Don't over-improve your home: 6 things to consider and what projects add the best value
It is possible for your house to become just a bit too nice when remodeling? If you're looking to sell, then the answer is yes.
When renovating your home, not every upgrade and improvement to the property is going to end up paying off in the end. Just like any other aspect of the real estate market, there are a variety of factors that will determine whether a home improvement is worth investing in.
"I think if you're improving it for yourself and your own enjoyment, then you should renovate to whatever level makes you happy," said Melissa Rubenstein, an agent with Corcoran Infinity Properties in New Jersey "But, if you're looking for a return on investment or long-term value of your improvements, I definitely think it can be possible to over renovate your home."
So, before you throw money out the window by overimproving your property, here's what you need to know to avoid it.
What determines whether a home is 'over-improved'?
If you over improve a home, that means you put more money into the property than you can realistically get out of it once you sell it. While it is possible for any home to be considered "overimproved," there are several factors that influence just how much money you can put into a home before it gets to that point.
Among these factors are the location of the home, as well as the lot size of the home. Rubenstein said that there is generally a maximum price that your home is going to get, regardless of how many improvements were made to the property. If your home is in a more ideal location and has a larger lot size, that maximum amount is automatically going to be higher.
"In a better or more desirable location, you can spend more because you're going to get more for your home than you would in a less desirable location or for a home with a smaller lot size," she said. "You're going to max out at a certain value, so if you put in more money in improvements past that highest comparable value, you're not going to get that money back."
In addition to location, Rubenstein said you have to consider the style of the home before renovating. For example, a split-level home may be less desirable than a Colonial-style home. As a result, you'll likely get a better return from a Colonial-style home than you would for those same renovations in a split-level property. This would lead to the split-level home being considered overimproved.
Attilio Adamo, a broker with Coldwell Banker Realty in Closter and team leader of the Adamo Group, said the type of improvement and the quality of the materials also play a role.
If you have a home that could be priced up to $1 million, for example, you're likely going to use better materials, like marble. In contrast, in a home that would be priced up to $750,000, you would opt for less pricey materials, like manufactured stone. If you were to use the pricier materials in a home that has less value, you're not going to get as good of a return and, therefore, the property could be considered overimproved.
And, as always, fluctuations in the market can make a big impact on how much your improvements may be worth, Adamo said.
"If you home was worth X amount of dollars, you take a year and a half to improve your home and there ends up being a downward shift in the market, then you're losing your investment unless you did it for yourself to enjoy. But, if the market returns, values would start increasing again. It goes into cycles," he said.
What improvements typically give the most return?
While there is a chance that some improvements will give a better return on investment than what would typically be expected, there are some home improvement projects that are consistently beneficial.
According to Remodeling Magazine's 2023 Cost vs. Value Report — which compares the average costs for 23 remodeling projects and the typical resale value of those projects — HVAC electrification, garage door replacement, manufactured stone veneer siding and steel entry door replacement were the top four projects with the highest resale value, each recouping more than 100% of their initial costs.
"Curb appeal is huge. Almost everyone is starting their search on the interest and they’re seeing photos. So photos are the most important thing in terms of marketing your home," Rubenstein said. "I’d say when people see that first shot of a home, if you have a new stone veneer, if you have new siding, new garage doors, that’s a home that they’re going to click on, as opposed to a home that looks very dated from the outside, which they’re just going to swipe right past. You’re going to get a ton more traffic for your home because that’s usually the first picture that people see of it."
In addition to exterior improvements, Adamo said that kitchen and bathroom improvements almost always give some of the highest returns on your investment. According to the Cost vs. Value Report, minor remodels for midrange kitchens typically recoup about 85.7% of their initial costs, and midrange bathroom remodels typically recoup about 66.7% of their initial costs.
Adding a deck or porch space to a home will also often give a high return on investment, he said. The addition of a wood deck recoups about 50.2% of its initial costs, according to the report.
"My advice to anyone who wants to do any major renovations is to consult their local real estate expert and let them know what you're putting into it and see what they feel the future value is compared to what the current value would be," Adamo said.
Maddie McGay is the real estate reporter for NorthJersey.com and The Record, covering all things worth celebrating about living in North Jersey. Find her on Instagram @maddiemcgay, on X @maddiemcgayy, and sign up for her North Jersey Living newsletter. Do you have a tip, trend or terrific house she should know about? Email her at MMcGay@gannett.com.