Most Valuable Home Improvements
Expect a good return on your investment for minor upgrades to your kitchen and bath.

No matter how strong or weak the market, making the right home improvements that will add equity to your house is a simple matter of knowing what buyers really value. That’s hard for many homeowners because they tend to overvalue their own properties and make improvements that fit their personal tastes. Real estate experts agree that there is a system to making the right home improvements to encourage the sale of your house or increase its value. It comes down to three factors: understanding how much you must spend, setting realistic expectations about how much you will recoup for each improvement after the sale and determining the right improvements to make. Based on these results, you can make additions that are highly desirable and profitable when you sell your home.

Curb Appeal
The number-one area for improvement is curb appeal because how you present your home from the outside forms the first and most lasting impression with potential buyers. According to Remodeling magazine’s "Remodeling Cost vs. Value Report 2006," the project that will bring the highest return on your investment is new vinyl siding. Nationwide, homeowners can expect a huge return on high-quality, low-maintenance vinyl siding. For homes that can benefit from higher-cost, upscale building products, like foam-backed vinyl siding, the return approaches 90 percent.

Like siding, replacement windows add to curb appeal and speak to the quality of your home right from the street. New windows are sharp-looking, energy-efficient and easy to operate. They add to your home’s equity and are second only to new siding in return-on-investment.

In terms of additions that bring a big return, adding a second story if you have a one-story home is worth the investment. The project itself may be daunting, but its impact is huge. Likewise, a new deck improves the exterior appeal of the home and adds outdoor living space. To capitalize on this asset, realtors suggest staging the deck with furniture, a grill and potted plants.

Best Upgrades for Interior Space
Bathrooms are still the number-one place to recoup expenditures in your home. Half-baths are very important in public living areas of the home. If you do not have a guest half-bath, the investment of adding one will certainly bring a return when you sell the home. Realtors advise that you treat this room as a visitors’ space with high-end finishes and furnishings. Another popular bath addition is the secondary half-bath, or the family half-bath, which is different from the half-bath used primarily for guests. It is usually located near the back of the house or off the kitchen. Unlike the guest half-bath, this space should be practical for washing up after play or yard work with easy-to-clean finishes and flooring.

Most Valuable Home Improvements
Adding a deck to your home improves curb appeal and can boost the selling price.

If you plan to remodel or upgrade an existing full bath, realtors warn that you should beware of fancy fixtures or finishes, especially in gold or brass, because they may go out of style and appear dated. When upgrading your shower, consider an oversized shower with a rainhead instead of a spa tub. While tubs are luxurious, most families still want a shower where they can bathe quickly and a tub that is easy for bathing children.

Improving your existing kitchen with a minor remodel is likely to bring a high return when you sell your home. Minor remodels include updating appliances, countertops and flooring as well as re-facing or replacing cabinets. Experts warn homeowners not to overprice the remodel or push it beyond the scale of the neighborhood. Granite or stone countertops and stainless-steel appliances are pricey trends that may not pay off in the long run.

In the kitchen, as with all improvements, it’s important to stay within the range of the homes around you. If the neighborhood does not have high-end finishes in most of its homes, you’re better off selecting neutral finishes instead of pricing yourself out of the neighborhood. On the flip side, if the homes in your neighborhood all have high-end kitchens, you should upgrade to meet that baseline if you wish to get a comparable selling price.

Creating New Space
Adding a bedroom or family living area to an attic is a wise use of space and dollars. Not only does it make use of existing, unused space, it insulates under the roof and makes dead space energy-efficient. Improvements that are energy-efficient are selling features in all areas of the country. Attic rooms can also be versatile or multi-purpose spaces. A guest room, bedroom or teen gathering place can double as a craft room or office.

A basement remodel is also a sensible use of your dollars. Like the attic, it’s existing space waiting to be converted. The dollars spent to convert it are easily recouped in resale value. Buyers are looking for added family space and home theaters, which are easily accommodated in remodeled basements.

When to Upscale
The "Remodeling Cost vs. Value Report 2006" also shows results for high-end or "upscale" additions, remodels and replacements. While the general rule of thumb is to stay within the norm in terms of materials and finishes, it is important to match the baseline set by homes in your neighborhood, as mentioned above. While granite countertops may be upscale for some, they are the norm in many neighborhoods. Do your homework before you make decisions. If most of the houses in your neighborhood have wood windows, consider making the investment when you purchase replacement windows. Vinyl siding may not be compatible with your neighborhood architecture, but fiber cement or foam-backed vinyl may be an upgrade worth considering. Take a hard look at your kitchen and baths. You may need to do a major kitchen remodel in order to compete with homes in your area. The best way to determine the level of home improvement required for a successful sale is to visit the homes around you and study comparables. Then follow their lead.

Beware of Personal Upgrades
There are many improvements that enhance the property for the owners but serve as a liability when it comes time to sell. Pools are often a drawback at sale time. Again, base your improvements on the homes around you. If you live in an area where a backyard pool is the norm, it is probably a wise investment. If not, consider professional landscaping or a deck. Improving the look of your property always provides added value. Hardscaping—like pools, walls and sculptures—can be too personal for some buyers’ tastes. A good rule of thumb is to ask yourself how long you plan to stay in your home. If the answer is 10 years, make the improvements that benefit your family. If you intend to stay 5 years or less, don’t add high-end items like pools and spas.

Credit: Renovate with Tommy Mac