Home Improvement in the Real World

Dear Pat,
We read in the newspaper a few weeks ago that replacing our windows could return about 125% if we sold within a year. Our house is pretty drafty, and we'd like to believe the article, but frankly it sounds too good to be true. What do you think?
---We're Skeptical

Dear Skeptics,
All together now, let's say, "If it sounds too good to be true, it probably is." Repeat that over and over when you read articles that specify high percentages and whopping dollar returns when making a home improvement. Remember these articles are often taking their information from "studies" done by associations of remodelers and manufacturers. I don't doubt that some of these efforts to pin down the relative value and return on home improvements are well intentioned, but I question the validity of the data as it applies to individual, real-world situations.

In the real world a house sells for one price, not an itemized price. John and Mary sold their home for $250,000. They realize that with so many variables affecting the final price they can never be sure if they're really getting paid $12,500 for the $10,000 windows they installed just prior to sale. Let's look at just a few of the variables that affect price:

  • Overall condition. Your new improvement is only one of dozens of impressions collected by a buyer passing through your home.

  • Skill of the Realtor. A Realtor must lead her/his clients through all phases of the transaction, including market analysis and pricing, home preparation and staging, market strategy and materials, advertising, negotiating and closing. Competent performance of these steps can have a greater impact than a single home improvement, and poor performance of any of them can erase the value of all the work you paid for.
  • Location. These studies focus on regions or metro areas. In the real world, we know that value (thus, perceived return) varies widely from neighborhood to neighborhood, even block to block.

  • Transaction. Every transaction can be structured in a way that nets the seller the same amount, at different sale prices. For instance, sellers often finance points and closing costs for buyers nowadays; some (or all) of this may (or may not) be added to the sale price. Same house, same new windows, many different prices are possible.

Please be aware, Skeptics, that I've exposed only the tip of the variables iceberg; simply putting your faith in a trade association's pre-crunched numbers can be booking passage on the Titanic. Of course there are some general rules to follow, but every situation is unique. Please call an experienced Realtor who knows your area, one who has a clue about the kind of improvement(s) you might want to make, before you commit to a contractor.