Americans spend large amounts of money each year on residential remodeling projects and seeing an increasingly lower return on investment (ROI).
When you are planning a renovation project in preparation to sell your home, the key to maximizing ROI and avoiding costly renovation mistakes is knowing which upgrades will add the most value. HVAC upgrades are a safe bet and a smart investment — and yet, these home improvements are some of the most commonly overlooked by homeowners and flippers.
Making the wrong renovations could mean spending thousands of dollars on upgrades that never pay themselves off. Below, you will find an explanation of why HVAC upgrades are your best bet, backed by a list of upgrades that will almost always pay off and help you sell your home faster.
Home Equity Explained
Home equity is the portion of your property that you truly “own.” If you borrowed money to purchase a home, your lender has an interest in the property until you pay off the loan, although you’re still considered the homeowner.
Home equity does not refer to the final sale price or even the property assessment. Equity refers to how much value derived from the home after debts. If a home is valued at $250,000 and a $80,000 mortgage remains, the home’s equity comes out to $170,000. Anything that increases the sales price or decreases the debt boosts the equity.
Your home equity grows in proportion to the price of your home. You can actively work to increase your home’s value through improvement projects. When the real estate market is healthy and growing, then house prices rise and you’ll build equity without any effort on your part.
Improving Home Equity
Anything that improves the condition of a home could potentially increase home equity. Upgrading a kitchen would be an example of driving up home equity. So could adding a pool or building a covered patio.
Installing a new roof will not likely increase the value, as doing so represents maintenance. A dilapidated or aged roof would drive down the sales price, which would hurt equity. Not everyone may invest money in things that drastically drive up a property’s value, but most responsible homeowners stay on top of maintenance. That means they make fixes when necessary and perform upgrades.
Ways to Add Home Equity Through HVAC Upgrades
When it comes to renovating a house to raise the value, the first upgrades that come to mind usually involve upgrades to kitchens and bathrooms. While these are some of the most valuable renovations you can make to a home in any housing market, homeowners have frequently overlooked a potentially even more lucrative realm of upgrades: the HVAC system.
A home’s HVAC system is an imperative part of its overall functionality, and an outdated system means the home is not working as well as it could be beneath all of the cosmetic improvements. Fortunately, there are a number of ways you can upgrade this portion of a Southern California home to increase equity.
Why You Should Invest in Your Home’s HVAC System
Upgrades such as refinished cabinets and modern appliances in the kitchen are nice to have, but an updated HVAC system is critical. While homebuyers will not necessarily notice a brand-new HVAC system, they will definitely notice an old or broken one — and it might cost you the sale. A prospective buyer probably might not automatically walk away from a home without all the newest gadgets, but they tend not to even look twice at a home that lacks basic heating and cooling abilities.
As such, you should take HVAC renovations quite seriously. You might hesitate when you look into the costs, but HVAC remodels have a higher average return on investment than most other types of remodeling projects, yielding a return of up to 71%.
Improve Your Home’s Energy Efficiency
If you already have an HVAC system in place, it is well worth your time, money and energy to focus on making it more energy efficient. Today’s buyers are more environmentally conscious than ever before. If your HVAC system is over 10 years old, this may mean it is time to replace the entire unit altogether.
However, if your system is already modern and efficient, there are a number of other, smaller upgrades you can make to your home to enhance its overall efficiency in the coming years, such as:
- Replacing and upgrading weather stripping throughout the house
- Installing appliances such as smart thermostats
- Upgrading and updating windows and doors to more efficient versions
Questions to consider when updating your HVAC system
The secret to knowing which HVAC upgrades to make is understanding which ones are best for the kind of house you have and the people you intend to sell to. You will want to take into account the region, the age and size of your home, your budget, and the layout of your property. With these factors in mind, you can get an idea of your HVAC system upgrade options by consulting an HVAC professional and asking the questions below.
- Is your current HVAC system still working well?
During the home-selling process, you can bet that people will ask you the age of your HVAC system. If it was installed less than 10 years ago, it very likely has several good years of use left in it, and anything newer is not likely to make a difference in home value or offers from potential buyers. Anything older than 15 years old, however, will be a turnoff to buyers. At this point, consider replacing the HVAC system completely.
- Can you get away with an HVAC repair rather than a replacement?
If your HVAC unit is less than 10 years old but functions like it needs to be upgraded, you might be able to get away with some simple repairs rather than a complete system overhaul. To find out if you should repair or replace an HVAC system, multiply the age of your existing unit by the cost of the repair. If the total is more than $5,000, you are better off replacing the system than repairing it.
- Is your home located in a climate that requires heating and/or cooling?
Upgrading an HVAC system in a geographical location that does not necessitate air conditioning or heating will not add value to your home. For example, upgrade a heating system in a place like Southern California where temperatures are mostly warm and the heater would not be used often might not be a secondary choice to upgrading the air conditioning features.
- Do you currently have energy-efficient HVAC units?
Efficiency-labeled homes are increasing in preference and popularity among new homebuyers. When it comes to increasing the resale value of your home, upgrading to energy-efficient HVAC appliances is one of the smartest moves you can make to stand out in today’s competitive housing market.
Basic HVAC upgrade options
- [H4] Insulation
Poor insulation is an easy fix and a low-risk investment that yields a 95% to 116% return. Properly insulated walls improve a home’s ability to regulate internal temperatures and reduce the demand on its HVAC system.
Replacing an old furnace or boiler is an easy upgrade that does not require much labor. Most furnaces can last up to 15 years with proper maintenance, but most older heating appliances require frequent, pricey repairs and cost a lot to run. By switching to a new heating appliance, you conserve energy and improve the efficiency of your home’s heating system, which is attractive to potential buyers.
- Air Ducts
If you are replacing an old HVAC system with a more efficient one, you might need to upgrade your ductwork to accommodate it. Ductwork is made to last 25 years at the most, but it starts to degrade about 15 years in. Deterioration will reduce the efficiency of an HVAC system significantly, so it is a good idea to replace the ductwork if you plan to sell your home in the near future.
Even if the walls of your home are highly insulated, the benefits are negated if the windows are not equally energy-efficient. Approximately 35% of a home’s heat escapes through low-quality windows. By upgrading to double- or triple-pane vinyl-insulated windows, you can recover about 74% of your energy costs and increase your home value.
While the roof serves to protect everything under it, it is also an important insulator. Inefficient roofing materials account for 25% of heat loss. Just by upgrading to modern, high-tech shingles, you can relieve a lot of the strain on your HVAC system and improve your indoor comfort.
- Central Air
People want to be comfortable in every room of their home all year long. Most homebuyers today consider central heating and air conditioning a standard feature rather than an upgrade, so without it, you may struggle to get an offer close to asking price, if you can sell your home at all.
- Doors and Weather Stripping
Another way to significantly improve your HVAC efficiency with minimal labor is to upgrade to energy-efficient doors and repair or replace any old weather stripping. Some of the most energy-efficient materials available for residential doors include fiberglass, steel, and vinyl. Try to avoid wood and glass if your goal is to prevent airflow.
- Smart Thermostat
Smart thermostats are now ranking in the top three most desirable home technologies among homeowners and prospective buyers. These devices allow you to control your home energy consumption and regulate temperatures from your smart device.
Even if your mortgage principal balance remains the same, increasing the value of your home also increases your home equity. Just keep in mind that some home renovations add more value than others, so do your research before starting a renovation project. Our team can help you evaluate the best options for your home based on its size and heating and cooling needs.
If your system needs repair or inspection before winter, call us on 951-926-1002. You can also visit our Contact page and complete the contact form.