Invest Wisely: How to Increase Your Home Appraisal Value

When it comes to increasing the value of your home, it’s critical to spend your hard-earned money in the right places. Not all home improvement upgrades and renovations will increase your home appraisal value. Well-meaning real estate agents, contractors, and HGTV hosts will tell you that remodeling your kitchen or bathroom can add thousands to the value of your home, but the real results will often surprise you.

Whether you’re trying to sell your house, seeking to refinance or take out an equity line of credit, your home appraisal value matters. The fastest way to increase your home’s value is through renovations and upgrades, but not all upgrades and improvements impact the appraisal value of the home. Cosmetic upgrades can impact the home value, depending on what they are. Replacing hardwood flooring in the kitchen with tile will likely not impact the value of the home but replacing 20-year-old worn out carpets with top-of-the-line hardwood floors will.

Home improvements done right can add real value. For every dollar you spend, approximately 75 to 80 cents go back into your home through increased value. But, there is a major difference between personal preference and home improvements and upgrades. For example, a 24-karat gold faucet in a bathroom will not add any value to the appraisal as a gold faucet is not something a typical buyer would be willing to pay extra for when purchasing a home. Adding a bathroom to create a master suite, however, would add real value to the home appraisal.

If you’re looking to upgrade your home, make two lists. One list will contain upgrades that will add real value to your home, and the other list is for personal preferences that make you happy. Home improvement projects that will have a major impact on your appraisal include additions like bathrooms and bedrooms and major structural upgrades like replacing a worn roof or stabilizing a crumbling foundation. The market expects you to upgrade these items over time to keep the house in average or better condition. Without replacing or updating structural items when they’re in disrepair, the home’s value will suffer.

Kitchen remodels, and bathroom renovations or additions will yield the biggest bang for your buck. Home buyers have long focused on the kitchen, and even millennials want a modern kitchen. For as little as $5,000, you can add new stainless-steel appliances, a new countertop, and flooring. Apply a new coat of paint and update the cabinet hardware and you could increase the value of your home by three to seven percent.

On the other hand, it’s easy to overspend. Homeowners will often spend $40,000 on a complete kitchen remodel, and the investment does not reflect in the home appraisal value. This is the classic case where the cost of the upgrade does not translate into value. A brand new kitchen will impact the value of the home, but it is not a direct dollar for dollar match. During the appraisal process, appraisers compare your home to other comparable homes in the area. In this case, the property would be compared to other properties that also had remodeled kitchens of similar quality to reflect the market value of the improvement.

Other home improvements and upgrades that add real value to your home include finishing a basement or attic to add usable square footage and creating a more energy efficient home with new high-efficiency windows and new water heating system. And don’t forget about curb appeal. Keep the hedges trimmed, plant a few flowers, and paint the front door. A small investment in your landscaping can go a long way.

Another important factor that many borrowers who are seeking to refinance or take out an equity line of credit don’t realize is that any improvements that are not permanent are considered personal property and therefore not usually valued in the appraisal. Things like above ground pools, hot tubs, and a shed without a permanent foundation are often not included in the value of a home appraisal.

While it might be tempting to go all out with granite countertops, top-of-the-line smart appliances, and an open concept kitchen and living area during your kitchen remodel, you might not see a huge increase in your home appraisal value. It’s important to identify what home improvements and upgrades are personal preference and what ones will add real value to the home. Increasing the home appraisal value of your house is possible if you invest your money wisely.