The National Association of Realtors (NAR) conducts an annual survey of its members in 80 cities that is created by Remodeling magazine and used to estimate the return on investment for 33 home improvement projects. The 2009 report concluded that, on average, for every US$1,000 homeowners spend on projects, they get back $638.
Even projects normally hyped as sure bets for adding value generate surprisingly weak gains, NAR reports. Converting an attic into a bedroom, for example, is typically regarded as garnering interest among potential buyers who might have otherwise disqualified the home from their search. An extra bedroom will indeed add value - just not for the majority of people who spend on the conversion. NAR figures homeowners recoup $831 on average for every $1,000 they invest.
Kitchens and bathrooms remain two of the most popular upgrades, and do have among the best returns on remodeling investments. But even for these rooms, mid-range jobs, which offer the highest returns, yield only about $720 and $710, respectively, on average, for each $1,000 invested.
The only investment that tends to get more out of buyers than sellers put into it is a heavy, insulated steel entry door, according to the NAR/Remodeling survey. Spend $1,000 on such an upgrade and you're likely to add $1,289 to your sale price.
If you're looking for examples of ways to waste money on renovations, there are lots of choices. Remodeling a home office yields just $481 for every $1,000 invested. Buying a backup power generator (perhaps from the likes of Honda or Briggs & Stratton) will add only $589 for each $1,000 invested.
Lashinsky says that on occasion, buying a new appliance for your home can pay off - if the one being replaced is so horribly out of date that it unsettles potential bidders. The agent has a long list of bad ideas to avoid. Among them: Converting a bedroom into a home office and yanking out the closet to make the room look bigger.