Add value to your home, or sell?
Julie Garton-Good, GRI, DREI

Welcome to "The Frugal HomeOwner™". You may be considering a few improvements or even an extensive home remodeling project. But how can you gauge if the repairs and improvements you're about to make will actually add to the value of your home? Let's walk through the questions you need to answer to decide if it makes more sense to improve, or move, and what steps to take to get the best return on the money you invest in home improvements.

When improving your home, it's tough to recover one hundred percent of your investment in the short run. This is particularly true if the improvements are major, such as a swimming pool, hot tub, or storage building. That's why it's important to gather information initially from a REALTOR®, an appraiser, and a lender. They'll help you evaluate the area where you live, how your home's value fits in your neighborhood, and what type of improvements will give you the best shot at improving your property's value.

Let's tackle the neighborhood considerations first. Most professionals will tell you to avoid high-cost remodeling if you live in an area where the value of homes has dropped, or it appears that homes in the area could devalue. This could happen because of zoning changes nearby, alterations in traffic patterns, and other economic downturns. The idea is that you don't want to make costly improvements if the area conditions won't help maintain the additional investment.

Even if the area does have stable values, be sure not to over-improve the home to a much higher level than other homes in the neighborhood. It's best if your home's value is just a little below the best in the area. That way you'll have room for appreciation to strengthen your property value over time, but you won't be putting money into improvements that the market won't recognize as valuable when you sell the property.

Be sure to evaluate how long you think you'll stay in the house before you start. It makes no sense to invest time and money in remodeling if you plan on moving before you derive personal satisfaction from the improvements and a return on the investment. Ask a REALTOR® to show you properties that include the improvements you're interested in, and then have him/her do a market analysis of what your home is worth right now. Economically, it may make more sense to sell now and purchase a home that includes these features--without adding the expense and headache of remodeling.

Many home owners make the fatal mistake of remodeling or improving the property, only to find out later that it didn't add what they thought it would to the property's value. So before you pick up that hammer, contact a REALTOR® for advice. A real estate professional can show you facts on comparable properties that have sold with improvements like the ones you're considering--even give you an estimate of what that new den is likely to add to the market value of the property.

Okay--so you've decided that staying put right now and adding on that den does make sense. What steps can you take to get a good return on your investment? First, make sure that the work is done professionally, using quality materials. Second, respect your floor plan and the layout and size of your lot. Appraisers add little value for rooms that lack function and appear to be added on as an afterthought to the general floor plan. Be sure to watch for rooms that are too small to be useful, have poor lighting, or limited access to other rooms in the house.

Third, be sure to update without resorting to fad colors and features. The improvement needs to outlive the latest trend and be serviceable long after it's paid for.

Once you pencil out the improvements you want to make, consult with an appraiser to see if they're compatible additions for the type and style home you have. Next, meet with a lender to see if it will be cost-effective to finance these changes. You'll need to decide if an equity line of credit will meet your needs, or if it would be better to refinance your mortgage to free up working capital.

Gathering the information you need before you start your home improvement project may sound like a lot of work; but without the information, you may be spending thousands of dollars needlessly without the long-term results you desire.

Happy remodeling!