5 On Your Side

The right home improvements yield bigger payoff

Posted April 9, 2010
Updated April 10, 2010

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— Warmer weather traditionally brings an increase in home sales. This year, most buyers have more to spend after they move in thanks to the federal homebuyers’ tax credit.

Tax credit can be used to invest more in home Tax credit can be used to invest more in home

Homeowners who invest that money in the right home improvements can see an even greater bang for their buck when they decide to sell.

Realtor Susie Miller said the two rooms where that investment pays off the best are the bathroom and the kitchen.

A comparison of annual cost and value data by Remodeling Magazine shows that giving a home an external facelift can also pay off. Installing a steel door can return 128 percent of the cost when the home sells. Sellers recoup about 80 percent of the value of adding a wooden deck. Replacing siding and certain windows offer about the same rate of return.

Remodeling Magazine Cost vs. Value Report

Miller warned that before spending any money, owners should think about how they live, rather than what they can get for their home.

“We are purchasing these walls and roof to live in and enjoy,” she pointed out.

Remodeling Magazine also identified projects that don’t pay off as well. Sellers who added a home office saw only about a 48 percent return on that investment. A sunroom addition returned about 51 percent.

To qualify for the tax credit, buyers must not have owned a home in the last three years. The tax credit is 10 percent of the purchase price of a home up to a maximum of $8,000. Those who have owned a home for at least five of the previous eight years can qualify for a maximum credit of $6,500.

Buyers must have a house under contract by April 30 and must close by June 30 to claim the credit.

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