Mortgage Blog

There are many ways to create value in your home for a home refinance. Homeowners often do not understand which upgrades and/or renovations will actually help to build value when it comes to selling a home. An appraiser can only add value to a home for very specific things. Now let’s take a look at some of the things that a homeowner can do to add value to a home.

Does Home Improvement Build Value?

One of the best ways to add value to a home is to add a bedroom to the home. This essentially puts the home into a whole new class for the purposes of an appraisal. The home will now be compared to homes with 4 bedrooms instead of homes with 3 bedrooms for example. The homes with 4 bedrooms are essentially in an entirely different class when it comes to an appraisal. This can drastically increase the value of your home. The addition of a bathroom can also add a fair amount of value to a home.

Simple additions and upgrades can add value to a home, but generally will only add that value if some of the items that are being upgraded are in a state of disrepair. Upgrading a kitchen for example does not necessarily add value to a home for the purposes of an appraisal. The cost of granite countertops and highly customized upgrades do not translate to dollars when an appraisal is done. The amount that it costs for the upgrades will almost never add value above the cost of the upgrades.

This raises the question, what is the situation in your home? If you plan to live in your home for the rest of your life, then appraisal value really does not mean much for the purposes of upgrading your home. Simply decide if the money that you’re spending on upgrades will improve your quality of living. You do not need to worry about getting dollar value out of your upgrades. However, if you may be selling your house in the next 5 years or so and getting a new home loan, you have to be cost and value conscious. It is easy to spend $50,000 or $100,000 upgrading a kitchen. You will never recover this cost when you sell your home. If you spend that same money adding a bedroom and a bathroom you can add value in your home that will exceed the cost of the upgrades. It may even be a good idea to speak with an appraiser in your area and find out how much the value of your home will increase if you do add a bedroom or a bathroom. This can give you a good idea of what you should spend on the upgrades.

You also have to consider upgrades if you are selling your home. This gets a bit tricky. If bad landscaping or disrepairs are preventing you from getting offers on your home then it may be time to upgrade some of those things. You will most likely not recover the cost of these upgrades or repairs, but it may be the difference between selling your home or not. Your realtor should be able to help you make those decisions.

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