People ask me all the time about my personal formula for home remodels, but in my experience every project and every home is unique. I let each home visually tell me how it needs to be changed. For some remodels a complete new kitchen is in order, while other kitchens can be transformed with new countertops, backsplash, and cabinet re-facing. For some homes the outdoor landscaping is as important as the changes that will be made inside the house. It all depends on the home, the location and the market demand at that moment.
It is surprising that sometimes homes that are side by side sell for almost the same amount of money, even though one home had more extensive remodeling done at a different time in the market. When a market is slower, the buyer pool is smaller and unfortunately the seller with a more extensive remodel will not capture a higher sale price than the seller with a more basic remodel. But remember, many remodeling projects are done simply for the homeowner’s enjoyment, not necessarily for resale. Remodeling a home successfully requires attention being paid to three critical areas: design & aesthetics, location of property, and market timing – both when doing the remodel work and when selling the remodeled home.
According to the National Association of Home Builders the RMI numbers (Remodeling Market Index) are very promising for the remodel business: (see graphs from the NAHB here: http://www.nahb.org/fileUpload_details.aspx?contentID=137354)
- The RMI (Remodeling Market Index) rose to 57 which is the 6th consecutive 3 month period that the index has been over 50. This means that for over 18 months the remodeling index has been increasing. An RMI above 50 shows a healthy strong remodeling market.
- The RMI could have been even higher, but many remodeling companies are having difficulty finding qualified labor and subcontractors.
- The RMI index has reached its highest level in over 10 years.
- The RMI shows that many homeowners are choosing to remodel or to buy a home that needs remodeling.
As a real estate professional you may be asked by a potential buyer if a particular home is a good candidate for a remodel. Be careful of how you answer this! If you don’t know all the facts you may be leading your buyers down a very dangerous road. So you should always recommend the homeowner contact a remodeling expert. Here are some of the things to think about when considering a remodel:
- If the property is remodeled, verify whether the property setbacks will remain the same, increase, or decrease.
- Does any of the current plumbing or electrical system need to be replaced or can you simply add to it? (What is behind the walls is always important!)
- Is this client someone who could handle the extensive project management that comes with a remodel?
- Does the client have the money to do the remodel?
Remodeling can be an excellent solution for your clients, but make sure they do their due diligence before signing on the dotted line.