Baltimoreans get lowest return, new survey shows

DOES IT REALLY PAY TO REMODEL?

October 25, 1992|By Adriane B. Miller | Adriane B. Miller,Contributing Writer

Baltimore homeowners on average recoup far less of the cost of remodeling projects than do other homeowners nationwide, a survey just published by a national building trade magazine indicates.

Researchers from Remodeling magazine asked about 250 real estate professionals from 60 cities, including Baltimore, to compare the cost of 11 popular remodeling projects with the return homeowners could expect on the investment if they sold their home within a year. According to the results, Baltimore homeowners receive the lowest return for almost every remodeling project the magazine considered.

Remodeling gave sales agents estimates of what each project would cost in their city if it were done by a professional contractor. The estimates were compiled for each city from two sources: Home-Tech, a Bethesda company that publishes estimating material for remodeling contractors; and R.S. Means Co., a Massachusetts firm that publishes an annual unit-cost-estimate book.

Sales agents then estimated the resale value of the remodeling vTC projects for mid-priced houses in established neighborhoods where much remodeling work was occurring.

Nationally, sales agents found that most remodeling projects would return an average of at least 80 cents of each dollar homeowners spent to remodel, if the owner sold the house within the first year.

But in Baltimore, sales agents found that remodeling projects would return only about 50 percent of the investment to homeowners.

The most valuable remodeling project nationwide turned out to be a minor kitchen make-over. On average, agents reported a 104 percent payback on this project.

In Baltimore, the project earned homeowners a return of only 55 percent. That difference of 49 points from the national average was the largest disparity reported.

Other home remodeling projects that, nationwide, showed a high return on the initial investment included a bathroom addition (95 percent return nationwide vs. 65 percent in Baltimore); a major kitchen remodeling (94 percent vs. 55 percent); and a family-room addition (85 percent vs. 43 percent).

Baltimore's most valuable remodeling project, according to the survey, is window replacement, bringing homeowners a 69 percent return on their investment. A deck addition here is worth a 59 percent return. Adding an attic bedroom could bring a 50 percent return, siding replacement a 47 percent return and a master suite a 38 percent return. Homeowners in Baltimore recoup a paltry 35 percent of the costs to add a sun room.

"Those numbers amaze me," said Kathy Wheatley, president of Wheatley Associates in Monkton and head of the Remodeler's Council of the Home Builder's Association of Maryland. "They are not what I've been hearing from local real estate agents. I think they're very low."

Ken Holmes, senior editor of Remodeling and author of the 1992 "Cost vs. Value Report," said he could not explain why Baltimore's numbers were so low.

"If you look at the whole survey, there is a lot of variation from one city to the next," he said. That could be due, he said, to the subjective perceptions of individual agents.

Another factor that probably affected the numbers is the length and depth of the recession and what it has done to the real estate business. "The East Coast in general has had a very tough year," Mr. Holmes said.

But East Coast doldrums would not explain why people in Philadelphia or Wilmington, Del., realize better returns on their remodeling dollars than do Baltimoreans, as the Remodeling survey shows.

Whatever the reason, Mr. Holmes cautioned homeowners against using the survey to decide whether to proceed with remodeling projects.

"Based on this survey, I wouldn't want to suggest to anyone in Baltimore you shouldn't be remodeling your house," he said.

"If you spend $10,000 in the kitchen, you don't know if it's going to return $5,000 or $15,000 in value. But if you're in a slow real estate market and the house has an obvious flaw, you need to spend the money to fix it."

Jim Turner, a broker with Chesapeake Bay Realty in Perry Hall, said homeowners should look at other factors besides the return on their dollar for remodeling projects.

Remodeled houses are much easier to sell than outdated houses, he said. And even if homeowners can't label an improvement in their listing, the advantages are there.

"The things you do [to your house] to make life more convenient and more desirable might not be desirable features for the next buyer," Mr. Turner said. "But if it's important to you, it outweighs the cost."

The cost of remodeling

The cost of various remodeling jobs in Baltimore and the amount each adds to the resale value of a house; the percentage of project's cost that is recouped at time of sale; and the national average.

.. .. .. .. .. .. .. .. .. RESALE .. .. .. COST .. .. .. .. .. NAT.

PROJECT .. .. .. COST .. . VALUE .. ... RECOUPED .. .. .. .. .. AVG.

ATTIC BEDROOM ..$21,643 ... $10,750 .. .. .. 50% .. .. .. .. .. 81%

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