Source: Edge: October 2008 REALTORS® are often asked to suggest improvements that will make their clients' homes more saleable
Some good information to pass on the Buyers and Sellers:
Energy efficient renovations offer good return on investment
and provide the biggest return on investment (ROI). Kitchen and bathroom upgrades still offer some of
the best ROI. But now, according to the 2008 Appraisal Institute of Canada (AIC) RENOVA survey,
energy-efficiency upgrades are high on the list of top paybacks.
Every other year, AIC surveys its members and compiles a list of renovations that, in the opinion of
professional appraisers, yield the highest recovery rate. The recovery rate is defined as the likely increase
in a home's resale value which could be attributed to a renovation as a proportion of the cost of the
renovation. For example, if a $10,000 renovation increases the home's value by $6,000 then the recovery
rate is 60 per cent.
Refurbished kitchens and bathrooms can typically bring in around 75 to 100 per cent of the investment at
resale, provided the renovations are professional and tasteful. "If renovating in order to sell, homeowners
must plan for changes that will meet the needs of a majority of potential buyers," says Joanne Charlebois,
AIC's Director, Marketing and Communications. "They also need to ensure any modifications reflect
current market trends."
Since energy savings are on the minds of most consumers, this year's survey asked respondents to rate
five energy-efficient upgrades in terms of their influence on the resale value of a home. Green
renovations were cited most frequently by respondents as having an average recovery rate of 61 per
cent. High efficiency windows received the highest level of agreement among respondents as the energysaving
home improvement that would have a significant positive impact on the appraised value of a
home. The type of heating system, heating system efficiency and insulation were also considered to
make a significant difference. Efficient hot water heaters, on the other hand, were judged to have only
minimal influence on a home's resale value.
Several other improvements were identified as having higher recovery rates including using neutral paint
colours (67 per cent), the addition of a cooking island in the kitchen (65 per cent), and installing a Jacuzzi
or whirlpool bath separate from the shower stall (64 per cent). Spa-style shower systems were cited as
being very popular upgrades. However, while stylish and trendy, their recovery rate is a relatively low 36
per cent. Not surprisingly, adding a swimming pool also scored very low in terms of ROI. In fact, the
addition of a pool, hot tub or skylights were not only considered to contribute very little to the resale price
of a home, in some cases they could even have a negative effect.
According to AIC, homeowners who are thinking about making home improvements should consider the
following tips taken from the 2008 survey responses:
- Renovations that add features to a home that other homes in the neighbourhood already have such as a second bathroom have a higher recovery rate than features not shared by neighbouring properties.
- Renovations done on a home with a lower market value than the others in the neighbourhood provide a higher recovery rate than renovations done on a home which is worth more than neighbouring properties.
- Poorly done renovations may have no positive effect, or worse, actually reduce the value of a home.
- Ensuring that a home is in good repair and well maintained is essential. However, renovations done on a home which has maintenance problems will have a much less bearing on its resale price.
The Resource Center page of AIC's RENOVA Web site, www.aicanada.ca, offers a calculator to help
home renovators get a better idea of the ROI they can expect for a variety of home improvement projects.
The site shows a payback range in dollars and as a percentage of what you plan to pay for the upgrade.
Homeowners can choose from among the 20 most popular home improvements.
Get out what you put in
Get out what you put in
Home upgrade ROI (%)-return on inv
Kitchen upgrade 75 - 100
Bathroom upgrade 75 - 100
Interior painting 50 - 100
Roof replacement 50 - 80
Replacement of furnace or heating system 50 - 80
Expansion (addition of family room) 50 - 75
Doors and windows 50 - 75
Adding a deck 50 - 75
Install hardwood floor 50 - 75
Adding a garage 50 - 75