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Buying & Selling a Home

What's the Payoff for Remodeling?

With luck, you could recover 86% or more of your cost.

Remodeling projects are enticing investments. You get to play the Iron Chef in a new, modern kitchen or pamper yourself in a spa-style bathroom, then recoup your money when you sell your house. In fact, anticipating that payback is often a driving force in convincing yourself—or your spouse—that a project is worth the money. But how much return can you count on? The "2005 Cost vs. Value Report" from Remodeling magazine says it’s not uncommon to recover 86% or more.Despite unrelenting new construction, the average U.S. home is 32 years old and in need of lifts, tucks and add-ons. As a result, home remodeling has become a national obsession. The National Association of Home Builders expects Americans to spend more than $160 billion on home improvements in 2006.

The table below shows the average price tag for a dozen popular projects, based on figures provided by HomeTech Information Systems, which develops software for estimating remodeling costs. The percentage of cost recouped at resale is based on estimates by members of the National Association of Realtors. The numbers are national averages (single-city reprints for 60 cities can be ordered for $9.95 per reprint at www.remodelingmagazine.com). The payback can vary dramatically by region.

Sal Alfano, editorial director of Remodeling magazine, notes that in extremely hot markets and those with a lot of new construction, resale values may slip below national averages. That’s because buyers would just as soon purchase a new house with all the amenities than a remodeled home.

A dozen popular projects

Check out the average cost nationwide for 12 remodeling projects, plus estimates of how much of that cost you would recoup when you sell your home. Keep in mind that payback can vary dramatically by region, however. In the case of a minor kitchen remodel, for example, recovery ranges from 85% in the Midwest to 112% in the West.

PROJECT PRICE % OF COST RECOUPED
Minor kitchen remodel, mid-range $14,913 99
Major kitchen remodel, mid-range $43,862 91
Major kitchen remodel, upscale $81,552 85
Bathroom remodel, mid-range $10,499 102
Bathroom remodel, upscale $26,052 93
Bathroom addition, mid-range $22,977 86
Bathroom addition, upscale $47,212 86
Master suite, mid-range $73,370 82
Master suite, upscale $137,891 80
Window replacement, mid-range $9,684 90
Window replacement, upscale $16,096 89
Siding replacement, upscale $10,393 104

Source: Remodeling Magazine 2005 Cost vs. Value Report