Should You Renovate Your Home Before an Appraisal? - - By Max Shafer

The United States has been in a home improvement boom since the onset of the pandemic, with homeowners looking for ways to improve their properties at every turn.

So if you are planning to list your home in the near future, it may seem obvious that this renovation work will have a positive effect on your home’s appraised value. While there are definitely reasons why renovations can have a positive effect on an appraisal, it is not necessarily a no-brainer to move ahead with a project. Keep reading as we delve deep into all of the pros and cons of renovating a home before an appraisal.

Pro - It Can Help Align Your Home With Current Trends

The strongest argument in favor of remodeling prior to an appraisal is to align your home with current trends for which the contemporary real estate market is willing to pay a premium. Features such as open kitchens, low maintenance board and batten siding, and elegant hardwood floors are a few features that stand out to contemporary buyers and can allow you to up your asking price. While renovating does not make your home new, it does add a “like new” feel to your property, and buyers may be champing at the bit to be the first to take advantage of the trending new feature you have implemented into the home--reducing the time your home sits on the market.

Con - Remodeling Is Expensive

While everyone loves the idea of remodeling to increase the value of their home, as the old saying goes, “it takes money to make money.”

And the cost of an average remodeling project is not cheap--especially in this period of hyperinflation.

Although remodeling costs can vary significantly by size and scope, the average project costs roughly over $46,000 as of early 2022.

When you factor this in with the costs associated with selling the house (realtor fees, repairs, title insurance, etc.) total costs can quickly approach or exceed six figures.

So with the real estate market remaining scorching hot in most parts of the country despite the rising interest rates, it may be advisable to forego the renovation prior to the appraisal and let the new owner have at it.

Pro - It Can Help You Stay Ahead of Any Major Problem Areas

As mentioned, the cost of selling a home can be expensive, with repairs being one of the items on the list. While some small electrical wiring or cosmetic repairs may not break the bank, some inspectors will identify major issues that could preclude the home from selling.

Therefore, if you suspect there is an issue with the house that may cause a sale to fall through, it is a great idea to just renovate prior to the appraisal and be proactive in squelching the issue. For example, if you know there is a roof leak that will significantly reduce the asking price of your property, replace the degraded asphalt roof with more innovative composite roofing tiles to turn a major black eye into a strength come listing time.

Con - Not All Projects Recoup Impressive Resale Value

There is a misnomer by some that gains in home value after remodeling projects are profit for the seller.

False.

It is quite rare that the gains in resale value ever exceed the cost of the project itself. If this were the case, all homeowners should be in a continual state of remodeling.

The hope with remodeling projects is that they appeal to the market and can help your home sell faster and get back as much of the project cost as possible.

And to this effect, not all projects partially recoup costs at the same rate. While some projects, such as a garage door replacement, typically return over 90% of project costs, some upscale bathroom projects regularly return less than half of upfront expenses.

So if a project will not help your home sell faster and will end up costing you tens of thousands of dollars, there is no point in doing it prior to the appraisal.

Pro - It May Qualify You For Tax Benefits

While private homeowners generally cannot write off renovation costs for tax purposes, some projects qualify for government relief. For example, you may get tax credits for energy-efficient projects such as continuous insulation synthetic stucco or solar panel installation. Or you may get some relief for making your home ADA compliant.

And if you are a professional in the house flipping business, then you can obviously write off renovations as work expenses.

Do your research and if there are any kinds of tax breaks for your project and if it will increase value while helping the home sell faster, why not do the work before appraisal?

Con - Remodeling Takes Time

Some projects, such as a window sash replacement or adding a new entrance door, can be completed in little time. However, some projects, such as master suite additions or major kitchen overhauls, can drag on and on--especially given the acute labor shortage in the construction industry.

As one of the reasons to renovate is to sell your home faster, having a remodeling project tied up in construction can defeat the purpose and slow down your appraisal.

Remodeling Before an Appraisal: Weighing the Pros and Cons

Renovating a home is generally a good investment for a homeowner. As such, if you are planning to list your home in the near future, you may be motivated to get that final renovation in before appraisal time. This may or may not be a good idea. By considering the pros and cons listed above, you can discover the most impactful projects and determine if a renovation is the right choice ahead of an appraisal.

Max Shafer is a contributor to the Innovative Building Materials blog. He is a content writer for the construction and home improvement industries with an interest in landscaping, outdoor remodeling, and interior design. Max is focused on educating homeowners, contractors, and architects on innovative materials and methods of construction that increase property value, improve sustainability, and create a warm and welcoming ambiance.

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Max Shafer

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Innovative Building Materials