Renovations and Upgrades: Driving Property Value Growth

Renovating a home in Coeur d'Alene, Idaho increased its listing price by nearly $2 million through strategic upgrades and market demands.

### How to Increase a Home's Listing Price by Nearly $2M
* 🏡 Changing a home's address from a less desirable street to a more prestigious one can **significantly boost the listing price**.
* Renovations that create an **open floor plan** and upgrades in high-demand areas like the **kitchen and primary bathroom** can add **substantial value** to a property.
* 💰 The cost of upgrades should ideally align with the **value they add to the listing price**, as determined by **local market comparisons**.
* 🚪 Addressing buyer preferences, such as **closet space** and **double sinks in the primary bathroom**, can make a property more appealing.
* Structural changes like **lowering the floor to create more height** and adding an **egress window to convert a space into a legal bedroom** can also **increase value**.
* 🌱 Green technologies like tankless water heaters can be costly upfront but result in **long-term energy savings**.
* 📈 Market conditions, such as **increased demand from out-of-state buyers**, can help justify **renovation expenses**.
* 🏞 While renovations can enhance a home's value, the most significant driver of property value is the **land itself**, which tends to **appreciate over time**.

- [Narrator] This home's front door used to be here on 8th Street, but the owners moved it here, changing the address to Wallace Avenue. Why? They wanted to increase one thing: the listing price. - [Lea Williams] Some buyers don't wanna live on a thoroughfare street. - [Narrator] And this change is just one of many that took the house from this end of the market to this end. Let's take a look inside this property to learn how it got a nearly $2 million price tag. Six years ago, two renovators purchased this home in Coeur d'Alene, Idaho; a lakeside destination with a competitive market for second homes and vacation Airbnbs. - [Lea Williams] It's been completely remodeled: four bedrooms, three and a half baths. It is over 3,200 square feet. - [Narrator] The first renovation

which changed the address, brought this home amongst
more expensive competition. - We did back that up with data of homes sold on 8th versus
the streets like Wallace, and it really helped justify that price. - [Narrator] And inside,
the renovators knocked down most of the walls, combining
the living room, dining room, and kitchen into a
highly-desired open floor plan. - But there's no assurance
that that preference today will last forever. - [Narrator] But 71% of
consumers say they would pay a premium for an upgrade,
specifically in the kitchen, more than any other room. - [Lea Williams] They
will notice the brands of the appliances. They look for the newer,
soft-closed cabinets. It's almost expected. - [Narrator] But the cost
to upgrade that space may be more than the value
it adds to the listing price. - Think of appraising as hyper-local.

It's really block-by-block. You have two identical homes side by side. One has a renovated kitchen, one doesn't, and they sell for 75,000 difference. And that's telling you in a sort of reasonable way in the market. The premium for this kitchen, maybe it cost them 50,
maybe it cost them 100; it added 75,000 of value. - [Narrator] These same
comparisons can be made for upgrades in every other type of room. For bedrooms, the focus goes
to windows and closet space. This property's primary
bedroom can easily fit a king bed and two nightstands. But the two closets in this room aren't quite as generous in size. - One buyer said, There's
just not enough space for my clothes. So, for those buyers, the recommendation would be, let's expand the closet. - [Narrator] The sellers
decided not to front the money for a closet expansion, hoping
that this would still appeal

to buyers, since Coeur d'Alene has a rising short-term rental market. But just a rendering of how renovations could expand the space can actually help alleviate buyer concerns. It's that visualization that is hard for people. They will triple the cost in their mind as they're walking through the home, and by a seller having that bid for the actual work to be done with this actual material, it will oftentimes just take that objection off the table. [Narrator] The bathroom, on the other hand, saw a full renovation, complete with a marble shower, standalone tub, and importantly for this neighborhood and price range. I mean, you gotta have two sinks in your bathroom. [Jonathan Miller] It's not about the premium the double sink adds, it's the negative if you don't have it. [Narrator] 71% of buyers paying $500,000 or more

for a property, they expect a double vanity in the primary bath. Buyers typically also expect bathtubs, especially in a market catering to families. So, it is required, really, but it doesn't mean every bathroom has to have a bathtub. [Narrator] The seller is settled on tubs in two of the three bathrooms, with one here, one upstairs, and just a single shower in the basement. And here, the changes became more structural. The sellers actually lowered the floor in this space to create more height between the ceiling. They can make actual real living space out of it. That really adds a tremendous value to the listing price. [Narrator] And this investment was made even more profitable by something like this: an egress window. When you add an egress window, it adds value because now you can call this a legal fourth bedroom. [Narrator] In Idaho, an improvement like this window

can pay for itself 10 times
over when it comes time to sell. In fact, some of the
improvements that deliver value to the listing price
aren't cosmetic at all, like a home's water and HVAC system. - This tankless water heater is something that a lot of homeowners,
when they're renovating, add. But what it does is it
adds a cost upfront to do, but in the long run, the heating costs for
water heaters are lower. - Think of it in the context of your utility bill every month, and do you want it to be less? And that's the incentive for green. - [Narrator] Not all
technology in the home carries that same weight;
for example, in this market. Many smart home capabilities, like auto outdoor watering systems, don't actually add any extra
dollars to a listing price. - But it does help make
the home more marketable and sells faster. - [Narrator] Before making any changes,

experts suggest asking, how
quickly does that seller want the property off their hands? That motivation will determine
which renovations make sense. After transforming 90% of the home, the renovators sold the
house near its listing price. That is with nearly $1 million invested into the renovations. But notice how all of these improvements are uniformly neutral. - You wanna appeal to as
many people as possible, so you don't have olive green
appliances in your kitchen unless that's the norm
for the neighborhood. The market doesn't care that
you love the purple bedroom. - [Narrator] The renovations also center around square footage and making that number feel
even bigger than it is. That's because square
footage is a crucial metric to a home's value. But in the suburbs like this neighborhood, square footage has a diminishing return. - Yes, a larger home is
worth a lot more money, but the difference from
4,000 to 5,000 square feet

is a smaller difference than maybe from 3,000
to 4,000 square feet. - [Narrator] Market
conditions can also help justify expenses. - Here's a market that was underutilized, and then benefited greatly
from Californians coming in and creating this demand
that never existed before. - [Narrator] And in April, 2024, home prices in Idaho were up over 15% compared to the year prior. - [Jonathan Miller] This
up-and-to-the-right phenomenon is essentially what
we're seeing nationwide. - [Narrator] And ultimately,
the most important value driver of a property is not something
you can necessarily renovate, because it's the land itself. - When we see house prices
rising in a neighborhood, it's more about the land rising;
the structure, the house, call it the improvements,
they depreciate over time unless you upgrade them. But land, over time,
generally appreciates.

The $1 Million Renovations Behind This 350% Listing Price Increase | WSJ Listing Price

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The Transformation of a Home: From Address Change to Million-Dollar Listing

The home's address change from 8th Street to Wallace Avenue was aimed at increasing its listing price, backed by data on home sales in the area.

The renovation included a popular open floor plan and a upgraded kitchen, which 71% of consumers are willing to pay a premium for.

The decision not to expand the closets in the bedrooms was made despite the potential buyer preference for more closet space.

Maximizing Property Value through Renovations

Renovations that provide a visual of expanded space can alleviate buyer concerns and potentially triple the cost in their minds.

In the real estate market, a marble shower, standalone tub, and a double vanity in the bathroom are not just premium additions but are now expected by buyers, especially those paying $500,000 or more.

Structural changes like lowering the floor and adding an egress window can significantly increase the value of the property, making it a profitable investment.

Maximizing Home Value through Renovations

Investing in a tankless water heater can increase upfront costs but lowers long-term heating expenses, adding value to the home.

Green technology not only reduces utility bills but also makes the home more attractive to potential buyers.

Renovations should be neutral and appealing to a wide range of people, focusing on increasing square footage to maximize the property's value.

The Impact of Market Conditions on Home Prices

Market conditions can justify the rising expenses in the housing market, especially with the increasing demand in certain areas like Idaho.

The up-and-to-the-right phenomenon of rising home prices is being observed nationwide, with the land itself being the most important driver of a property's value.

The appreciation of land is a key factor in the rising house prices, as opposed to the depreciating effect of the physical structures over time.