Closet Prices: Cost Vs. Value

May 29, 2010

Recently a client asked me how an investment in remodeling his closet might impact the resale value of his home. This is an understandable concern since we were talking about a high end, cust om wood closet that could run over twenty thousand dollars in cost. So, conscientious businessman that I am, I set out to find an answer that would satisfy my customer’s concerns—even though I already knew what it was.

Like many folks these days who have let their library card expire, I began my search with Google, then to the archives of Closets Magazine, the closet industry trade publication. No luck. Next I browsed the contents of the latest “Freedonia Group” marketing study of home organization products (http://www.freedoniagroup.com/pdf/1967smwe.pdf). This extensive study appears to be focused primarily on demand not aftermarket value.

But then mysterious cosmic forces aligned with my desire—the next morning I opened my email inbox to the headline, "Cost vs. Value Report" in my monthly issue of Remodeling Online ( http://remodeling.hw.net/). "Hallelujah!—Heaven’s door had opened and spilled out gold. But my joy didn’t last long. Conspicuously absent from their data was any specific mention of closet upgrades or closet remodels. The omission of this category seems a bit short-sighted since the cost of a major closet remodel is on par with or greater than that of many of the bath, window, and deck addition projects that Remodeling was tracking.

 

The closet industry mantra—you are bludgeoned with it constantly in advertising and in trade journal articles—is that custom closets add to the resale value of your home. It’s one thing to prattle on to a customer about this glorious resale value, but it’s quite another thing to be able to put the issue in financial perspective with any real data to back up the ad rhetoric. Looking at the case at hand: the cost of the proposed master bedroom closet at $20K+, along with the pantry and mudroom closets we had already installed, totaled out at over $25K. So, how do I answer my client’s concerns over the lasting value of his considerable investment in his custom closet?

Let’s look at the numbers we do have.

The Remodeling Cost vs. Value Report does mention closets as part of a master suite addition, which it further divides into two categories: master suite addition and upscale master suite addition. The numbers for both are pretty similar in our part of the country, the New England region, around 70% return on investment. They define this project in terms of features, like total square foot area, bathroom, walk-in closet, millwork, French doors that open onto a deck, etc., total cost, resale value, and percent of cost recovered at resale. Should we assume that a high-end closet upgrade from wire to custom wood in an otherwise spectacular master bedroom suite would yield a similar 70% return on investment? Rule number 1 aside, who the heck cares? (Rule number 1: never assume anything.)

In my opinion: Forget all the statistical voodoo. The way I have answered the question of resale value for my customers over the past thirty years of doing remodeling work is to return the same question to them, "What is it worth to you?" Ask yourself how any home improvement you are considering will impact your everyday quality of life, from a functional and aesthetic, as well as an economic point of view. For me it all boils down to two questions: Will it make you and your family happy for years to come, and can you afford it? Unless you are screaming and cheering a heartfelt YES! to both of these questions, your return on investment will probably fall short.