The Home Renovation Realtors Say Could Diminish Property Value

With so much uncertainty in today's housing market, it's understandable if you're confused about what kind of renovations will improve your bottom line. The internet is rife with advice about the front door paint colors that can boost resale value, which countertop materials people love (and hate), and those major red flags that drive potential buyers away. If your home is older or just feels outdated, you may be considering more than just minor cosmetic upgrades before listing it for sale. But think twice before doing any major conversion that results in losing a bedroom, because it's one home renovation realtors say could diminish your property value.

Limited inventory, skyrocketing prices, and interest rate anxieties, make this a challenging time to sell your home. Along with getting your listing price just right, you'll likely be thinking about what features are most likely to attract buyers. According to Zillow, 77% of buyers describe homes having the desired number of bedrooms as extremely important. In fact, only budget and air conditioning rank higher! 

As multi-generational living becomes more common, and homeowners are moving half as often as they used to, many buyers carefully consider the number of bedrooms to make sure they will accommodate children, in-laws, guests, and remote work spaces now and in the future. According to Texas real estate agent Jordan Suber, "Converting a bedroom into another type of space (such as a home office, gym, or storage room) can decrease your home's value, especially if it reduces the number of bedrooms below what's typical for similar homes in the area."  Instead of a full conversion, consider staging a spare bedroom to demonstrate it's multi-purpose potential instead. 

Reducing the bedroom count can drastically reduce your home's appeal with potential buyers. Eliminating a bedroom to create a closet or larger suite is a common mistake, especially if you're anxious to sell your historic home. "Homeowners, in a misguided attempt to make an old house more current combine two bedrooms into a larger one or create a master suite at the expense of another bedroom." Atlanta-based broker Greg Kurzner cautioned. "But if you turn a 4-bedroom home into a 3-bedroom home – when comparable homes have 4 bedrooms, the house might be worth less after the improvement," he stated. It's a sentiment repeated ad nauseam by realtors across the country.

They're not the only ones sounding the alarm. Appraisers like Ryan Lundquist also warn that "apples-to-apples" valuations of your home will be based on the true number of bedrooms. If you convert a bedroom to a den, gym, or playroom, buyers may see the bigger picture but Lundquist says "it's a quick way to lose marketability (and maybe value.)" 

FHA, VA, Fannie Mae, Freddie Mac, and even conventional loans all typically require appraisals that follow strict guidelines when it comes to accurate bedroom counts. If you remove or alter a bedroom, the appraisal could lead to a lower valuations or loan complications. Converting a bedroom into another type of space can also create significant zoning, code compliance, permitting, and insurance challenges that can rear their ugly head before you make it to the closing table. Consider a conversion carefully to avoid fines, or worse, costly refits that make a potential buyer quickly run the other way.