How to Add Home Equity Through HVAC Upgrades
January 28, 2020
According to Harvard’s Joint Center for Housing Studies, Americans are spending increasingly large amounts of money on residential remodeling projects each year and seeing less and less of a return. From 2017 to 2018, the money spent on home remodels nationwide increased by 7.5%, totaling nearly $340 billion. Yet, the average ROI for these projects was only 56% — a decrease of 12% in just one year, as stated in a survey by Remodeling Magazine.
When you’re 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 will always be a safe bet and a smart investment — and yet, these home improvements are some of the most commonly overlooked by homeowners and flippers.
In today’s market, it’s riskier than ever to make the wrong renovations. You could end up spending thousands of dollars on kitchen and bathroom upgrades that never pay themselves off. Below, you’ll 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.
Why to invest in your home’s HVAC system
Upgrades like refinished cabinets and new countertops are nice to have, but an updated HVAC system is critical. While homebuyers won’t notice a brand-new HVAC system, they’ll definitely spot an old or broken one — and it might cost you the sale. A prospective buyer probably won’t automatically walk away from a home without all the newest gadgets, but they won’t even look twice at a home that lacks basic heating and cooling abilities.
As such, you should take HVAC renovations quite seriously and make them a priority over new flooring, paint, and other aesthetic or luxury upgrades. You might hesitate when you look into the costs, but The National Association of Realtors (NAR) reports that HVAC remodels have a higher average return on investment than most other types of remodeling projects, yielding a return of up to 71%.
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, according to the program manager of the National Association of Home Builders (NAHB). You’ll 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 clicking here or by asking yourself the questions listed 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 isn’t likely to make a difference in home value or offers from potential buyers. If the current components are still operating optimally, there’s no use in shelling out money to fix what isn’t broken. 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’re better off replacing the system than repairing it.
If you still have doubts about what to do, click here for additional tips.
Is your home located in a climate that requires heating and/or cooling?
Upgrading an HVAC system in a geographical location that doesn’t necessitate air conditioning or heating will not add value to your home. For example, it would be a waste of money to upgrade a heating system in a place like Southern California where temperatures are consistently warm and the heater would not be used.
On the other hand, if your property is located somewhere with a harsher climate, experts say that upgrading your HVAC system will help you sell your house faster. For example, upgrading to a solar heating system would be a smart move if your home is located somewhere sunny, whereas a heat pump would be an appealing feature for a home located in a desert climate.
Do you currently have energy-efficient HVAC units?
Efficiency-labeled homes are increasing in preference and popularity among new homebuyers (because who doesn’t want to save on their utility bills?). 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.
As reported by energy.gov and the US Green Building Council, homes that have energy-efficient HVAC systems see a 5% to 8% higher selling value compared to homes without this feature. If your unit is too big, too small, or too old for your house, consider making the upgrade to minimize energy waste and attract buyers. Some states even offer tax breaks for homeowners with energy-efficient HVAC systems. You can find out which incentives your state currently offers by clicking here.
Opportunities for HVAC upgrades
It’s hard to go wrong with most basic HVAC upgrades, especially if the home you’re renovating is more than 20 years old. Experts in real estate all agree that, even though you may only recover 50% or less of certain HVAC investments, an upgrade could capture the interest of buyers and make it worth the purchase.
Refer to the list of HVAC-related upgrade ideas below for easy ways to considerably increase your home value and make your property more competitive on the market. While reading, keep in mind how much you want to spend and the current condition of your existing HVAC units.
Basic HVAC upgrade options
Poor insulation is an easy fix and a low-risk investment that yields a 95% to 116% return. Fiberglass insulation only costs around $1,200 on average and yields a $1,400 return upon resale within a year of completion.
Properly insulated walls improve a home’s ability to regulate internal temperatures and reduce the demand on its HVAC system. In theory, an insulation upgrade would be easy for the homebuyer to do on their own. Realistically, however, most buyers want their new house to be move-in ready and won’t want to take on any projects after a move. Most people are willing to pay a little extra to have these things done for them, which makes this appealing upgrade a great selling point to disclose.
Replacing an old furnace or boiler is an easy upgrade that doesn’t 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.
Learn More: Which Heating Upgrade Is Best for Your Home?
To check the age of your furnace, scan its surface for a tag with a serial number. This number usually tells you the age of your unit. For example, if a serial number is something like 1194CA4678, the first four digits mean that the furnace was manufactured on the 11th week of 1994. Dates after 2000 are usually encoded in the last three to six digits of the serial number (for example, 69809-1032708 would mean that the furnace was manufactured in July of 2008).
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’s a good idea to replace the ductwork if you plan to sell your home in the near future. Doing so will improve your home’s air quality and ensure that it meets the level of cleanliness recommended by the US Environmental Protection Agency.
Even if the walls of your home are highly insulated, it won’t do much good if the windows aren’t equally energy-efficient. Approximately 35% of a home’s heat escapes through low-quality windows. By spending $15,000 to upgrade to double- or triple-pane vinyl-insulated windows, you can recover about 74% of your energy costs and increase your home value by about $11,000, according to Remodeling Magazine.
A survey by the NAHB also revealed that homebuyers of all economic backgrounds ranked energy-efficient windows among their most-wanted home features, making this upgrade a no-brainer. In addition to reducing drafts and boosting heating efficiency, your new windows reassure your homebuyer that they’ll reap long-term savings on their heating and cooling bills when they purchase your home.
While the roof serves to protect everything under it, it’s 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. Asphalt shingles can lower a roof’s surface temperature by up to 50 degrees and increase home value by $12,000. Investing in a new roof might seem like a big expense, but the NAR has shown that you can recover 105% of the cost at resale.
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 what you’ve asked for — or to sell your home at all. A central air installation can cost anywhere from $6,000 to 15,000, but it could increase your home value by up to 10%. Some simple math on your part will help you decide whether this investment will yield enough of a return to be worth the hassle.
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. After replacing your door, you should see a return of 75% to 91% of your investment upon resale, depending on the type of door you’ve chosen. You might even have better curb appeal and attract more prospects when you give your house a quick facelift with a new door.
When choosing a door, look for the label of the National Fenestration Rating Council that indicates how good of an insulator that particular door will be.
When swapping out your door, don’t forget about the weather stripping. New weather stripping will ensure a tight seal around your doors and windows and prevent air leaks. This is one of the cheapest upgrades you can make to your home, ranging from $130 to $340.
If you’d like a more exact estimate, you can calculate the cost of replacing the weather stripping around your door here.
Luxury HVAC Renovation Options
If the HVAC system of the home you’re selling is already in ship-shape and you still have some funds for home upgrades, consider adding a luxury HVAC feature based on the luxury upgrades popular in your area. Jill Simmons, the Director of Consumer Communications for Zillow, stated that, “Having smart home features like smart thermostats are great features to tout in listing descriptions and may help attract a buyer’s eye, which can go a long way when it’s time to sell. Additionally, smart home features may signal to buyers that the home is updated and may have other desirable traits, upgrades, or features.”
She goes on to recommend that, when choosing smart upgrades, you should be mindful of your neighborhood’s trends, the style of your house, and its value. Try to add luxury features that appeal to a wide range of buyers rather than limiting yourself to one type of person. Some upgrades may be so out of place that they don’t yield any return on the investment. For reliable advice, talk to a real estate agent about which features will be most suitable for your property. Some of your options are listed below.
Variable Refrigerant Flow (VRF)
Residential variant refrigerant flow (VRF) systems are becoming increasingly common in luxury homes. These systems operate quietly at high efficiencies to appease the most environmentally conscious homeowner. VRF units are installed in every room so that, no matter where you spend your time, you aren’t cooling or heating space you aren’t using. These systems are perfect for newly constructed residences or for replacing old cooling systems.
Another NAHB survey showed that 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. The cost of a smart thermostat can range from $150 to $400+, not including installation, but you can find affordable options below $150 on Amazon.
With the way the world is going, home appraisers are beginning to include smart devices in home appraisals, according to Realtor.com. Consumer Reports reveals that smart home features like smart thermostats can bump your home’s resale value by up to 5%. For example, that would be a $20,000 value added to a $400,000 home simply because consumers are willing to pay more for a house with modern amenities.
A humid climate can be difficult to live in, but dehumidifiers are great smart devices to help with controlling humidity in the home. They can be integrated with a residential HVAC system to produce consistent air quality across all areas of a house so there’s never a difference in comfort as you move around indoors. Whole-home dehumidifiers can cost between $1,300 and $2,800, but the cost might be a great selling point for prospective buyers if you live in Florida, Georgia, Hawaii, or another humid place.
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