8 Home Improvements That Pay Off

WITH HOMES LINGERING on the market for months — and those that sell going for well below the asking price — sellers need all the help they can get. One way to help improve the odds of unloading a home: renovations.

But before homeowners start knocking down walls and shopping for Viking ranges, they should consider the actual payoff of these projects. Growing demand for construction materials from abroad, particularly in India and China, and skyrocketing fuel prices are pushing remodeling costs ever skyward, says Sal Alfano, editorial director at Remodeling Magazine. The Bureau of Labor Statistics' Producer Price Index, which tracks material and supply costs for maintenance and repair construction, jumped 12.4% from June 2007 to June 2008.

Meanwhile, the amount homeowners actually recoup from these projects is shrinking. In 2005, 68% of remodeling projects recouped more than 85 cents on the dollar, according to Remodeling Magazine. Last year, just 7% of projects recouped such amounts — and that figure is expected to drop even further this year, says Alfano.

"The market is probably as low as it's been in recent memory," says Alfano. "The buyer is unwilling to pay as much as [they] would have a year ago for that property...[with the] deck or the remodeled bathroom." Given that the buyer has the upper hand, homeowners must carefully weigh the cost of each project against the realistic amount they can expect to recoup once they sell their home.

Indeed, some improvements practically pay for themselves or, at the very least, gain more attention from prospective buyers than others will. Putting an in-ground pool in the backyard or building a two-story deck with a gazebo, for example, aren't going to appeal to a broad scope of buyers, says R. Randy Lee, board chairman of the Building Industry of Association of New York City, which represents residential and commercial builders. Cleaning up the exterior of the home (a.k.a. "curb appeal") or adding more storage space, on the other hand, will prove much more appealing.

While the amount you recoup may not be as high as it once was, projects like these will help sellers unload their homes faster and for better prices than those that aren't renovated, says Deanna Kory, senior vice president at the Corcoran Group, a real estate company.

According to real estate broker Kory, home builder Lee and Remodeling Magazine, here are the home improvement projects that offer the biggest payoff. (View our chart below for a breakdown of the numbers.)

You'll also save yourself time and headaches later on by addressing these problems before they're discovered in the home inspection.

Rather than knocking down walls or adding onto your home, try working with what you have. Converting a spacious attic into a bedroom, for example, costs an average of $46,691, according to Remodeling Magazine. That may seem steep, but by doing so, you can increase a home's selling price by $25,000 to $100,000, says Kory.