The appraisal industry is pushing a new product aimed at homeowners considering a major home improvement: a feasibility study analyzing what your home will be worth before and after the project.
The Appraisal Institute, a trade association for real estate appraisers, says a feasibility study weighs the cost of rehab projects against an estimate of the property’s value before and after the improvement.
Appraisal Institute President Richard Borges II claims the study would help homeowners avoid spending money they won’t recoup at resale, particularly if the improvements don’t jibe with standards for the community.
Of course, remodeling decisions involve more than dollars; you should also consider your enjoyment of your home.
In addition, if you don’t want to spend several hundred dollars on a feasibility study — appraisals typically cost between $200 and $500 — consult your REALTOR®, who can advise you about what the project might add to your home. A REALTOR® will be familiar with the interiors and exteriors of homes in your neighborhood as well as recent sales prices.
According to Remodeling magazine’s most recent Cost vs. Value report, the projects with the highest expected return on investment include:
When you’re calculating cost and value, think about how long you plan to stay in your home, Borges added. The longer you do, the greater the opportunity for a return on investment, he said.
Some green and energy-efficient renovations, such as adding Energy Star appliances and extra insulation, can pay you back relatively quickly via lowered utility bills, or by enticing homebuyers to choose your home over a less-efficient home.
In the feasibility study, your appraiser can assess local supply and demand for green and energy-efficient properties and features, Borges said.