What Renovations Are Worth Doing?

Pointers from "The Wall Street Journal Guide to the Business of Life" on real-estate basics.
By WALL STREET JOURNAL STAFF REPORTERS
A growing area of coverage for The Wall Street Journal is what we call the business of life. The intent is to report the latest news in a way that helps readers make sound decisions about their own lives. The new book, "The Wall Street Journal Guide to the Business of Life," edited by Journal editor Nancy Keates, offers strategies on everything from getting the best medical care to helping a child get into his or her top college.

Below is an excerpt about how consumers can choose their home renovations wisely to get the best return on resale.

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What's Worth Doing?

It's long been known that when it comes to renovating your home, it isn't how much you spend -- it's how you spend it. Bathrooms and swimming pools have always added value, but some other home improvements are more susceptible to fading in and out of fashion.

A study sponsored by the National Association of Realtors analyzed the effect of various housing characteristics on residential property values these days, shedding light on what renovations have integral value and what kind of housing styles are gaining or losing popularity.

What homeowners are currently willing to pay more for:

· central air-conditioning and fireplaces
· eat-in kitchens
· utility rooms
· in-ground swimming pools

What they aren't:

· dining rooms
· dens or studies
· intercom systems
· kitchen pantries
· above-ground swimming pools
· home offices
· in-law suites

More Things Worth Doing

As reliable as the daffodils, each spring the housing industry encourages owners to renovate their homes to enhance resale value. Remodelers talk about investing in new bathtubs or windows, while real-estate agents tout the value of new carpeting and countertops. It makes sense, at least on the surface. But experts say that unless an upgrade is to correct something functionally obsolete -- say, to add a second bathroom in a four-bedroom house -- most remodeling projects return only a fraction of their cost. Studies by organizations ranging from consumer groups to trade magazines show that, on average, improvements made in the year before a home's sale return only about 70 or 80 cents on the dollar. There are exceptions, of course. Studies have shown that larger, upscale remodelings in hot housing markets like Washington, New York or San Francisco can even turn a profit for the homeowner. But whether your house is in a sizzling market or one that is stagnant, you have to be smart about the kind of improvements you undertake.

The trick is to bring your home up to neighborhood standards, but no higher. But how do you know the difference between an improvement that's excessive and one that will help sell your house -- and maybe pay for itself? The Wall Street Journal asked a number of experts which modest upgrades would bring the best returns in today's market, and which are a waste of money. Since remodeling for resale value is a dicey proposition, we limited our inquiry to projects or products that cost less than $10,000.

Worth Doing:

1. Granite countertops: Price: $3,600 for 90 square feet. At $40 a square foot or more installed, granite is about 40 times as expensive as plastic laminate. But upscale-home buyers have come to expect it. Although honed, light-colored granite is trendy, stick with polished black stone -- it's elegant-looking, and more durable.

2. Carpets: Price: $6,375 for 2,500 square feet with a 10-year wear warranty.

Yes, how boring, but next to a paint job, nothing makes a house look fresher. Though the Federal Housing Administration demands a minimum of 3⁄8-inch pad and 23-ounce density carpet, choose a half-inch pad and a 27-ounce density. And don't stray from earth tones.

3. Pull-out kitchen faucet: Price: $300 for a European-style chrome faucet. Faucets occupy center stage in a kitchen, so they attract buyers' attention. Trendy finishes like brass and nickel cycle in and out of style, so stick to standard polished chrome. Gooseneck styles high enough to put a pot under are currently popular, but pull-out styles with a hose are the most versatile. Forget redoing bathroom faucets, though. They're more a matter of personal taste, and a buyer may just junk yours.

4. Melamine closet systems: Price: $1,600 for a walk-in closet with three rods, six shelves and five drawers. Coated-wire systems are okay for mid-range homes, but upscale buyers shun them. On the other hand, furniture-finished wood is overkill if you're remodeling for resale. Spring for shelves made of melamine-surfaced particleboard or medium-density fiberboard. Melamine is a plastic laminate available in different finishes, but consider a wood-look finish.

5. Synthetic entry doors: Price: $1,730 for a fiberglass door with beveled glass inserts and two sidelights. Front doors are the first things a buyer sees up close, so they shouldn't look dumpy. Five years ago, most synthetics looked fake, but improved veneers and finishes have made fiberglass and steel doors resemble the real thing. And though fiberglass dents and steel rusts, both provide better security with less maintenance than solid wood, especially if the door faces the sun.

6. Laminate wood floors: Price: $1,630 for a 15-by-15-foot room. Made of either thin-wood veneers encased in plastic, or photographs of wood on a plastic base, laminates have also become more realistic looking in the past couple of years. Because you can wet-mop it, laminate has become more popular than real wood for areas subject to spills, like kitchens and basements. It can't be refinished three or four times like real wood can, but if you're moving soon, who cares?

7. Body-spray showerheads: Price: $2,383 for shower tower with two telescoping overhead sprays, four moveable body sprays and a handheld spray. Multiple-showerhead systems do everything from misting to massage. They're still rare enough to get a buyer's heart beating faster.

8. Garage storage systems: Price: $220 for hanging storage-wall starter kit with 11 hooks, a wire basket and a shelf. A recent survey by real-estate brokerage Century 21 found that the garage is the most important amenity to buyers, outranking a large kitchen, formal dining room or big backyard. And what they prize most about the garage is its storage capacity. But you don't need to add pricey cabinets, which can easily push the bill for a storage wall into the thousands. Just give buyers the idea of how they can personalize, while you get your hoes and rakes off the floor.

And...More Things To Skip

1. Wet bars: Save the $1,875 average price. Novel in the '80s, wet bars have become clichés. Unless you plan to turn a corner of your basement into a wine cellar, they're losers.

2. Concrete countertops. At around $9,000 for an average installation, they're hot and trendy -- but Realtors report far too many buyers hate them. Plus, they need resealing twice a year and are prone to cracking. Moreover, they tend to bring out the inner artist in homeowners -- we've seen owners incorporate everything from computer chips to toy plastic people into designs. Remember: Another person's art may be hard to live with.

3. Chandeliers. Save the $4,000 for the Italian crystal gold-leaf model. Like concrete countertops, they alienate too many buyers in a world in which chic recessed lighting is increasingly popular.

4. Structured wiring. It seemed a good idea five years ago to spend $5,000 to hardwire your home for broadband PC networks and stereo speakers. But wireless has come and changed all that.

5. Saunas. Spend the four grand if you like them, but like wet bars, they're yesterday's ideas.

6. Indoor swim spas. The $5,000 you spend on one of these 14-foot-long tanks that lets you swim against the current will attract a certain kind of fitness-inclined buyer, but too many others will worry about maintenance, leaks, humidity and mildew.

Some Basics To Remember

1. You're in for the long haul. The National Association of Home Builders says to count on a major home remodeling taking as much as twice as long as you'd planned.

2. Expect the unexpected. The National Association of the Remodeling Industry recommends setting aside as much as 20% of your budget for contingencies.

3. Relationships with contractors are everything. One common mistake -- many people don't complain at the beginning, then blow up at the end. Communicate all the way through.

4. Details, details. Count on as much as a fourth of your budget being taken up by finish-work, which includes everything from light switches to the kitchen sink.

5. Don't pay too quickly. If you do, you won't have leverage if something goes wrong. Experts recommend holding back 10% of fees.

-- Adapted from "The Wall Street Journal Guide to the Business of Life," edited by Nancy Keates (Crown Publishers/Wall Street Journal Books, 2005). For more information, please visit http://wsjbooks.com.