It is no secret that today’s housing market is on the rise. As buyers clamor for a limited supply of
homes on the market, how can you ensure that you squeeze every last drop of value out of your
home? In this article, we will discuss various ways to add value to your home and the type of
value each may provide, whether it be Actual Value, Perceived Value, or Comparative Value.
Adding usable square footage is the most sure-fire way to add immediate actual value to
your home. Adding more space is the top way to add value based on the methodology for
assessing a home’s value. In a market largely dictated by square footage, this will immediately
and without question, make your home inherently worth more. This concept is especially
impactful in markets where the price per square foot is escalating or tends to remain very high.
Because of the higher price per square foot, homeowners can realize exponential value
increases by simply finishing out otherwise unused spaces. To illustrate, let’s take two Texas
markets’ average prices per square foot and compare the two. According to Realtor.com,
Houston’s Median Price Per Square Foot as of April 2022 was $176 compared to Austin’s at
$356. Nearly double! That means for every 100 square feet of usable space added to a home in
Austin, homeowners would see an increase in home value at twice the rate of Houston
homeowners. This strategy isn’t necessarily the most cost-friendly to incorporate, but it is
definitely the most effective, and in cities, with high prices per square foot the return on investment
can be extremely attractive!
However, adding square footage does not necessarily have to be very expensive or
arduous. While one way to add square footage is by creating a brand-new addition to the home,
(including new exterior walls, foundation, etc.) homeowners may also finish out existing spaces
like the garage, sun room, or basements in select markets. One final consideration here is to be
cognizant of your home’s current size and how impactful adding additional space can be. For
example, adding a new 100 square foot bedroom to a 1000 square foot 2-bedroom, 2-bathroom
bungalow in Austin would carry much more value than adding 100 square feet to a 3,000 square
foot, 5-bedroom home in Houston. First, there is a much higher square footage ratio in terms of
overall square footage in Home 1 (a 10% sq. ft. increase) versus Home 2 (which only adds a bit
more than 3% to the total square footage). And second, 3-bedroom homes tend to sell much
quicker than 2-bedroom properties, whereas adding a 6th bedroom isn’t nearly as desirable nor
does it provide much more utility to a home that already has 5 bedrooms.
If you’ve already maximized the square footage value of your home or you cannot afford
the task of adding extra space, there are plenty of other ways to increase your home’s value.
The next biggest way to add value to your home is by improving your home quality. You can
upgrade your home in multiple ways, like renovating, improving finishes, increasing curb
appeal, and replacing big-ticket items. When it comes to renovating, the rule of thumb is to start
with areas that tend to provide the highest value return. These areas are generally those that
people use the most often or common areas. The kitchen and bathrooms are widely viewed as
the most important areas to improve first (and with the highest ROI), followed closely by the living
room and master bedroom. Renovations don’t necessarily have to include every intricate detail
of each space either. The most practical renovations are those that cost the least while making
the biggest impact. Interior paint, for example, can be very cost-effective ($1-$2 per square foot)
and make an entire space appear brand new without replacing other aspects of the same
space. Replacing dingy carpets with low-cost LVP flooring instead of hardwoods is also an
effective alternative. New countertops, tiles, backsplashes, or hardware/fixtures are other
opportunities to create value without breaking the bank.
A home’s curb appeal can also carry huge perceived value. After all, the outside is the
first thing any prospective buyer or passerby will encounter. A fresh coat of exterior paint can
spruce up old brick or siding. New shutters frame windows and make the home look less
“bland”, but are relatively inexpensive to incorporate. Upgraded landscaping can be very
inexpensive and creates a fresh look to the same home. By simply cleaning out flower beds,
adding some mulch and a few new plants; or even just trimming back intrusive branches and
keeping the lawn mowed, the perceived value of your home can increase drastically.
Lastly, by replacing big-ticket items, you can reduce the amount of hassle and expenses
a prospective buyer will have to carry. New roofing can cost thousands of dollars, but this will
likely make the transaction process much simpler than having to negotiate concessions or the
sales price. If buyers feel there are too many repairs required in the home, they may not wish to
pursue the home during a sale at all! By replacing some of the larger expenses up front (like old
roofs, AC units, or remedying foundation issues) you can effectively reduce the risk of having
your home sit on the market longer than desired, and thus realize fewer costs in the long run or
a lower sales price.
While other improvements certainly have higher actual value increases, making your
home more efficient or “smarter” can likely cause it to stand out when on the open market
compared to other homes when all other considerations remain equal. Some implementations to
consider, once you have exhausted all other improvement options, are energy-efficient windows
and lights, solar panels, smart home applications, etc. While these improvements may not carry
the same weight as adding square footage or renovating, they can set your home apart from
others by offering lower utility costs or maintenance to prospective buyers and making them more
inclined to purchase your home over a competitor. The less amount of time your home sits on
the market the more you can reduce your carry costs as a seller and time is money!
To conclude, by making your home bigger, more efficient, or upgrading its quality, you
can increase its value and push your earnings potential to its highest level.