Don't count on HGTV-like returns from your renovations
I’ll admit it. I’m obsessed with HGTV’s Love It or List It.
It feeds my two obsessions of looking at homes for sale and seeing how a space can be reimagined.
I'm also quite taken by the stars of the show. Real estate agent David Visentin and designer Hilary Farr are quite good at what they do.
But are their results too good to be true?
The post-renovation value of a home given the Farr treatment is always higher than the pre-renovation value by an amount that exceeds the renovation budget.
Sometimes it's a lot higher.
Seriously, the episode I’m watching right now features a pre-renovation value of $300,000, a renovation budget of $35,000, and a post-renovation value of $385,000.
That’s $50,000 more than the renovations supposedly cost, and Farr was only able to redesign the kitchen because, as usual, the home had lots of structural and safety issues that sucked up most of the money.
HGTV’s Steven Lerner, senior vice president of programming and development, told me via e-mail that the show consults several real estate agents, including Visentin, to determine how much the property would be listed for before and after it’s renovated.
But I’ve reported for years on the results of the Cost vs. Value survey by Remodeling Magazine and the National Association of Realtors, and have never seen remodeling returns like what the show claims.
Case in point: not one of the 10 most valuable home improvements for 2014 boosts a property’s resale prices by as much as the project costs. The average return is now just 66.1%, and that’s a hefty increase from 2013’s 60.6%.
The highest return was 96.6%, and that was for a midrange steel door.
And while I haven’t seen every episode, in those I’ve caught, midrange steel doors don’t play a starring role.
So what planet does this show take place on?
Not exactly another planet, but a country with a real estate market so different than ours that it might as well be.
The slight accent — can you say, “a-boot” — screams Ontario to this former Detroiter. And yes, Love It or List It is filmed in Toronto and its suburbs.
The housing market there is not just hot. It's red hot.
So hot that our rules for home appreciation — and how much renovations can boost property values — simply don't apply there.
The average selling price in the greater Toronto area in March 2014 was $557,684, according to the Toronto Real Estate Board. That’s more than $100,000 higher than the average selling price just three years ago.
I know I’m always perplexed by how much homes on the show are worth.
How many times have I screamed at the TV: "$700,000 for that dumpy little bungalow! Are you insane!"
Yet the families featured on the show seem unfazed by the staggering sums of money they're spending.
No wonder study after study says most Canadians have been priced out of the market.
Then there's the second major reason for these wacky numbers — the unreal real world of reality television.
According to Lerner, renovation figures are based on actual costs, but he concedes that designer and project manager fees aren’t included.
That has to be a significant savings. I can’t imagine Farr’s services come cheap.
But I think the value of the work exceeds the stated budget in other ways, too.
Almost every home has ancient wiring, crumbling foundations and rotten beams that require expensive fixes.
Many of the show's most dramatic moments occur when Farr reveals those structural problems to the irrationally angry homeowners and explains how the money spent on those repairs means she can't redo the master bath or add a bedroom.
Yet even when tens of thousands of dollars are spent upgrading the electrical system, replacing the roof or bolstering the foundation, the post-renovation value is still more than the renovation budget.
Now I don't claim to know how property values are determined in Canada. But no one in this country should expect the money they spend to keep their home from burning down or collapsing to boost their property values.
Those projects are not the same as remodeling a kitchen or updating a bathroom.
And finally, Farr has exquisite — and very expensive — taste. When she tackles a project, she goes high end, with custom everything.
(Have you ever caught an episode where she’s forced to use prefabricated cabinets or, God forbid, linoleum? It’s not pretty.)
I'm always skeptical that the full value of those cabinets and appliances, granite countertops and windows, is being counted in the cost.
Having said all of that, let's be clear.
I’d be thrilled if Farr and the Love It or List It team would help my husband and I redo our vintage condo.
I’d just be realistic about the return we can expect.
When Visentin theatrically produces that new appraisal, after all of the work is done, we wouldn’t expect to recoup 100% — or more — of what we spent.
That's the reality of Love It or List It for American viewers.