Many people think that the main job of an architect is to make a house look good. While that is certainly one goal of a residential remodeling project, there are others of equal or even greater importance. The way a house flows and circulates is critical to how it feels and functions. How a house functions determines the ultimate success of a project. As the old adage says, “Pretty is as pretty does.”

Another critical factor to a successful project involves proper budgeting and return-on-investment issues. Thanks to HGTV, many are led to believe that every project creates instant added equity in every home. Unfortunately, this is not generally the case.

Before: Updating the kitchen is a value-added project. While you don’t recoup the investment instantly, it definitely impacts resale value and the prospective buyer’s perspective.

 

After: Updating the kitchen is a value-added project. While you don’t recoup the investment instantly, it definitely impacts resale value and the prospective buyer’s perspective.

(Trina Knudsen)

When you are selling a home, you should be concerned with two general audiences. The first is the appraiser and the bank. These are the folks who will determine the basic worth of your property or, in other words, the figure on which the bank will loan money. Unless you find a buyer who will pay cash, the bank has a lot to say about how the sale of your home will go. The evaluation is mainly based on “comps” or comparing the actual recent sale price of similar homes in your area to determine market value.

The other audience is the buyers. These are the folks who apparently judge your home in a matter of seconds or minutes to see if they will even consider buying your house. This is a much more emotional audience who will be swayed by style, light, views and the aesthetics of the space, as opposed to the appraiser who will take a much more “nuts and bolts” approach to the home.

Appraisals are functional equations. Houses are categorized in terms of actual square footage, and the number of bedrooms and bathrooms present. Therefore, adding additional bedrooms, bathrooms and/or square footage will generally increase the home’s appraised value. This will change the comparable houses and directly impact the evaluation of your home. In this sense, the option with the best return on investment is to add a bedroom without an addition. If you can reconfigure existing space so as to create an additional bedroom, you can keep the investment low to impact the value at a higher rate. Attic bedrooms, including a bathroom, are actually one of the highest-yielding projects, according to the 2015 Cost vs. Value Report for Salt Lake City from Remodeling Magazine, but they are also one of the most expensive and involved types of remodeling projects a homeowner can undertake.

Value from an appraiser’s perspective is determined from the stats of the house more than from the finishes. However, you can get points for the house being in good condition, and some appraisers may recognize nicer finishes (like granite countertops, real hardwood, new carpet or updated kitchens). On the other hand, these are just the things that will appeal to buyers. As you can see, a successful remodeling project requires careful planning to find the perfect balance to appeal to both audiences.

Unless the economy crashes again, the longer you live in your house, the greater the financial appreciation will be of your new or updated space. While there is no instant return on every dollar you spend, hopefully a point will be reached at which your entire investment will be returned by your increased property value. However, this takes time and a remodeling project that will stand that test of time. In other words, a remodel based on sound, timeless design principles with tasteful, appropriate materials and sound construction methods will pay off in the long run. The money you spend on planning well with competent professionals will be the best way to assure you of a great return on your remodeling investment.

Ann Robinson and Annie V. Schwemmer are the principal architects and co-founders of a residential architectural firm focused on life-changing remodeling designs at RenovationDesignGroup.com. Send comments or questions to ask@RenovationDesignGroup.com

Renovation Solutions: How to make remodeling a smart investment