Seattle-area home sellers often face a hard question. Does it pay to remodel a house before selling it?
The easy answer is: It depends. Studies by the National Association of Realtors, among others, show that almost every major renovation project, like a new kitchen or bathroom job, will be a loss for the seller in a home sale.
But that doesn’t tell the whole story, according to Seattle-area real estate agents and home sellers. Several factors can play into the decision to do a major remodel prior to a sale, such as the home’s projected sale price, its location and its potential. The Seattle area is also unique in certain ways, such as having a high number of affluent young tech workers who, agents say, tend to want finished homes.
And some home sellers come out ahead after doing significant remodels.
Take Connie Lindsay of Kirkland. In the past five years, she sold two Seattle homes: a 1918-built home in Portage Bay in 2019 and an investment property in Ravenna last year. She invested around $150,000 total to renovate the homes with the expectation she would make a profit on the sales.
And her bets paid off nicely. Lindsay figured she recouped about double what she invested, even though the Ravenna home was sold last year, when the market was sluggish.
But Lindsay said she wouldn’t necessarily advise Seattle-area home sellers to undertake a big rehab.
“You have to be cautious no matter what you do when you’re upgrading your house, and you may not get dollar for dollar even if you have the guidance of a good Realtor,” she said. “It’s not for everyone.”
NAR’s national remodeling studies also emphasize caution. Home sellers can potentially lose tens of thousands of dollars on renovations that fall flat with buyers. And there is more danger of taking a loss while the Seattle-area market remains slow and home prices are unsteady.
Izak Lewis, a first-time property investor, said his project left him skeptical that you can remodel your way to a big payday in the current market. Lewis bought a fixer-upper investment property in Ballard last year and extensively renovated it for around $100,000. He also built a 1,000-square-foot home on the lot.
The two homes sold in December and January. The project proved modestly profitable, Lewis said. However, he said he just broke even on the house that had to be rehabbed.
“A lot of the people who have done remodels and been successful got in at a good time in the market,” Lewis said. “They fixed up their homes, and then when they were ready to sell, they got a little bit lucky.”
“Money losers”
Of 11 interior remodeling projects NAR studied in a 2022 national report, just three types of work — refinishing or adding new hardwood floors and replacing insulation — were projected to pay for themselves or increase the seller’s profit in a home sale.
Several common interior projects are “money losers,” according to NAR. When homeowners undertake these major remodels, they rarely add enough value to the home to pay for the work. If a home seller, for example, were to spend $80,000 remodeling a kitchen and $35,000 on a bathroom then sell the home, they could expect a dollar-for-dollar loss of $20,000 and $10,000 on those jobs, respectively, NAR projects. If the seller were to build a new primary bedroom suite costing $172,500, the loss would be $72,500.
The story is the same with outdoor upgrades, according to a 2023 NAR survey. Pools, decks, patios, among other common outdoor projects, are usually losers when evaluated on purely investment terms. The exceptions are landscaping and lawn care and adding an outdoor kitchen, which tend to recoup the investment.
“Scalpel, not a sledgehammer”
NAR’s Deputy Chief Economist Jessica Lautz said the association’s estimates don’t account for regional differences and local conditions. Identical homes in different ZIP codes can yield different results. Also, NAR’s surveys suggest that when homeowners remodel, they tend to be happy with the improvements; remodeling can improve their living condition and quality of life.
The biggest mistake home sellers make isn’t necessarily undertaking a significant renovation, Lautz said — it’s doing so without consulting with a competent real estate agent beforehand. Sellers often remodel according to their tastes.
“One could invest too much in a highly personalized remodel,” Lautz said. “That would probably be the biggest mistake if someone is going to put money into remodeling or even staging a home. So, they really need to appeal to the broadest range of potential homebuyers.”
Lindsay consulted with her listing agent, Seattle real estate agent Matt Miner, and hired his construction company to do the work. Miner said he doesn’t know whether it is worth rehabbing a home until he tours the house and does an inspection. He often advises sellers against doing major work.
But Miner said national studies that attempt to tally the costs and benefits of remodeling on a per-room basis can give a false impression. He said his clients normally don’t spend all their money on one-off projects, such as gutting and replacing a kitchen or adding a new bedroom. The budget is usually spread around to fix specific problems throughout the house, such as replacing dated countertops in the kitchen or worn bathroom tiling.
“We renovate, I call it, with a scalpel, not a sledgehammer,” he said.
Lindsay’s former Ravenna property, for example, sold last spring when the Seattle market was beginning to sour due to higher interest rates. Despite a shakier market, Lindsay went ahead at the end of 2022 with a $100,000 renovation.
Miner advised her that the house could sell for more than its $750,000-$850,000 price range without any extra work. The home needed a new kitchen and upgrades to floors, bedrooms and bathrooms. It sold for just under $1 million a day after it was listed last March. It worked out, but Lindsay says she recognizes that her decision carried risk.
“This market is fickle and it’s a gamble — you just don’t know,” Lindsay said.
Miner said that some homes have unfixable problems, such as an odd floor plan or excessive traffic in the neighborhood. In that case, a major remodel might not boost the value much.
“My rule of thumb is that you should at least double your money that you spend,” Miner said. “Now some people will accept less; that’s their prerogative. But the measure in my head is it’s a lot of effort. It takes a little more time. You should make some money.”
Another reason to renovate is that it can help a home sell more quickly. Seattle real estate agent Danny Greco said recently, more buyers have been looking for finished properties that they don’t have to remodel.
“So, the less updating they need to do, even if it’s just cosmetic, the faster that home appears to be selling,” he said. That said, Greco usually advises his clients against doing major renovations prior to a sale.
“Historically, I’ve never really been a fan of big-scale projects just to sell the property more quickly because you can’t guarantee you’re going to get a dollar per dollar or greater return on what you put in,” Greco said. “But everyone’s got their own sensitivity and timelines and budgets.”
Sheela Damle, one of Greco’s clients, said she and her husband opted for a cautious rehab of their Ballard town house, mostly to deal with a decade of wear and tear. They hired contractors to replace the carpet and paint the exterior. Damle’s husband painted the interior. However, they decided not to refinish the hardwood floors or upgrade the carpet.
She said their hope was to get the home sold quickly, and their plan worked out. The town house is now under contract, and they’ve moved into a larger home in Ballard.
“We weren’t really expecting to make additional money on top of it,” she said. “We had the perspective of it would basically just help it sell.”
Miner said he always recommends replacing carpet and refinishing floors, painting the interior and staging a home with appropriate furniture. Inexpensive moves like removing grimy backsplashes, re-grouting and replacing mismatched lighting can also make a big difference.
He also said it is a good idea to fix the roof and other issues that might be flagged during a buyer’s home inspection. He said if obvious problems are uncovered, the homebuyer may suspect that hidden problems lurk within the house.
“It’s all psychological, I think is what I’m really telling you,” Miner said. “Really, what I’m doing is looking into a buyer’s psyche and saying, ‘What are they going to be worried about with this house?’”
