• Sang Han

Chapter 10. America's Next Top Remodel (Not all home-improvement projects are created equal)

Updated: Dec 19, 2021

When you want to sell your house, people will give you advice about remodeling parts of your house. In particular, you will hear a lot of advice to remodel your kitchen and bathroom.

So why would you consider remodeling?

According to my experience, the goal of proceeding with the remodel is mostly the following two things.

1. To sell my house fast

2. To increase the resale value

*by the way, selling a house quickly is one of the ways to indirectly increase the Resale Value.

Then, let’s find out how much the remodeling meets the above objectives.

1. To sell my house fast

In my experience, comparing similar houses with similar price points, houses with remodeled kitchens and bathrooms certainly sell faster than houses that have not been remodeled. However, it is a little unreasonable to say that the reason for the fast sales is "due to the remodeling". Because whatever the condition of the house, if the price of the house meets the market demand, it will be sold unconditionally within 2-3 weeks. On the other hand, many houses that are well remodeled do not sell for several months.

In other words, whatever the condition of the house, it will be sold as long as the price is right.

2. To increase the resale value

* Again, the figures shown here are from the big data analysis that Zillow has accumulated in their systems over the past 10 years. The results can vary from region to region, even from case to case, so we politely decline to your object to the data we share here.

Every renovation adds some value to your home. So, as explained above, among similar houses with similar prices, some remodeled houses sell quickly. That means, Buyers choose a modeled house because they can get more value buying a remodeled house than other houses at a similar price.

So, we can see that at a similar price, remodeled houses sell fast.

However, all the sellers’ ultimate goal of any sale is a higher bottom line number. If so, can we increase the bottom-line number through remodeling?

Of course. If the value of the house raised through the remodeling is greater than the cost of proceeding with the remodeling, the profits obtained after selling the house will be greater than the profits obtained from selling without undergoing remodeling. Conversely, if the value of the house raised through the remodeling is lower than the cost of proceeding with the remodeling, then proceeding with the remodeling itself will be a loss.

Then, which remodel can increase the bottom-line number?

Zillow shared the return on investment (ROI) of each remodel as follows through their big data analysis. "Cost Recover" in the picture below is the increased value of your home for every $1 invested in the remodel.

In other words, in the case of the upscale window, every dollar spent will generate 1 cent of additional profit. In the picture, the average cost is $8,000, so after this remodel, the selling price of the house is $8,080 higher than the same house without the updated window.

Let's look at another example. In the picture, the cost recovery of the Midrange Kitchen update is $0.52. In other words, you can lose $0.48 for every $1 spent on the remodel. The above is the content that can be viewed in the buyer's position as well. If you buy a house with an updated kitchen through the correct negotiation process, there is a high probability that it will cost less than buying a house with an outdated kitchen and then updating it. Conversely, it could be more profitable to remodel the bathroom by yourself than buying one with a remodeled bathroom.

If you analyze and consider these areas with the realtor you work with when selling or buying a house, I am sure that you will be able to get more value from the real estate transaction.

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#zillowtalk #remodeling #리모델링

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