Best and Worst Home Improvements

Before you install that custom wine cellar or bamboo flooring, it's wise to make sure such upgrades won't leave you in the red long-term. Fancy features such as these might not seem so essential to a buyer with different tastes.

Rather, in a market slump, sellers whose properties have the right add-ons get the highest rate of return on their investment, allowing them to move their homes faster and for more money than their neighbors.

"It's about keeping up with the Joneses, but not exceeding them by too much," says Alan Hummel, chief appraiser of Minneapolis-based Forsythe Appraisals and former president of the Appraisal Institute, a membership organization of professional real estate appraisers. "If something isn't up to the standards of other houses in the neighborhood, investing in improvements will bring a big return. If it's already at that level, spending more may help you sell your home faster, but it won't have a high rate of return."

That means that if your kitchen cabinets and appliances lag behind those of the guy next door, an investment of $40,000 to update the room completely will likely be made back and then some when it comes time to sell. But the same investment on a kitchen already at or above those in the neighborhood will have diminishing returns with each extra dollar you spend.

Another example: Don't waste your money on a new roof. Few buyers care about the materials and age of a roof; their only concern is whether or not it leaks. Similarly, don't invest too much on individualized features like a sauna or a steam bath. They might make your home stand out, but if a buyer doesn't share those tastes, it can be a strike against the property.

And don't spend a lot on technological advancements. In the early 2000s, people spent millions wiring their homes for Cat-5 connectivity; when wireless internet became standard, those investments became worthless.

"The simple things can bring the highest rate of return," says Hummel. "It can be as simple as making sure landscaping looks good, or that the exterior paint is fresh. Especially with median to luxury homes, curb appeal is very important."

That's especially true since 80% of buyers begin their searches online, according to the National Association of Realtors. In this case, a photograph is worth more than a thousand words; it could mean the difference between a quick sale and languishing on the market.

Time to start evening out the front yard and working the nicks off the garage door.

Right-Away Remedies

If you don't have the time to spend on additions and improvements, there are more quick-fix strategies that can net large returns.

Hiring decorators and designers to fill your home with coordinating furniture, fresh flowers and high-tech TVs and stereo equipment can sometimes result in a faster and higher-priced sale.

"A home we staged just sold for $1.9 million amongst multiple offers after only receiving one offer of $1.1 million prior to staging," says Beth Shepherd, president of Dressed to Close, a Los Angeles-based luxury staging company. "We can generally add 15% to 20% to the sale."

Talk about being in the right place at the right time. Los Angeles is a particularly depressed market, and Shepherd's business has tripled in the last year. The most difficult requests? A 40-gallon saltwater fish tank and a baby grand piano delivered up 70 stairs. Prices depend on the size of the house, but Shepherd estimates fees of $10,000 for a $1 million home and $17,000 for a $5 million home.

Another thing to consider before charging in with fixes and revamps is how American homes are changing.

"With the trends we're seeing, homes in the future will be very different from how we think of them now," says Gopal Ahluwalia, vice president of research at the National Association of Home Builders. "Forty percent of homes built last year didn't have a living room, and the square footage of the average home is getting smaller."

Upscale home buyers, he says, are still enamored with kitchens and master bedrooms, which makes those rooms important candidates for improvements or updates.

"Master bedrooms continue to be sanctuary," says Hummel. "Nice amenities like fireplaces and vaulted ceilings ... those are things that will set a property apart from others."

Just don't go too far.

"There's nothing worse than putting $300,000 into a $700,000 house and only raising the value of the home to $800,000," says Hummel. "Practice moderation."