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Question: I purchased a home in an upscale Illinois neighborhood about six months ago. Although the average home price for my ZIP code is about 40% to 50% higher than what I paid for my home (with the exception of my neighbor who just did a complete rehab), the other homes on my street are valued at around 35% less than mine. My house has only three bedrooms and two baths. We are thinking about adding a second story to the house with another bathroom and at least one more bedroom. My concern is that I would overbuild for my street. Should this be a concern when four-bedroom homes two blocks away sell for a 40% premium? Is there any rule of thumb to calculating a price for a given area? Is the median price in the ZIP code enough? Should I look at the median value of homes on the street I live on? The street I live on is a good location; the only thing holding it back is that there are several older couples on my street who have no reason to renovate. -- Bryan, Lake Forest, Ill.
Bryan: This sounds like a tough call. There are no definitive answers, but here are some pointers from people who deal with these questions on a daily basis. Comparing your house price with the median for your ZIP code would be casting the net far too wide. A single ZIP code can encompass a full range of housing, from luxury to squalor. On the other hand, you needn't compare only with the values on your block. Prospective buyers may well be comparing your home with ones within a few blocks. Still, to the extent that other homes on your block look shabby, that may well hurt your resale value, no matter how posh your house looks. Expanding your home can be a good investment in terms of resale value, but it isn't a sure thing. Kyle Wheatley, the owner of Century 21 Team Wheatley in Killeen, Texas, says people often find that they don't recoup their full investment in a home expansion when they resell a home. Mr. Wheatley, who also owns a construction company, advises against such a project if your only aim is to increase the value of the house. But go ahead if you need the extra space, he says. Steve Berges addresses this question in his new book, "101 Cost-Effective Ways to Increase the Value of Your Home," due for publication by Dearborn Trade Publishing in June. Mr. Berges, who owns Symphony Homes LLC, a home-building and renovation company in Lake Orion, Mich., says it's vital to consider how the size of your house compares with others in the neighborhood. If yours is one of the smallest, he says, it may make sense to add a room. If it's already one of the largest on the block, "investing your hard-earned money to make it even larger would most likely yield negative returns." What pays off most in terms of resale value? Mr. Wheatley suggests renovating bathrooms and kitchens. Something as simple as refacing cabinets or putting in new countertops can make a big difference. Mr. Berges agrees about kitchen and bathroom makeovers. But he says lots of other relatively small projects also can make a big difference in resale value: better landscaping (or even just removing junk from your lawn), fresh painting, roof repairs, new flooring and improved lighting. And don't forget good ventilation, he adds. You may no longer notice stale pet or cooking odors, but prospective buyers will. -- Mr. Hagerty is a staff reporter for The Wall Street Journal. His "House Talk" column appears most Fridays on RealEstateJournal.com. E-mail him your questions about the residential real-estate market. Please include your first name and city and state. If your question is answered and posted, we will show your first name and city. Due to volume of mail received, we regret that we cannot answer every question.
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