Project Upgrade

For years, the tried-and-true axiom among real estate professionals was that putting dollars into smart remodeling projects paid handsome dividends to homeowners. But judging by the latest data published in Remodeling magazine’s 2010-11 Cost vs. Value Report, sinking money into a major room/area redo may not be a worthy investment right now.

The report indicated that, on the average remodeling project, homeowners recouped 16 percent less value than they did in 2009, which represents the biggest drop the magazine’s survey has recorded in its nine-year history. And this occurred in spite of the fact that construction costs decreased for the first time since 2004.

For example, a major kitchen remodel costing $57,215 yielded a current cost recoup of less than 69 percent, down from 72 percent in 2009. For a mid-range bath renovation totaling $16,142, owners can probably expect to recoup 64 percent of the cost versus 71 percent observed a year ago. But many experts recommend that you take the report with a grain of salt.

“The survey results only say that if you’re trying to sell your home in the next year, remodeling is not a cost-effective way to increase the sales price,” says Joe Masters Emison of BuildFax, Austin, Texas.

The bottom line: If you plan on living in your home for five or more years, the project may still be worth it because you’ll not only get the extra use, but the perceived value of the project will change as the economy improves, says Jim LaVallee of EpiCity, Atlanta. What’s more, with the construction market currently in a downturn, homeowners can probably deliver the project for much less than what the magazine study estimates it should cost.

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