Make it Pay!

More than 30% of American homeowners plan some sort of remodeling job within the next two years. And if you're one of them, the editor of Remodeling magazine urges you to think through your plans carefully, or you may recoup only a fraction of your investment when it comes time to sell. "The biggest mistake you can make is over-remodeling for your neighborhood," advises Peter Vanvanter.

Although some owners are willing to sink money into their renovation for their pleasure alone, most hope for a good return down the road. You won't get that if you live in a neighborhood of small bungalows and a huge family room, or if you convert a precious third bedroom into a home office.

Even if you live in an area that can support costly improvements to your property, its wise to set priorities. With 92,000 professional remodeling firms as their subscribers, the editors at Remodeling magazine take the issue of cost versus value seriously. Each year they do an extensive analysis of the returns home owners can expect from various sorts of renovations.

What are the best bets? The chart below shows where your remodeling dollars will bring the greatest return, if you sell in a year.

Of course, there's much more to cost-effective renovation than simply picking the right job. It's also important to be sure the remodeling work is well-executed and done at a fair price.

Real estate specialists offer these five suggestions:

1. Educate yourself about local market tastes
   "Most renovations should be undertaken with caution after checking current market conditions," says David Friedberg, the co-manager of a large Coldwell Banker Realty Office.

2. Inspecting the homes for sale in your neighborhood is a quick way to get a feeling for the quality of competing properties and how they're priced.

   "Even if your house is an older property, you should include brand new homes on the tour," recommends Eric Belsky, a senior research associate at Harvard's Joint Center for Housing Studies.

   "Why? Because builders tap market research on buyer preferences and incorporate their findings in the homes they build," says Belsky, who is involved in a three-year study of supply and demand trends for the remodeling industry.

   "New homes are a good bellwether for types of features home buyers want today," Belsky tells us.

   "You'll quickly discover, for instance, that most contemporary buyers like high ceilings, lots of large windows, and an open floor plan," he reports. "They also relish extensive closet and storage space, large bathrooms and energy efficient windows, among other features."

3. Hire an architect for an extensive addition to an upscale home.
   "Design is probably the weakest strength of remodelers," Vandevanter mentions.

   Many remodelers advertise themselves as "design build" firms, and they are capable of adding new square footage to your home in a manner that blends with the current property.

   "But, more is at stake, in terms of aesthetics, if you are doing an addition to a property selling in the top 10% of the local price range," Vandevanter points out. "You'll be further up the creek without a paddle if you have a pricey home and your addition looks odd."

4. Renovate your home for mainstream tastes
   "You may think stainless steel-surfaced appliances would look sleek and contemporary in your newly renovated kitchen. They're popular with many home buyers at the moment. But others think they present a cold, utilitarian look. And the bigger question is whether a stainless steel kitchen will look outdated in the future, when it's your turn to sell. If you're selling anytime soon and money is an issue, you're probably better off with white appliances, which will appeal to a wider cross section of the buying population over a protracted period of time," advises Linda Cutter, a broker associate for Re-MAX.

   "Don't individualize your remodeling job. Vanilla is a better flavor than tutti-frutti," she adds.

5. Employ reason, not intuition, in making renovation decisions
   How can you be sure your remodeling job makes sense before you commit? Realtors are a good source of information on the topic, as Freidberg points out. Even if you're not expecting to sell for several years, getting an agent's opinion before you hire a contractor could spare you expensive mistakes.

6. Try to renovate as much in advance of your sale as possible
   National statistics show that most owners either remodel in the first two years after they've purchased the home or right before the property goes to market.

   "But, if you have the means to do the project now, why wait until you're ready to sell? Many home sellers suffer pangs of regret that they waited too long," reports Harvard's Belsky.

   "There's a lot to be said for accelerating your remodeling, so you can enjoy it while you are in the home," he concludes.