Each year, a number of cities in the Cost vs. Value Report show a cost-recouped average that is above 100% for some remodeling projects. This indicates that, on average, those projects are worth more in resale value than the owner spent to construct them.
This may seem impossible, particularly to homeowners in areas where property values are still lower than they were several years ago and only rising slowly, and it certainly is the exception to the rule. When it does occur, however, it is usually tied to a particularly hot real estate market or to specific projects that are either in high demand from buyers or make a big difference in how buyers perceive a property. If a remodeling project helps a house meet buyers' expectations—adding a deck to the only house in the neighborhood without one, for example, or adding a second bathroom in an area where every other home already has two—the homeowner can expect a good return either in the form of a higher selling price, a quick sale, or both (assuming everything else about the house is up to standard).
Projects that lose resale value have in recent years typically been victims of the economic slump, as has been the case with many higher-cost, “upscale” projects. A low ranking may also reflect a lack of demand, but this can be misleading at the local level. A backup generator may have much more appeal—and higher value to a buyer—in areas where damaging storms are common or where the local power utility is prone to service interruptions. It also can lose value during years in which there were no major storms. Similarly, a home office remodel may appeal to buyers who intend to telecommute or run a home-based business, but will have little value to other buyers who would prefer to have an extra bedroom or an exercise room.