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While you may love nothing more than living in your home right now, there must be some part of you that hopes – and expects – your home’s value to climb, especially if you’re thinking about selling your home one day.
We don’t want to make any assumptions, but for most sellers, their highest priority is getting the highest offer they can for their homes. And on the buyer’s side, many of them are willing to pay more for upgraded homes.
While home values typically rise over time, home appreciation isn’t guaranteed. You can take matters into your own “hands” and add extra value to your property by making the kinds of upgrades that help build value and attract higher purchase offers.
But (spoiler) not every upgrade you make will spark a bidding war. Fortunately, you’ve got us to explain which upgrades are worth your time and money. And speaking of money, we can help you figure out how to pay for the upgrades, too.
5 Upgrades That Increase Home Value
Upgrading your home is one of the fastest ways to increase home value – but not all upgrades are alike. Some improvements – like additions, basement conversions and kitchen or bathroom remodels – usually have a bigger impact (think: $$$) on your home’s value.
Let’s explore the five upgrades that increase home value the most.
1. Adding livable square footage
Adding livable square footage is a great way to increase your home’s value. Homes are often evaluated and priced by livable square footage, so a larger home will almost always be worth more than a similar smaller home.
The National Association of REALTORS® (NAR) found that every 1,000 square feet of living space increases a home’s selling price by 3.3%.
You can add livable square footage to your home by building an addition or converting an attic or basement.
2. Making energy-efficient upgrades
Energy-efficient upgrades can boost property values, help you save money on your energy bills and reduce your carbon footprint.
Energy-efficient upgrades are known to entice prospective buyers to part ways with more of their money. A National Association of Home Builders study found that buyers are willing to pay nearly $9,000 more on the purchase price to save $1,000 a year on utility bills.
Popular energy-efficient home upgrades include:
- Modern furnace and HVAC systems
- Tankless water heaters
- Replacing old appliances with energy-efficient appliances
- New windows
- New insulation
- Solar panels
3. Boosting curb appeal
The first time a prospective buyer sees your home, it will probably be from the outside. Of course, we don’t need to tell you how important first impressions are. But we do have a relevant statistic to share: On average, homes with high curb appeal typically sell for 7% more than similar homes with, let’s say, less appealing exteriors.
You can improve your home’s curb appeal by:
- Replacing your garage doors
- Installing a new front door
- Installing outdoor lighting
- Adding shutters or window boxes
- Repairing any damage to your home’s exterior
- Painting your home’s exterior
4. Updating the kitchen or bathroom
It’s well known among real estate professionals that updating your kitchen or bathroom(s) is one of the most worthwhile home renovations you can invest in.
You can expect a kitchen remodel to increase your home’s value by roughly 60% – 80% of the project’s cost.The return on investment for a bathroom upgrade is slightly lower at around 67% of the project’s cost.
Kitchen upgrades that can improve your home’s resale value include:
- New fixtures (like a kitchen faucet)
- Replacing your cabinet’s hardware with modern pulls, knobs or handles
- Updating the flooring
- New appliances
- Replacing countertops
- Adding an island
Bathroom upgrades that can improve your home’s value include:
- Upgrading the flooring
- A new vanity
- New fixtures (like your sink, showerhead or light fixtures)
- New cabinetry
- Replacing or refinishing your tub/shower
5. Refreshing paint
Most sellers who want to sell their property for top dollar will have their homes repainted before listing the property on the market.
A fresh coat of paint can be a low-cost way to help increase the value of your home.
Choose neutral colors, like whites and grays, that help keep the buyer’s attention on the home – not the color.
How To Pay for Renovations That Add Value to Your Home
Some upgrades will cost little or no money, while others can easily set you back several hundred or thousands of dollars.
You can finance your upgrades if you prefer not to pay cash for the renovations. Here are some of the best financing options to consider:
- Home equity loan: If your loan-to-value (LTV) ratio is less than 85%, you can borrow a lump sum of money against your home’s equity. Good news: Home equity loans have low interest rates. The potentially not-so-good news: It may take a few weeks before the money is in your bank account.
- Home equity line of credit (HELOC): A HELOC is a revolving line of credit that offers the flexibility of withdrawing money as needed. HELOCs are an excellent, low-interest option. And like home equity loans, they are only available if you have a qualifying LTV ratio.
- Cash-out refinance: A cash-out refinance swaps out your existing mortgage for a bigger mortgage, and you pocket the difference between the two loans in cash. A cash-out refi can take some time, but it’s a great way to tap into your home’s equity.
- Personal loan: Personal loans, which typically have higher interest rates than home equity loans or HELOCs, can be used for almost anything – including (you guessed it!) home improvements.
- Credit card: Credit cards are a fast and easy way to pay for home renovations – but those sky-high interest rates should make you cautious about using plastic. Another disadvantage? You’re limited to your credit limit, which you should avoid maxing out.
What’s your budget and timeline?
Before you commit to installing solar panels, adding shelving or repaving your driveway, consider your budget and timeline. When do you want to sell your home? How much can you comfortably spend on upgrades? How long will the renovations take?
The answers to these questions should help you develop a realistic budget and sensible timeline.
A Little Can Go a Long Way
If you’re not sure you want to take out a loan, rest assured that you can drive up your home’s sale price without spending your entire life savings. A little TLC, elbow grease and (maybe) YouTube tutorials can go a long way toward maintaining and increasing your home’s value. Do you want to wow your future buyer today? Start cleaning and decluttering, grab a paintbrush or break out your gardening gloves.
Strapped for cash?
Your home’s equity is your money. So whether it’s for a new kitchen or consolidating debt, a cash-out refinance can help get you there.
National Association of REALTORS®. “The Value of Housing Characteristics.” Retrieved September 2022 from https://www.nar.realtor/ncrer.nsf/files/rbsirmansmacpherson2.pdf/%24FILE/rbsirmansmacpherson2.pdf
National Association of Home Builders. “How Much Are Buyers Willing to Pay for Energy Efficiency?” Retrieved September 2022 from https://eyeonhousing.org/2019/04/how-much-are-buyers-willing-to-pay-for-energy-efficiency/
National Association of REALTORS®. “How Much Does Curb Appeal Affect Home Value?” Retrieved September 2022 from https://magazine.realtor/daily-news/2020/01/27/how-much-does-curb-appeal-affect-home-value
Home Advisor. “How Much Does a Kitchen Remodel Increase Home Value.” Retrieved September 2022 from https://www.homeadvisor.com/r/how-much-does-a-kitchen-remodel-increase-home-value/
Angi. “How Much Value Will a Bathroom Remodel Add to Your Home?” Retrieved September 2022 from https://www.angi.com/articles/value-bathroom-remodel.htm
HomeLight. “Top Agent Insights: Q1 2019 Report.” Retrieved September 2022 from https://3xlsey17pnzh3nf35w1wwnug-wpengine.netdna-ssl.com/wp-content/uploads/2019/04/real-estate-top-agent-insights-survey-q1-2019.pdf