is too much on improvements?
Nearly every homeowner has a wish list. Perhaps you'd
- Rip out and replace
that hideous green carpeting the previous
homeowners must have purchased to match
the front lawn.
- Build a walk-in closet
so every pair of shoes, every shirt, every
suit has its place.
- Add a double-decker,
wraparound deck so entertaining can spill
In any case, one thing is for
certain: Completing any item on that wish
list comes at a cost. And as projects snowball
-- and home improvements inevitably do --
you may start to wonder if it's all worth
Considering your home's worth is one way of answering
that question. On average, don't put more than 20 percent of a home's value into
improvements on the home, most industry experts say.
always been hesitant to endorse averages because every house has its own story,"
says Gregg Hicks, director of marketing for Reliableremodeler.com.
"If you simply use a percentage model, you might be shortchanging or over-extending
yourself, depending on your situation."
From the age and
condition of the home to what the Joneses of the neighborhood have done, there
are a lot of factors to help in deciding how much work may be necessary and, likewise,
what would be considered going overboard. Still, Hicks says a rule of thumb on
how much to spend can be a good starting point.
In fall 2006, Dan Fritschen,
author of "Remodel or Move?" and
founder of a Web site by the same name, surveyed
5,000 homeowners who were considering that
choice. Half of those were planning to remodel
and expected to spend 30 percent of their
home's current value on the project. In a
similar 2005 survey, one-third of respondents
planned to remodel and expected to spend the
same percentage of home value.
So what does it take to get a thumbs up on
improvement spending from the experts? Neighborhood
knowledge. Consider the highest priced home
as a limit.
can improve up to that level," says Fritschen. "Going over that should
only be done if you don't want to recoup the majority of your remodeling investment
by your home appreciating." In other words, you'd better enjoy that fourth
bathroom and natural stone-surrounded pool with waterfall if nearby houses have
no such amenities.
Or, as Becky Nelson, senior
loan officer for Opteum Financial Services,
puts it: If you want $50,000 in custom landscaping
while your immediate neighbors are struggling
to mow their lawn, that's fine. But when you
move, you're not getting the $50,000 back.
Nelson adds that in the mortgage world, that
over-improved house would be considered "the
castle of the neighborhood." You'd be
hard-pressed to find a buyers' agent that
recommends purchasing the neighborhood castle
-- or a house that sticks out in any obvious