Home Improvement Remodeling

Homeowners undertake home improvement remodeling projects for a variety of reasons: additional space, changing needs, or new lifestyle preferences. When remodeling for the purpose of improving a home’s value, however, there are two types of projects: equity building remodeling and resale remodeling.

Home Improvement Remodeling for Equity Building

Remodeling projects are one of the fastest ways to increase the relative equity in a home; therefore, increasing its appreciation value as an investment. When choosing home improvement projects to build equity, however, it is important to consider the long term effects such changes will have on the home’s value as well as the overall cost.

Types of Projects

Equity building home improvement remodeling projects should focus on increasing a home’s value in the eyes of appraisers, since they are responsible for adjusting a home’s potential market value. Popular projects that increase the equity value of a home include:

• Adding additional rooms, such as screen porches, laundry rooms, garages, bathrooms, or bedrooms.
• Improving the overall property by installing an alarm, sprinkler system, or landscaping.
• Adding luxury features such as a pool, deck, or fireplace.
• Finishing a basement or attic to increase living space; possibly providing a separate entrance.
• Repairing substantial problems with the home such as exterior wall, roof, or structural damage.

While these may be extensive projects, they can also add substantial value to a home in the long term.

How Remodeling Affects Equity

Home improvement remodeling can affect a homeowner’s equity only if it increases the value of the home. While interior decoration, new paint, and other surface projects may make a home more appealing, they do not substantially change its value. If an owner has a home that initially cost $150,000, they may be able to do $15,000 worth of equity improvements without spending nearly that amount of money, since those improvements are added to the overall value of the home compared to current market rates and demand. Of course, if additional loans or a second mortgage is needed to complete the projects, the overall cost to the homeowner could be far greater because of interest rates and the additional principal.

Home Improvement Remodeling for Resale

When homeowners are considering selling their home, minor remodeling projects can greatly increase the short term value and market appeal of their property. The key is to make the home attractive to prospective buyers so they can picture it as their new home.

Types of Projects

There are many types of remodeling projects that can prepare a home for sale, including:

Painting is a quick and easy project to increase a home's market appeal.

• General home and property cleanup, including trimming trees, washing exterior surfaces, and weeding gardens.
• Increasing curb appeal with flowering plants, basic landscaping, and fresh exterior paint.
• Repainting the interior with neutral and coordinated colors that new owners can easily change if desired.
• Updating appliances and fixtures that will remain with the home, such as dishwashers, bathroom fixtures, and entryway lighting.
• Having the home thoroughly inspected and certified as up to current building codes.
• Upgrading closets with additional shelving and storage space.
• Completing necessary minor repairs, such as broken screens, ripped linoleum, or chipped baseboards that can detract from the home’s appearance.

Many resale remodeling projects can be completed in a short period of time for very little money, but they can add immeasurable appeal to a home as it is put on the market.

How Remodeling Affects Resale

The key to successful home improvement remodeling for resale is that it helps prospective buyers picture themselves as the new owners with minimal effort. By making minor improvements, the home may sell more quickly and at a higher cost than if no changes were made, making the initial financial investment well worth it. Homeowners should note, however, that minor projects should never conceal flaws or other problems with the home (repainting to hide water damage, for example); inspectors are quick to spot such tactics and savvy homebuyers will not be fooled, making the investment worthless.

Securing Money for Remodeling Projects

Depending on the type of home improvement remodeling planned, there are several ways to secure project financing. Many homeowners consider refinancing their homes or pursuing home equity loans to provide the necessary capital. Another option may be to apply for a specific home improvement loan. Before signing up for additional debt that may add years to mortgage payments, however, homeowners should thoroughly investigate their financial options and whether remodeling projects will pay off in the long run as a sound investment for their home and their financial situation.

Home improvement projects can improve a home’s value in both short and long term appraisals. Whether for equity building or resale value, choosing the right projects and carefully balancing remodeling costs with financial ability can help homeowners improve their homes and their wallets simultaneously.