Why would you renovate a home you’re planning to leave behind? If you need to sell quickly, renovating before selling can make your house far more marketable to buyers looking for a move-in-ready home.
Most renovations won’t provide a 100% return on investment, but if you’re okay with living in the home a while longer, the rest will likely be paid off in greater comfort, functionality and enjoyment of your home. However, if you need to close the sale so you can relocate, if your home is located in a sleepy market, or if you’re trying to sell during the slower winter months, building that wow factor will make your home stand out.
According to a 2019 CIBC Home Renovations Poll 49% of Canadians planned to renovate their homes over the next year. The top 3 renovations homeowners planned to spend money on were basic home maintenance 50%, landscaping 42%, and bathroom renovations 36%.
89% of the Canadians polled considered home renovations to be an investment. 67% of the homeowners chose to renovate their home rather than sell it to start over somewhere else, while 33% opted to renovate to increase the perceived market value of their homes.
According to the Appraisal Institute of Canada, payback on renovations can be measured in three ways: the value of enjoying your renovated home, the value of the increased selling price of your property, the value of maintaining your home’s worth. It’s the last two we’re looking at today.
Sell your home as is, or invest in a renovation?
If your home is immaculate, it goes without saying, just list it! But if you’re reading this article, chances are your home is not in pristine condition. The primary consideration when deciding whether to renovate or list your home as is will be your timeframe.
If you’re looking for a quick, clean sale, without price reductions, deals that fall through, or costly contingencies, taking care of any potential deal breakers before putting it on the market will enable your Realtor® to show a home with that wow factor, without any deal-killing surprises during the close. There may even be a bidding war over your property, with a sale over the asking price.
Many buyers will invest everything they have into the down payment, and the mortgage payments are going to leave little for repairs. The assurance that everything’s been looked after, with the inclusion of transferable warranty documents for upgrades like a new roof or HVAC system, goes a long way in putting their minds at ease that there won’t be unforeseen expenses soon.
Realtors® tend to advise sellers to list right away before they change their minds, or list with another broker. If they have buyers looking for a fixer-upper project, with plenty of borrowing power, a deal can certainly be made, price-adjusted for the estimated remodel costs and contingencies the buyer anticipates.
It can take longer to sell a home that doesn’t show well. Here experience counts. A real estate agent with a large contact list may have prospective buyers on file they can call; clients already looking for a home they can renovate themselves or flip.
If a home sits on the market for a while, and it doesn’t sell, agents on the MLS are going to want to see a significant price reduction on that stale listing, or a far more attractive property before they show it to anyone else. Many sellers take a chance on selling it as is and will renovate it later if it doesn’t. Here it’s important to remember that you never get a second chance to make a first impression. If you miss the perfect buyer the first time, another will likely show up at some point, if you have the time to wait.
Which home renovations deliver the highest return on investment?
According to the Appraisal Institute of Canada, the five renovations with the highest return on investment are:
- a kitchen renovation or addition,
- bathroom renovations or bathroom addition,
- repainting the interior/exterior,
- updating the decor, and
The top five renovations for restoring or maintaining the property’s worth are:
- replacing the roof,
- updating a dated heating/cooling system,
- replacing windows and doors with high-efficiency units,
- updating the electrical system, and
- repairing structural defects.
- repairing structural defects.
Since you’re not planning to live there, investing in top-of-the-line appliances or a spectacular kitchen with quartz countertops usually doesn’t make sense. Sometimes a few hours of elbow grease, touching up the wood on the cabinets, and replacing the old Cove Top laminate countertops will make the kitchen look almost new.
However, if the home has a tiny galley kitchen that’s potentially a deal breaker, you might consider a bump-out extension to increase its size, with fresh reasonably-priced cabinets and appliances. According to AIC, kitchen upgrades typically yield a 75% to 100% return, making these your most valuable home renovation investment.
Make sure the bathrooms are pristine. Home buyers are going to visualize themselves soaking in the tub, sitting on the toilet and putting their toothbrushes on that countertop. If the toilet, tub, shower stall or sink is badly stained or chipped, replace them. A new contemporary shower head and faucets, light fixtures and coat of paint will typically complete the transformation.
Two of your bathrooms are of primary importance: the ensuite and the main bathroom nearest the bedrooms. Families, where both parents head to work each morning, will appreciate having two sinks in the ensuite, and if the buyers have teens, the main bathroom will benefit from having two sinks and plenty of mirror space. The floor plan may not always make a second sink practical in the ensuite. If the main bathroom only has one sink you might consider swapping a tub for a shower stall, extending the countertop, or perhaps moving a wall over a bit. Bathroom renovations also deliver a 75% to 100% return on your investment.
A fresh coat of paint covers up grime, smudges, scratches and dents that have accumulated on the walls, trim and doors over time. Repainting typically provides a return between 50% and 100%, provided the paint job is of professional quality and a neutral colour palette is chosen.
Unless you’re a professional designer, it’s important to remember that you are staging the home for the next owners, removing your personal touches from their living space. Bright, off-white, cream, beige or tan will create that wow factor and give homebuyers a blank canvas on which to explore their design possibilities. In contrast, a garish colour palette, uneven application, drips, streaks and brush marks can significantly reduce the resale value.
Cracked and aging tile, worn or dirty carpets and thinning vinyls or laminates can make the home look run down. Replacing the flooring with beautiful laminate hardwoods, with an accompanying coat of fresh paint, will make your home sparkle. Sanded and hand-finished solid hardwoods are spectacular; but remember you’re selling, so your family isn’t going to enjoy them. The approximate return when replacing old or outdated flooring is between 50% and 75%.
Heating, ventilation and air conditioning (HVAC)
When listing your home, you can count on someone asking how old your HVAC system is. Most potential buyers will turn away if the HVAC components are older than 15 years. Older furnaces are likely to break down or provide less heat, wasting valuable energy.
The annual fuel consumption efficiency (AFUE) rating of modern high-efficiency systems range from 90 to 98%, while older systems have an AFUE of only 56 to 70%. Monthly energy savings and a transferable warranty for a new HVAC system are big selling features. A typical return when replacing a HVAC system is 50% to 75%.
Finishing the basement
An unfinished basement can represent a missed opportunity for increasing the usable square footage, and the number of bedrooms and bathrooms. Unfinished basements are prone to water damage and often have an unpleasant smell. When they are finished, vapour barriers and insulation improve the comfort and energy efficiency of the entire home, reducing the demand on HVAC systems.
Basements can be converted into rental apartments, offering buyers a way to monetize some of their space. A return of 50% to 75% on basement upgrade costs is typical.
A well-painted exterior can significantly raise its curb appeal. Even if you can’t afford to paint the entire house, you can make it more visually appealing by painting the window sills, trim, and gutters. Painting your home’s exterior can increase its resale value by 5% if you choose a conservative, elegant colour that compliments the other homes on your street.
Garage door replacement
If you have an out-of-date, damaged or badly weathered garage door it can seriously affect your home’s curb appeal. It’s important to find a replacement that matches the architectural style, colours and price point of your home. Garage door replacements are a top renovation choice because the upgrade is relatively inexpensive while delivering a significant increase in perceived value. According to the Remodeling magazine 2022 Cost vs Value Report, garage door replacement ranked number one, with an average of 93.3% of the cost recouped on resale. 70% of Realtors® interviewed for the report agreed that a new garage door helps sell a home faster.
Manufactured stone veneer
In most projects, it can take a day or less for the stone veneer installation company to install manufactured stone veneer (MSV) cladding on your home, but the aesthetic improvement can be stunning. Installing stone veneer cladding, with a new garage door and a fresh coat of paint, and your home will make a remarkable first impression.
According to Remodeling’s Cost vs Value Report, applying manufactured stone veneers to the exterior delivered the 2nd best return on investment, averaging 91.4%. Prospective home buyers are willing to pay more for a house that appears to be in very good shape, based on their first impression, according to Remodeling.
Windows and doors
New windows may not be as obvious as some of the other improvements, but a clever Realtor® will be able to turn installing double or triple glass windows and thick energy-efficient doors into a great selling advantage. Energy-efficient windows and doors offer optimal thermal insulation, excellent sound insulation, improved burglary protection, maximum airtightness and insulating properties while reducing energy costs every single month.
The world is moving towards net zero and new high-performance windows and doors are a big step toward reducing your home’s carbon footprint. They typically provide a 50% to 75% return on your investment.
Landscaping the front of the home can increase the curb appeal significantly. A well-tended green lawn is almost essential, and tidy rockeries, shrubs or foundation plantings can add a splash of colour and interest. AIC’s report shows a typical return of only 25 to 50% for landscaping, so it’s important not to invest too heavily here.
Keep things simple. You don’t want prospective buyers to shy away because they’re concerned about the yard upkeep required. You also want to leave enough open space for buyers to visualize their own landscape possibilities.
Where should you start renovating before selling?
A big deal breaker can be the buyers’ discovery that the roof, heating/cooling system, windows or appliances are at the end of their life expectancy, or that there are significant structural problems. Even if a deal goes through, a home in serious need of repairs offers incredible negotiating leverage to the buyers’ Realtor®.
If you’re planning to sell your home, fixing things that are almost worn out or already broken is the place to start. Are there any design features you’ve always hated about the house? Chances are, prospective buyers walking through your home will spot them too, or their Realtor® will be happy to point them out, suggesting those represent a price reduction during negotiation.