Real Estate Guide 2009
A small modern looking home with a rooftop with foliage and trees on top of a set of house plans
real estate
Upgrades that help sell homes

The projects that added the least value were those appreciated only by select groups of people, according to the report. Home-office remodels and sunroom additions scored noticeably lower because such features don't appeal to all buyers, as a remodeled kitchen or bathroom would. Homeowners who remodeled a home office recouped only 54.6 percent of their investment; those who added a sunroom saw a return investment of 56.7 percent. Another project that scored low, recouping only 57.2 percent of its value, was adding a backup power generator, a feature many homebuyers likely will find appealing, but not worth tacking money onto the sales price.

While certain upgrades and renovations always make a difference with buyers, the real estate downturn has negatively affected the value buyers place on many projects. In fact, most projects pay off less today than in 2007, the report shows, with the exception of a few, such as an upscale bathroom remodel. However, according to Sal Alfano, editorial director of Remodeling magazine, the rate at which the value of remodeling projects declined slowed this year compared with the last report in 2007, suggesting that the remodeling industry might have hit its bottom.

A tax payoff

When considering renovations that pay off, the money you can make when selling the house is only part of the story. When you make certain improvements that increase your home's energy efficiency, you could be eligible for a tax credit as well.

For example, you can get a tax credit of 30 percent of the cost, up to $1,500, for buying certain windows, doors, insulation and roofs through the year 2010. Likewise, you could be eligible to get tax credits for 30 percent of the cost of major upgrades such as solar panels, solar water heaters and geothermal heat pumps.

These improvements will also pay off in energy savings, and any home that has energy-saving features is bound to be a hit with cost-conscious buyers, Lupberger says.

Even if a remodeling job you'd like to do isn't popular with buyers or if you don't plan to sell soon, you can take advantage of the market to make home improvements for your own enjoyment. You could also benefit from waiting to sell your upgraded home in a better real estate market for sellers.

"There are two ways to look at it," says Lupberger. "One is the return on my investment. That's a financial calculation. The second calculation is what you enjoy. Ideally, a good addition accomplishes both. There is something you enjoy and at the same time, you get a return on your investment by making your home more saleable."

Of course, other factors also come into play when a buyer decides to buy a house, Molony says. "The home's overall condition, availability and condition of surrounding properties, location and regional economic climate are all factors that influence value in real estate."

The bottom line is buyers pay for what they like. By making renovations that will appeal to the broadest range of people -- yourself included -- you can make the most of your home while positioning it as the one buyers want to have no matter what the market is doing.

Tamara E. Holmes is a freelance writer in Maryland.

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