Which Home Improvements Pay Off

Study Pegs "Value-Added" Contributions Of Key Home Real Estate Features by Kenneth R. Harney Realty Times

In what could be the largest study of its kind, researchers have calculated the "value added" contributions of dozens of home features and facilities. The study used sophisticated statistical analysis techniques on nearly 29,000 home sale transactions over an eight-year period.

Would you believe:

An extra half-bath adds 15 percent to the selling price of a home, but an extra full bathroom adds a stunning 24 percent.

Adding a sitting area to the master bedroom increases the sales value of the house by eight percent.

Garages more than pay for themselves -- adding 12.9 percent to the selling price of the home.

Fireplaces are hot. A house with a single fireplace sells for 12 percent more than an identical house without one.

A basement-located laundry room actually cuts the selling value of a home, whereas a laundry room located on the first or second floor raises the market value by 15 percent.

These are just a handful of the sometimes provocative conclusions reached by the new statistical study by the National Center for Real Estate Research, an affiliate of the NAR. The study, "The Value of Housing Characteristics," was conducted by Florida State University professors G. Stacy Sirmans and David A. Macpherson using data on closed home sale transactions in a 21-county metropolitan area including portions of Maryland, Delaware, Pennsylvania and New Jersey between 1996 and 2003.

What sets the new study apart from most "value added" research is that it uses sophisticated statistical analysis techniques -- a hedonic regression model -- to isolate each feature or characteristic of a house and calculate its specific contribution to selling price.

Most other "value-added" studies, by contrast, are based on estimates by home improvement contractors, architects, builders and others directly involved in real estate transactions. Some studies, such as one conducted annually by a national remodeling publication and used by contractors to pitch home improvement projects to potential customers, have been criticized on methodological grounds.

The new National Center for Real Estate Research study covered a wide range of house types, locations, price brackets and other characteristics. Here are more of the conclusions:

Additional bedrooms enhance value, but not as much as you might think -- just 4.1 percent to selling price per extra bedroom.

Higher ceilings are good -- a house with 9-foot ceilings sells for 6.2 percent more than an identical house with lower ceilings.

Central air conditioning is a big value-adder -- 12.4 percent to the selling price. In other words, a house without central A/C would sell for 12.4 percent less than an identical house with A/C.

In-law suites may be popular with in-laws, but most home buyers apparently don't value them. In fact, according to the study, an in-law suite knocks 5.2 percent off selling price. Ditto for a professional office in the house (minus five percent).

Vinyl and aluminum on the exterior of a house lowers value (minus 3.5 percent and minus 3.6 percent respectively), whereas stucco (+9.7 percent) and wood (+8.5 percent) are value enhancers.

Powering-up your electrical service pays off a lot. A heavy-duty 400 amp service adds an impressive 28 percent to selling price, and 200-300 amp service adds 14.2 percent.

Family rooms are good (+7.3 percent), as are separate dining rooms (+6.2 percent), but buyers will only pay 1.1 percent more for a "utility/mud room," according to the study.

An island in the kitchen is a smart investment (+5.3 percent to selling price), but a double oven in the kitchen adds even more (8.8 percent).

Water and golf views are predictably strong value enhancers. A "water view" adds 7.8 percent to sales price, but an actual "waterfront" location adds nearly 18 percent. A "golf view" adjacent to a golf course adds 8.1 percent.