When you put money into remodeling or updating your home, you should consider the purpose of the upgrade. If it is to improve the value, updating kitchens and bathrooms are usually the areas where your money gives the most value. However, just because you have spent $50,000 on improvements, doesn’t mean your home is automatically worth $50,000 more. One man I knew spent well over $100,000 on improvements to his already beautiful home and was shocked to get an appraisal that only increased his value by a small fraction of that amount.
Home appraisers do not consider how much you spent on upgrades. They simply compare the newness and “modern-ness” of your home (primarily kitchens and baths) to other homes that have sold in your neighborhood. If your home is dated compared to others, your appraisal will show less valuation, whereas upgrading to match other homes will help match their value (their sale price). If other sold homes have not been renovated, and yours has, you will probably get some bump up in value, but probably not as much as you spent on the renovation.
So, the take-away from a valuation standpoint is that regardless of what you spent on renovations your appraised value is relative to other homes sold in your area.
Of course a remodel or update is not just about raising the value of your home. If you are planning to sell your home, renovating to bring your home up to a contemporary look will improve the appeal to prospective buyers. And, there is the very important factor of your comfort and enjoyment. If you are planning to stay in your home for a number of years, then some improvements that don’t raise your home’s value, may still raise your spirits and make your home more enjoyable.
If you are looking to remodel, a refinance can get you cash at a very low rate compared to other financing methods. I’ll be glad to help you explore the best financing for your project.