In This Chapter

A renovation can have a powerful impact on your sale price. However, renovations made specifically for the purpose of selling, and not just for your own enjoyment, should be done strategically and with careful thought. It is possible to make expensive upgrades that do not translate into actual dollars. If the purpose of your renovations is solely to make money on a sale, you want to be sure that they will do just that. If you make poor choices when renovating and the buyers don’t see the value in the upgrade, you could take a big financial hit. It’s also disappointing when you create something that you feel is valuable only to find out that others do not agree.

In this chapter, we discuss all kinds of renovations, good and bad. We share tips and cost-saving strategies that will increase your profit upon selling and help you to avoid costly mistakes.

Renovating a home is complicated, but there is nothing more rewarding and fun than transforming something shabby or old into something new and valuable—and making a lot of money in the process! However, there are financial dangers. When you renovate simply for your own enjoyment, there is less riding on it because you have only yourself to please. But keep in mind that you may pay a price down the road if your renovations are too specific to your taste or too trendy.

Too often, homeowners simply assume that whatever they put into a home will come back to them. When you are renovating strictly for the purpose of selling, your motive is entirely profit driven. Consider every possible angle before you begin. If you misjudge, you could take a loss. Let’s begin with a discussion of good and bad renovations and how to tell the difference between them.

The definition of a good renovation is one that is appropriate to the size and style of the home, one that clearly adds value and that is universally appealing. After all, what good is a renovation when a significant portion of the buyer pool may not want it or like it?

Here are some good renovations for the interior:

Updating the bathroom(s): A bathroom is the second most important room to upgrade because it is also expensive to renovate, and buyers will pay a solid premium if they are updated. Your return will be strong, but it is hard to quote a range here because it depends on which and how many bathrooms you renovate. In general, master baths are important as well as main-floor powder rooms.

Cost-Saving Tip: Try to replace the countertops, sink, and toilet, and paint the walls. Other minor upgrades include replacing the mirror, faucets, showerhead, and towel racks.

Adding a main-floor powder room: If your home does not have one, then create one and it will become more valuable by thousands of dollars. You may be able to convert a coat closet, storage room, food pantry, or part of a vestibule into a powder room. Some homes simply don’t have the space and require a small addition to accommodate a powder room.

Cost-Saving Tip: If you choose to put a tiny addition on, it is more cost effective to add something else in the process, such as a mud room. You’ll get a lot more bang for your buck as long as you already have the contractors on your property.

Finishing the basement: This is a fantastic renovation to make because it adds another level of useable living space without the expense of putting an addition onto your home. This strategy almost always pays off in thousands and thousands of dollars on a sale.

Cost-Saving Tip: Save money on furniture and cabinetry. As you design the basement, put closets or built-in shelving anywhere and everywhere that you can fit them. Because you’re losing storage space by finishing that room, you’ll need them. Plus, they’re great for holding children’s toys and games.

In some parts of the country, central air-conditioning is considered a necessary system of a home. But there are many regions where it is considered an upgrade—and even a luxury. It’s worth more money than a similar home without central air.

Cost-Saving Tip: Most average-size houses require two condensers (an apparatus that cools a portion of a home) to cool the entire structure. If money is tight, install central air in the upper floors only. Cool air falls (as opposed to heat, which rises). The main floor will benefit from cool air coming down from the upper levels. Your energy costs will also be lower. Another way to save money is, if you live in a region with seasonal climate changes, to have it installed in the fall or winter. Contractors will charge you less then because they are not as busy.

Refinished original (or install) hardwood floors: Refinishing original floors is an upgrade with a wonderful return on investment because it maximizes an existing and expensive feature in a home. It would be extremely costly to install, today, the quality of wood that they used decades ago, so leverage that feature and make a nice profit. If you can afford to install new hardwood floors, then we encourage that as well.

Cost-Saving Tip: If a complete refinishing is not in your budget, do something called screening, which is a light sanding and staining of the floor. It costs much less but still looks great.

Installing French drains: If you live in an area that has a high water table or where you and many of your neighbors get water in the basement during heavy rain, a French drain is a very valuable renovation. They cost a few thousand dollars, but this renovation is well worth it if you have a water problem that can knock a huge amount of money off your sale price.

A French drain is a trench that is dug along the perimeter of your basement floor. If the floor is concrete, it must be jackhammered apart first. The trench can be as deep as 18 inches. It is filled with gravel and then the concrete floor is repoured within a couple of inches of the wall. If water ever comes in again, it will drain out through this gravel lip along your basement walls—although most well-constructed French drains should keep the water from ever coming inside again.

Cost-Saving Tip: If you cannot afford a French drain, opt for a sump pump (or two). They are far less expensive than French drains. They do not always keep water from coming into the basement, but they do take the water out of the basement. A sump pump is a 3- or 4-foot circular hole which is usually dug into a corner of your basement floor with an electric pump inside. It literally pumps water out of the room and into the earth.

Here are some good renovations for the exterior:

Adding a dormer to the roof to create a new room: If you have an attic with a sloped roof that inhibits head room, add a dormer to create enough height to finish the room. Like a finished basement, this adds a whole new level of living space, which is worth tens of thousands of dollars.

Cost-Saving Tip: If your roof is old, plan the dormer construction to coincide with replacing the roof. This will save you even more money.

Creating a portico: If your home does not have a vestibule or covered porch at the entrance, and the front looks a little bland, then building an architecturally interesting portico over the front door is not only functional but it can add a lot of value in terms of curb appeal.

Cost-Saving Tip: If you have a pediment above the door, try just extending it over the stoop and adding two columns.

Building a deck or patio: This is a fantastic strategy for small homes with a limited amount of square footage on the main floor. It gives the illusion of more livable and usable space without having to build an expensive addition.

Cost-Saving Tip: Building decks and patios can actually be do-it-yourself jobs. But pay close attention to the transition from the inside to the outside by making sure to create a nice finished look with a natural flow.

Commissioning a landscape design: Landscaping itself is often a do-it-yourself project, but dramatic landscape design is not. If you want to significantly increase the sale price of your home, call in a genuine landscape design architect to really make an impact on the value of the exterior of your home.

Cost-Saving Tip: Ask the designer what perennials or annuals he wants to use and then buy them yourself, as opposed to being forced to use the plants that he sells to you directly. When he’s done, tell him to leave the mulching to you and you’ll save a few hundred dollars more. If you need to remove trees, hire that contractor in the cool months—in their off season—and get a discount.

Installing shutters and flower boxes: It’s amazing what these two items can do in terms of helping a buyer to fall in love with your home from the curb. They are relatively inexpensive to buy, and buyers will pay a lot more for storybook-type curb appeal.

Cost-Saving Tip: Flower boxes and shutters are items that can be comparison shopped and ordered online. We have found that there is a huge variety to view, easy-to-understand descriptions of materials, wonderful photos, and periodic offerings of discounts.

Bad renovations are ones that do not add value, are too specific in taste, are inappropriate to the size or style of a home, or may not be universally appealing to buyers. If you spend the sort of time and energy and money required for a renovation, the last thing you want is for it to be unprofitable.

Here are some examples of bad renovations:

Converting a bedroom: Some homeowners will turn a bedroom into something else, like a giant walk-in closet. Unless the home is extremely large with an excessive number of bedrooms, this is usually a mistake. There is a strong relationship between sale price and number of bedrooms. When you lose one of them, you could be losing 10 to 20 percent on the sale.

Building a second kitchen: You may have in-laws, boarders, or a nanny living with you; or you may have a “summer kitchen,” which is often on the lower level and used for outdoor entertaining. The majority of home buyers do not want or need a second kitchen. Even if they could overlook it for the sake of the purchase, it will still cost money to have it ripped out.

Changing the style of a home: Homes that have maintained their architectural integrity are more valuable than those that have been changed. They are considered “true to the period” in which they were built. If you change the style that the home was intended to be, the home is no longer “authentic.” It would need to be “restored,” which everyone knows is an expensive word! When you try to sell a home with a style that has been compromised, it will cost you a great deal of money in the sale.

Modifying the use of the home: If you turn a single family home into a multifamily structure or a “mother/daughter” (which is a single family with a wing that has a bath and kitchen in it), then you have reduced your buyer pool by a huge percentage. Again, if the purpose of the renovation was expressly to sell, then you will likely have fewer interested buyers, which usually translates into a lower sale price.

Poorly executed renovations: Buyers are much more knowledgeable than ever before. They will notice if you used cheap materials or if the labor was shoddy, and it will be reflected in the offers that you receive. The savings you were after may be washed away by the loss of dollars in the sale price.

Paving over or converting a yard: Some families will convert the entire rear yard (or a very large portion) into a basketball court, skateboard park, dog run, tennis court, or even a pool. When you create a facility that takes up most or all of the yard, you’re taking away open land, which is a major motivating factor in buying. If your child got terrific use out of it, then it was worth it. But it is not a renovation to make in order to get a higher price.

Overimproving a home is when you spend money on improvements and the money does not come back to you when you sell. You may have gotten enjoyment from them while you lived in the house, but they can literally rob you of profit when selling.

The two most common examples of overimprovement are expensive additions and upgrading rooms using super-expensive materials.

Additions, on their own, are not bad renovations. They can add great value to a home. But it is crucial that you analyze what you will be spending compared to what the home will be worth when the work is done.

Let’s say that your home is worth $600,000 today, and most of the homes on your street are worth between $550,000 and $700,000. The addition that you want to put on will cost $150,000. That means that you would need to get $750,000 on the sale just to break even. As the average value of homes on your street demonstrates, you are not likely to break even, let alone make a profit.

We have clients who call us constantly to discuss their ideas for an addition. They are very smart to do that because they know that when you’re spending that kind of money (sometimes in the hundreds of thousands), you don’t want to bet on the market automatically giving you a profit in return. If you bet wrong, you can be in big trouble.

Good materials are always a good idea. But top-of-the-line materials are sometimes a bad idea when you are getting ready to sell. When you upgrade rooms, particularly kitchens and baths, it is possible to overspend and not get your money back.

A typical example of this type of overimprovement is when you see a million-dollar kitchen or master bathroom in either a very tiny home or in a home located in a less expensive neighborhood. By “million-dollar kitchen,” we mean a kitchen with the most expensive countertops, appliances, flooring, light fixtures, tile, millwork, and cabinetry that you can buy. When you’re trying to make a profit, it’s all about the best return on your investment—not necessarily the best materials that you can buy. Save the million-dollar materials for the million-dollar home.

Again, the only way to know if you are going too far with materials is to find out what the approximate value of your home is before you renovate. Then add to it the cost of all of your materials and labor. If the number is higher than what most of the other homes on the street are worth, consider cutting back on the level of materials you’ve chosen. If the cost is greater than average values on the street, the addition is probably not a good way to make money on the sale.

Planning is everything when it comes to renovations. The main reason you should plan is to save money. Another reason is that you do not want to be inconvenienced any longer than you have to. Ask anyone who has lived through a renovation. It is stressful, messy, and expensive, and it can take a long time! If you do not have a good plan in place, it will take even longer, you may make mistakes, and your costs will go up. The following sections guide you through a plan that will help you execute your renovation.

Most people think that the first person you should call when renovating is a contractor. But the first person you should actually call is a Realtor, because she can tell you how the renovation is going to impact your sale price. Have the Realtor come over to your home and physically walk the area that will be renovated. Share your ideas with her. Then ask her to share her thoughts about the profitability of the renovation. Will the renovation allow you to make a bigger profit when you sell or not? She may need to go look at some comparables and do some research in order to give you an intelligent answer, or she may know instantly that it is a risky move. Either way, this simple and cost-free act could save you untold thousands or even tens of thousands of dollars.

To find a good contractor, begin with personal referrals from your friends. They will likely have firsthand experience with a contractor, or know of someone who has. And Realtors usually keep lists of the good ones and what their specialties are. A referral is the best way to find a good professional.

If you only have the yellow pages at your disposal, then the questions you ask and the way that you screen them will be even more important. You may also ask to speak to their last three clients. If the contractor refuses, then move on to the next candidate immediately. That’s a red flag.

Time is money! It’s never truer than in a renovation. Okay, maybe it’s a little truer on a movie set. But we’re not talking about a film studio’s money; we’re talking about your money! Delays are costly, not to mention inconvenient when your home is in ruins (and possibly your marriage), or when you’re eating fast food every night and everything is covered in a film of plaster dust.

Kitchen renovations are especially tough. When you’re eating in, you may be doing dishes in the bathroom, and eating out can be expensive and tough on your health.

To make a tight but realistic renovation schedule, begin with the estimated duration of the job given to you by the contractors whom you have interviewed. It’s prudent to add two weeks—at the minimum—to that estimate. Some people add a month or more.

Work with the contractor to create a list of things that you are responsible for doing and establish when they need to be done in order to stay on schedule. A big responsibility of yours will be purchasing materials in order for them to be at your home on the day the contractor plans to install them. Another is providing access and scheduling inspections by the local municipality, which may need to witness certain stages of the renovations. Also, you need to determine when to have vendors come in for carpeting, appliances, and so on.

The time of year is important because, depending on when you launch the renovation, utilities may need to be rerouted or even shut down for a period. No water in the summer or no heat in the winter could present problems.

And finally, consider the family’s schedule. If there is a trip, camp, or even sleepovers on the horizon, leverage those as convenient windows to work with.

Typical delays on a home renovation include the following:

If you are renovating specifically for the purpose of selling, then you will have a sale price in mind that you would like to get. The first thing to do is to make sure that you will, in fact, get that price when your home goes on the market. You will have this information if you consulted a Realtor at the beginning of this process.

For example, let’s say that your home is currently worth approximately $410,000 and you hope to get $450,000 after making the renovation. That’s a profit of $40,000. Your contractor has given you an estimate of $25,000 for the job. You stand to make $15,000 in profit. But will you really get that $15,000 if the job goes over budget?

There are always hidden costs in a renovation. Good contractors will advise you that their estimates do not cover all your out-of-pocket costs. But they will not necessarily point out for you every single cost that is outside their domain on the job.

The contractor estimate should include the cost of materials such as Sheetrock, plaster, and moldings, as well as permit fees and labor, including the installation of appliance and fixtures, painting, and electrical and plumbing work.

But there are many items that may not be on the contractor’s estimate. Some of them are …

As you can see, that $15,000 profit could be eaten up by these items. It is important for you to sit down and do a complete budget. Leverage your contractor’s experience. Have him look it over and advise you as to what items you may be missing.

We have a number of cost-saving strategies for renovations:

Keep the original footprint of the home. If you are able to work in the existing structure of your home—without putting on an addition—right away you will have saved an enormous amount of money. After you make the decision to expand a home, the costs begin to pile up. To begin, it usually requires some sort of variance or zoning approval from the town in which you live. You will need to present a plan and blueprints. This delays the start of the job for weeks or even months. Then there are the costs associated with pouring or building a new foundation; adding to and rerouting electrical and plumbing service; installing a new roof over the addition (and perhaps the whole house), as well as new exterior siding or exterior paint; and providing new landscaping and possibly irrigation or drainage work. The final major cost comes when the work is complete and your taxes are reassessed based on more square footage. This is why we are such big fans of finishing basements and attics. The comparative costs are much lower.

General contracting your own renovation. When renovating, there are workers in your home doing all sorts of different jobs: electricians, plumbers, carpenters, painters, masons, and more. The boss, or the general contractor (also know as the GC), will often be the point person who oversees all of the work and the timing. There is a built-in fee for this role, and it could be as much as 15 percent of the total cost of the job.

If you have the time and energy, you can assume this role yourself. It requires your being on-site most days, making sure that everything is happening on the day it is supposed to happen, ensuring that all the materials you have chosen (appliances, fixtures, paint) are on-site when the workers need them, being available for inspections by the town, making phone calls and doing any necessary research, as well as communicating directly with the workers on the job. Sometimes, the renovation can actually go smoother when you are your own GC. After all, you’ve only got one client and it’s you—so you have your full attention!

Being able to stay in the home throughout the renovation. Unless you own more than one home, one of the biggest costs of a renovation is the rent you’ll pay to live elsewhere during the process. And while you are renting, you continue to make mortgage payments on the home you are renovating! These costs can mount to extraordinary heights. Find a way to reside in one portion of your home and close off the portion that is being renovated. If your kitchen is under construction, create a make-shift temporary one in another corner of the home. Move your microwave and refrigerator to that area and try to have some fun with it. (We said “try”!) When it begins to overwhelm you, remind yourself of the thousands you are saving by roughing it.

Making more than one renovation simultaneously. A small-scale example of this is when you wait to call a plumber or electrician until you have at least two or three things for him to fix. It costs money just for him to show up, so you want to get as much bang for your buck as possible. With a renovation, there are costs associated simply with setting up a job. If you’re going to have workmen crawling all over your property, it’s cheaper to have them renovate more than one thing. But more importantly, when you have a room that is gutted and the walls are open, that is the time to consider a renovation in a nearby space or adjacent room.

Renovating without having to move appliances. If you can keep the appliances in the same general location, it saves a lot of money. Keeping the main electrical, water, and plumbing lines intact, and avoiding the rerouting or creation of new ones, can save up to 50 percent on the costs.

Plan, plan, plan. As we’ve said, good planning is everything. But on a renovation, it is particularly important and can be the difference between making a profit and suffering a loss. If you have a clear timeline (with some wiggle room built in) and a detailed budget (also with some padding built in), then you can survive curve balls along the way and still make money.

Supervise, supervise, supervise. Even if you do not choose to GC your own renovation, it is imperative that you are present, at some point, during the course of each day. Ask anyone who has ever done a renovation before: the one day that you don’t show up, something will get installed, hung, or affixed in the wrong manner. Every day find out from the contractor what project he will be working on. Maybe it is a task for which you do not need to be present and you can take a worry-free day off. Also, you may not be a contractor yourself, but if something looks wrong, it very well may be. Ask a lot of questions. Don’t be afraid to ask the contractor to explain to you what he is doing, if you are unclear. Try to keep your interruptions to a minimum, however, as work often stops when the homeowner walks into the room with questions.

Weekend warriors. More and more homeowners around the country are making big renovations quickly with the help of family and friends. If you have the skill and know-how to oversee a project like this, then good for you. Do yourself a favor and make the turnaround as quickly as possible so you don’t lose your workers after time. And don’t forget to reward them with a big barbecue when it’s done!

The types of renovations described in this section have two fantastic benefits. They save energy, which is something that we all must look to do. But they also save you a lot of money on your energy costs. True, there is an up-front cost associated with these renovations, but those costs are offset rapidly by the money that you immediately begin to save in heating, cooling, and lighting your home.

If you are not already familiar with these renovations and terms associated with them, you will be in the coming months and years. They’re going to become more and more common. Here are some of them:

Energy Star is a highly successful joint program between the U.S. EPA (Environmental Protection Agency) and the U.S. DOE (Department of Energy). The program recognizes and labels energy-efficient appliances and other materials with the Energy Star emblem right on the packaging. Millions of Americans have already saved billions of dollars in energy costs by choosing Energy Star products.

For more information on the Energy Star program, as well as information on how to make your home green, visit these websites: