Home Maintenance Costs and Value Added to Sale Price

home maintainceResidential home renovations have been a traditional investment made by personal savers for generations. Between their ability to improve a saver’s quality of life, as well as create value through both the increase equity and sale price of the home itself, it has become a labor of love for both those handy and prudent.

That being said, between the variety of projects available to a homeowner at any given time, combined with a somewhat apathetic marketplace, it is important to be able to differentiate between the different kinds of renovation projects available, and how it is that they can be used to maximize the value built into a home in terms of both tangibility and sale price. This becomes particularly important in situations where a potential sale or loan is on the line.

Over the life of a residential home, there comes a time in which basic renovation projects become a requirement of ownership. These projects include things such as furnace, roof, and appliance maintenance, and are some particularly expensive aspects of home ownership. That being said, because of the way in which these projects maintain their respective values for usually between 10-25 years, they are an important aspect of the home’s overall value as a function of future cost flows.

A home with a recently redone roof will always sell for a higher price than a comparable property that does not. This aspect also becomes particularly important for buyers currently in the markets, because of the way in which a great deal of homes were constructed in the 1970s-1980s, meaning that they should have had these maintenance projects completed at least once already throughout their lifetime.

While residential maintenance projects will improve the tangible value of the property, and often bolster the sale price by saving the new buyer from having to do the renovation themselves, it is important to take note of how it is that banks and lenders will not look at a roof replacement as adding significantly improved value to a home unless it can be factored into an appraisal. This is because of the way in which a maintenance project is meant to offset the general depreciation of the property itself over time.

The end result is a situation where the bank will require an appraisal that not only notes the renovation as having been recent, but also improves the condition of the property since the last recorded renovation, or improved the value of the property beyond that which it has been assessed at by the local municipality for tax purposes. As such, borrowers should keep their end goals in mind while considering such a project as a furnace or roof replacement, as it might only maintain the equity value of the property if it is not up for sale.

Speak Your Mind