 80 percent earlier in the decade, when the resale market was booming.

The amount recouped varies by project and geography. For instance, an average minor kitchen-remodeling project in the D.C. area costs about $21,000, according to the study, and 81.9 percent of the cost is recouped.

"If you are going to be living there five to 10 years, you can be there to enjoy it," said Linda Braley, an appraiser in Northern Virginia. "If you are just doing it to sell, you may not get dollar for dollar back, but your property is more likely to sell."

And that's the reason people upgrade before marketing their homes. "If everyone else has [upgraded], then yes, you better hurry up and upgrade. . . . People are just going to walk in your house and walk back out again. You want to be typical for your neighborhood," said John Perry, an appraiser who works mainly in Prince George's and Anne Arundel counties.

"When doing upgrades, the thing you have to think about is this: You always want to be aware of other properties of the neighborhood," said John Bredemeyer, spokesman for the Appraisal Institute and an appraiser himself in Nebraska. If a seller has laminate countertops in the kitchen, Bredemeyer said, it would be wise to upgrade to granite if everyone else has granite. But that seller wouldn't get as much money back after installing granite countertops in a neighborhood where everyone else has laminate.

So, yes, it might be worth it to add that master bath just to sell the house, Braley said. "People are so used to having a master bath now -- something that people really expect, even if it is small."

In June, when the Rahonas decided they wanted to move, they began talking with Pam Kristof, an agent with Re/Max Allegiance in Northwest Washington. She confirmed what Linda already knew: The competition to sell is fierce, so to succeed, a home has to show better than the one down the block or down the hall.