Home Improvements that are Less Likely to Increase Your Property Value

There are two ways your property can lose value – events that are beyond your control and factors within your control. You may not be able to do much about conditions that impact the market such as rising interest rates, job losses in your area, foreclosures or other negative changes in the neighborhood, but you can do something about the condition of your property.

Three influences trigger homebuyers to purchase a home – location, price and condition. You can’t change the location of your home, but you can make sure that repairs and improvements that you undertake will add value to your home.

Every year, Zonda Media releases the cost vs. value survey in partnership with the National Association of REALTORS®. This report details home renovations that will deliver the best return on investment and those that don’t. As the results are derived from the opinions of survey participants, they’re subjective, but they do indicate new trends and homebuyer preferences in the marketplace.

With a couple of exceptions, exterior improvements yield better results than interior updates and mid-range improvements add more value than high-end luxury renovations. Homebuyers get their first impressions of a home from how attractively and well-maintained the home is from the outside. This first impression primes them to either be more open and relaxed about what they find on the interior. A negative impression made by an overgrown yard, peeling paint, or old, outdated siding makes homebuyers more wary of what’s inside and more likely to take a pass on the home or to make a low-ball offer. For that reason, many front entry details can be improved inexpensively and add significantly to the home’s curb appeal. Among these would be fresh paint, a new welcome mat, new porch light fixtures and cheerful flowers planted in the yard or in pots flanking the entry. Otherwise, home improvements can range from the replacement of a single feature like a front door or garage door, to a full interior and exterior remodel.  

Among improvements the survey found that add value for 2023 are those that provide an ROI of 85% or above. These include:

HVAC replacement (from gas to electric) - 103.5% ROI

Garage door replacement – 102% ROI

Manufactured stone veneer – 102.3% ROI

Entry door replacement – 100.9% ROI

Vinyl siding replacement – 94.7% ROI

Fiber cement siding replacement – 88.5% ROI

Minor kitchen remodel – 85.7% ROI

According to the survey, homebuyers in this inflationary economy want to save as much money as possible. They want workable kitchens and baths, but don’t have the income to pay for high-end renovations. That’s why it’s important that home sellers are realistic about where their homes would likely rank in the marketplace and not over-improve for the neighborhood. Homebuyers are equally reluctant to take on home improvement projects themselves, especially if they’re first-timers or buying at the top end of their mortgage qualification.

There’s good reason why HVAC conversions deliver the best ROI. There’s a definite trend toward electrification – away from natural gas. More electricity in the U.S. is coming from renewable sources, making the operation of gas more expensive than electricity.  Heat and air conditioning account for the greatest percentage in home energy use, reports the Energy Information Administration.  Reducing dependence on fossil fuels is most important to Millennials and Generation Z. Pew Research found in 2021 that these younger generations, who are now at prime homebuying ages, talk more about the need for action on climate change, and they’re doing more to get involved through volunteering and participating in rallies and protests. 649

Properties that are already in the luxury category don’t necessarily benefit from high-end renovations as this tier of homebuyers is more likely to want to renovate a home to their own liking and not the home seller’s vision of a “dream kitchen” or a “luxury bath.” The survey found that an upscale bathroom remodel at over $76,000 returned only 36.7%, while an upscale kitchen remodel at over $155,000 returned only 31.7%.

If large upscale renovations are discretionary, home sellers may do just as well to make minor improvements.

Additions to homes returned the least ROI, including from mid-range to upscale. A mid-range bathroom addition at $57K had an ROI of 30.2% while an upscale bathroom addition at nearly $105K netted only 26.6% ROI. Adding a mid-range primary suite at $158K returned just 30%. The lowest ROI (22.7%) reported was for an upscale primary suite addition at a cost of approximately $325K.

According to data compiled by RocketMortgage.com, there are six home improvements that should be avoided.

Swimming pool/Hot tub (ROI 7.3%) – Assuming you want to install an inground pool, do so only if you plan to occupy the home long term. Homebuyers don’t necessarily want the maintenance and hot tubs are perceived as distasteful.

Elaborate landscaping (ROI 5.5% - 12.7%) – Again, maintenance and expense are issues for homebuyers. Home sellers are better off having trees and bushes pruned and keeping their lawns trimmed.

Garage conversion (ROI 4.3%) – Garage conversions to living space is almost always awkward. In exchange for an extra room, you’re giving up safe parking for your vehicles and extra storage space.

Wallpaper (ROI negative) – Few patterns appeal to most homebuyers. Sellers should paint the walls in neutral colors instead.

Sunroom addition (ROI 5.3%) – Like other additions, sunrooms simply cost too much for most homebuyers, although the right buyer will appreciate it.

Bedroom conversion (ROI negative) – Everyone needs a place to sleep, but losing a bedroom to create a master bath or media room doesn’t make sense, as the number of bedrooms is the most important consideration for homebuyers.

Homebuyers love fresh, new looks in a home, but poor workmanship can bring down the ROI on any home improvement project. Do-it-yourselfers may understand that homeowners want updates, and to save money, these homeowners do all or much of the work themselves. If the results are amateurish, slipshod, or cheaply done, homebuyers will not be happy. Craftsmanship is essential to any home improvement project; home sellers will net bigger returns if they stick to what they know.