In earlier posts I talked about the values of energy efficiency and earthquake resistance of your home.  But, how about the values of remodeling projects that do not involve structural or energy-efficiency upgrades?

Hanley Wood LLC has published national and local data for the cost vs. value comparisons of various remodeling projects.  You may find their “Remodeling 2010-2011 Cost vs. Value Report” for the San Francisco Bay Area at their website: http://www.remodeling.hw.net/2010/costvsvalue/division/pacific/city/san-francisco–ca.aspx

Data in this report indicate that homeowners are not likely to recoup their investments from most remodeling projects.  The only exception with a positive return on investment is the replacement of the entry door with a steel one!  Given these data, why would people remodel their homes?

Here is my answer to this important question:  The value sides of the cost vs. value comparisons do not include the “utility values” (i.e. the values of the use and enjoyment of the improvements) of the remodeling projects.  In fact, the differences between the “value” and the “cost” of the projects correspond to the utility values of the improvements to home owners/sellers minus the utility values of the same improvements to buyers.  It is not surprising that the home owners/sellers who did the remodeling to fit their own needs and tastes would assign a higher value to it than the buyers who would have wanted to do it differently, or would not have done it at all.

My take on this information is that if you are about to sell your house, you should not bother with remodeling it; you will not recoup your investment.  If you are a buyer, on the other hand, you can buy a house that is not exactly what you need and want, so long as you can remodel it to fit your needs and wants.  If you intend to live in your new home for a while and enjoy the benefits of the remodeling, than you should have nothing to worry about the adverse cost vs. value comparisons.