Renovation and Rehabilitation of Real Estate Highlights from the 2003 Cost vs. Value Report

In collaboration, Realtor and Remodeling magazines have issued the sixth annual “Cost vs. Value Report” which sheds an interesting light on the local housing market. As many of our past and present clients are interested in remodeling issues, we have summarized the highlights and their affect on our local real estate market.

The full report covers 35 major markets nationwide and compares estimated costs for a renovation against likely increases in a home’s value. The quality of the final work and the particular neighborhood are still the most significant factors in evaluating your own potential return.

In each category, DC fared better than the national average and returned more than each dollar spent.

The Chart:

Estimates of renovation costs were produced by HomeTech (of Bethesda) which creates estimating software for contractors. Costs certainly vary by contractor based on their reputation and availability. These figures do not include the loss of use and inconvenience caused by a renovation.

The added value was calculated with input from Realtors and reflects the perceived value before and after renovation for resale. It does not include intangibles such as improvements to your own quality of life for your period of ownership and tangibles such as improved energy efficiency.

Our particular market is different from much of the nation. At the national level, the average home has elements that might be 25 years old. Locally we have homes hundreds of years old with varying levels of intermediate upgrades. The housing stock was built decades ago when having fewer baths and smaller closets was the norm. Improving existing features, building out new additions or reworking existing spaces greatly enhances future marketability as many buyers today want immediate gratification.

Particularly in the District, buying new construction is usually limited to in-fills in upper northwest, new apartments, and rebuilt houses in emerging neighborhoods. Renovation is virtually a requirement of this market – but the return on these efforts is reflected in the market demand at the various price points. Generally, our housing stock has been built with high quality materials, particularly brick and masonry exteriors and wood floors inside.

The report distinguishes between mid-range costs and high-end costs. The mid-range figures may not be appropriate for many Northwest Washington neighborhoods. It is based on a home with either 2 or 3 bedrooms and 1.5 baths and also includes finishes substandard to what is expected in this market where the average home price throughout the city is approximately $450,000.

If you plan to stay in your existing or new home, the report clearly indicates that you do not need to delay quality of life renovations for fear of resale. Busy Washingtonians place a premium on renovations already completed. The more challenging scenario is if you are planning to sell. If your have the skills or access to a contractor, the sprucing can also be worthwhile as long as commitments of your own time and construction lead time do not eat into profits. With proper marketing, a savvy agent can highlight the upside to buyers who are willing to do the work – or particularly want to upgrade to their own tastes.

The Melman and Molik team is well versed in all price points in the District, Maryland and Virginia. In 2001, Dan Melman finished the complete renovation of his own home, once described by his father as “four floors of nothing.” If you dream about fixer-uppers and tape “This Old House” marathons, call us today so we can find your diamond in the rough. Our rapid response number is 202.669.4689.

(c) 2004. Melman and Molik. All rights reserved. This article may not be reprinted, transmitted or distributed without the express written consent of the author. Violation of this copyright will be strictly prosecuted. This document is available on our website for use with attribution.