The low ROI home improvements sellers shouldn’t take on

Key insights:

• While most homeowners invest in improvement projects before selling, there are some projects that won’t pay off at the closing table.
• Plus, because today’s sellers have a bold advantage in the market, they should discern what is really worth updating before listing their home for sale.
• Data indicates some of the most expensive projects — such as a bathroom or owner’s suite addition — may have a low return on investment.

It’s no surprise that today’s housing market is hot for home sellers. In fact, today’s sellers are getting 102% of their asking price. If your home is in the right location and well maintained, you may not plan to update anything on your property before you list it for sale. But if your home is outdated, or you’re simply aiming for an even higher bid, some carefully considered renovations could give you an extra edge in the housing market.

Keep in mind, though, that not all home projects provide an equal payoff for sellers. Before making big changes to your home, be sure to research the typical return on investment (ROI) of the updates you have in mind.

The Remodeling 2021 Cost vs. Value Report (costvsvalue.com) provides an exhaustive list of renovation details that helps guide home sellers on what projects are worth taking on before their for sale sign is posted. The report includes the specific cost and value of home improvement projects across the country, and even breaks the data out by region and city.

Here are the projects Twin Cities homeowners should avoid if they want to position themselves for the most cost-effective sale in the near future.

1. Upscale owner’s suite addition

Cost: $338,083
Resale value: $152,119
Cost recouped: 45.0%

Everyone enjoys a spacious bed and bath. An upscale owner’s suite addition will result in a 32x20-foot space including the home’s primary bedroom, walk-in closet, lounge space and bathroom — but at a significant cost. At a cost of nearly $340,000 with a resale value of just over $150,000, homeowners shouldn’t invest in a project this extravagant unless they plan to enjoy the updates for many years before selling the home.

Instead, it may be wise for sellers to complete a mini bedroom makeover. Plenty of inexpensive tricks can help spruce up an existing bedroom, and they’re bound to appeal to interested homebuyers.

2. Upscale bathroom addition

Cost: $108,912
Resale value: $51,816
Cost recouped: 47.6%

If your home is low on bathroom space, you may be considering a bathroom addition. For the project profiled in the Remodeling 2021 Cost Vs. Value Report (costvsvalue.com), you’d install a shower, free-standing soaker tub, compartmentalized commode area and even electric in-floor heating.

As with the full suite addition, this update is quite expensive and recoups just over 47% of the initial cost at resale. Even a mid-range bathroom addition — which includes less expensive fixtures, tiling and cabinetry — will cost about $60,000 and recoup less than $30,000, according to the report’s data.

The analysis is clear: Even if your buyers will be discouraged by the total number of bathrooms in your residence, it is probably not worth it to put in a new bathroom right before selling. Instead, work to present your existing bathrooms in their best light. Strategically stage your bathroom by replacing hardware and light fixtures and setting out luxe towels.

3. Asphalt roofing replacement

Cost: $35,946
Resale value: $17,537
Cost recouped: 48.8%

Last, a full asphalt roofing replacement will recoup just about 49% of the project cost at resale — which isn’t a great ROI, when the project costs nearly $36,000. With this steep cost and little room for benefit, a roof replacement might not be the best project to take on before selling.

However, a new roof is quite a bit different than a bedroom or bathroom addition, because it is a replacement of an existing portion of your home. When pricing your home, you will have to consider your roof’s condition and you’ll also need to disclose any known issues with the roof. You may also end up negotiating with a buyer over the condition of the roof if they order an inspection and find any issues with missing shingles, leaks or other defects. Last, depending on how in-demand your home is, you may see fewer offers on your property if it’s clear that the buyer will need to replace the roof immediately.

The smartest path forward, when selling a home with an aging roof, is to speak with your REALTOR® before making any decisions or updates. As a local market expert, they can help you determine if the cost of the repair will outweigh the headache and risk of selling a home that has some roofing damage.

Want to learn about the ROI of home projects worth investing in?

We’ve detailed the three projects with the lowest return on investment, but the 2021 Cost vs. Value Report (costvsvalue.com) also shared the five projects with the highest ROI in the Twin Cities. If you plan to move soon, you may want to consider adding a stone veneer or replacing your windows.

Here is a list of the home improvement projects with the highest ROI locally. And if you’re planning other remodeling projects, take a look at the complete report for the Minneapolis area at costvsvalue.com.

Consult a real estate expert before you sell

While these renovations come with a bigger price tag, it might make sense for you to take on higher-cost, lower-ROI projects if you plan to stay put for a few years. You can measure your return on investment in your personal enjoyment of the space, after all!

However, if your updates are solely intended to improve your odds when selling, either with the hopes of an even speedier sale or one with a higher bid, be sure to consult your agent before you start renovations. Get in touch with Edina Realty or your agent, who can advise you on the most impactful changes that work for your goals and your property.

©2021 Zonda Media, a Delaware corporation. Complete data from the 2021 Cost vs. Value Report can be downloaded free at www.costvsvalue.com.