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Does home remodeling always pay off?

Structural dry rot may financially undermine newly renovated rooms
Published on Jan 26, 2004

Perhaps you've heard stories about homeowners who've greatly improved their net worth by remodeling homes and selling them. But, while remodeling can add value, there's no guarantee that a future buyer will pay you enough to recoup your investment. Consider the example of a homeowner who lost his home in the Oakland Hills, Calif., firestorm of 1991. Rather than rebuild, this fire victim decided to buy an existing replacement home. He invested his insurance proceeds in the purchase and subsequent remodel of the property. When he decided to sell several years later, he barely recouped the money he'd invested in the renovation. He had over-improved the property for the neighborhood. Buyers weren't willing to pay more than the property was worth on the open market. Some homeowners fall into the trap of thinking that their home is worth what they paid for it, plus the money they've invested in remodeling projects. This logic is often faulty, and can result in unwise investments. Repla...

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