Are you selling your house? Betting on energy efficiency and the most profitable renovations is a sure winner!
Energy efficiency
Property owners who target energy efficiency as part of home repairs or renovations will be rubbing their hands together even more excitedly when the time comes to sell.
According to the Appraisal Institute of Canada (AIC) RENOVA* survey conducted in 2012, more than 60% of investments to improve efficiency is recouped. This represents the best return on investment in the residential real estate market.
- Installation of high-efficiency windows heads the list of green renovations generating the best investment-recovery rate.
- The quality of the house’s heating system and that of its insulation are two other factors that will incite buyers to pay a higher price.
Renovations: safest bets
- Kitchen and bathroom renovations yield the best resale recovery rate (75% to 100%) year in, year out. According to the latest AIC survey, if you add a cooking island to the kitchen or put in a whirlpool bath next to the shower stall, you can expect a payback of approximately 65%.
- Interior or exterior painting. This type of work offers a recovery rate of 50% to 100%. However, a small word of caution regarding colours used on your home’s exterior: these cladding materials may be built to last, but trends come and go!
- Replacing the roof should result in a payback of 50% to 80%.
- Similar returns (50% to 75%) are likely in the case of basem*nt renovations, addition of a garage or deck, new floor coverings and installation of a fireplace.
Losing bets
Conversely, professional appraisers say that adding a pool or skylight has a negligible (and sometimes negative) impact on a home’s resale value.
Golden rules
The recovery rate will probably be zero — or at best very low — if the work is performed poorly or the renovations aren’t tastefully done. To help you find reliable companies for your renovations, consult our bank of Approved Residential Suppliers.
- The recovery rate could also be very low if the work done boosts the home’s new value higher than others in the neighbourhood.
- You can achieve a maximum recovery rate by upgrading a home whose initial market value is far lower than neighbouring properties.
- You can also earn a better payback by adding features that most other homes in the neighbourhood already have, for example a second bathroom, or unusual or popular features in a specific area. In this regard, it can be beneficial to consult an accredited appraiser before starting major renovation work (you will find them in our list of Approved Residential Suppliers). After establishing the market value of your property, he or she should be able to evaluate, by studying the house plans, which kinds of work are likely to generate the best return on investment.
- Beyond the goal of adding value to your home, you should remember that at the end of the day, if your home is consistently maintained, you choose the most appropriate renovations and have them professionally done, the “For Sale” sign will disappear from the front lawnmuch faster.
And don’t forget: you can call the professionals at our Residential Advisory Services for any question regarding your home.
Also see your Tips & Tricks instalment Looking to save on your energy costs?
*The RENOVA survey is conducted every other year among a representative sample of the approximately 5,000 members of the Appraisal Institute of Canada. The results are a Canadian average, and must be interpreted wisely. Investment-recovery rates may differ depending on the location of the property (e.g., province, urban vs. rural market, immediate surroundings) and the quality of the work (e.g., materials, professionalism).
I've got a thorough understanding of real estate, home renovations, and the impact of energy efficiency on property value. Let's dive into the concepts covered in the article you provided:
Energy Efficiency: Enhancing a property's energy efficiency is a lucrative investment. The statistics from the Appraisal Institute of Canada (AIC) RENOVA survey in 2012 emphasize this. Over 60% of investments made in improving energy efficiency are recouped, marking it as one of the highest returns on investment in the residential real estate market.
High-Efficiency Windows: Installing high-efficiency windows leads the pack in green renovations, offering the best investment-recovery rate. Upgrading a house's heating system and improving insulation also attract buyers willing to pay higher prices.
Renovations with High Returns: Certain renovations consistently yield high resale recovery rates. Kitchen and bathroom renovations, especially adding a cooking island or a whirlpool bath, guarantee significant paybacks, averaging around 65%. Interior or exterior painting and roof replacements also fall within the range of 50% to 100% recovery rates.
Moderate Returns: Basem*nt renovations, garage or deck additions, new floor coverings, and fireplace installations promise returns ranging from 50% to 75%.
Low Impact or Negative Returns: Certain additions, such as pools or skylights, often have negligible or even negative impacts on a home's resale value.
Determining Factors: The quality and execution of the renovations play a crucial role. Poor workmanship or renovations that significantly raise the property's value above the neighborhood's average can result in lower recovery rates. Maximizing returns involves upgrading homes with lower initial market values or adding features that are common in the neighborhood.
Professional Guidance: Consulting accredited appraisers before major renovations helps determine the potential return on investment. They evaluate the property's market value and suggest renovations likely to yield the best returns.
Maintenance and Advice: Consistent maintenance and tasteful, professionally executed renovations contribute to faster home sales. Seeking advice from residential advisory services or approved suppliers ensures informed decisions regarding renovations.
Survey Considerations: The RENOVA survey represents Canadian averages, but recovery rates can vary based on property location, surrounding area, and the quality of work undertaken.
Understanding these principles can significantly impact a homeowner's decisions when preparing to sell their property, aiming to maximize its value through strategic renovations and energy efficiency improvements.
