Home Improvements That Add Value: How to Decide What to Fix First

Every few weeks someone asks me, "What home improvements add value?" It's a fair question, and I wish there were a clean list I could hand over. There isn't one I can stand behind. What a project is worth depends on your house, your neighborhood, the quality of the work, and who is buying. What I can give you is a way to decide, and a few cautions worth keeping in mind. I'm a mortgage broker, not a contractor or an appraiser, so I'll stick to the financing side and the questions to ask the right people.

Before you think about a new kitchen, think about what the house needs to keep standing, dry, safe and working. Roof, plumbing, electrical, heating and cooling, drainage and the foundation are the things that can turn into big surprises later. A buyer's inspection tends to find them, and an appraiser or lender may flag them too.

A good first step is to write two lists:

Which home improvements add the most value?

I can't give you a ranking I could prove. The answer depends on your home, your area and the quality of the work. A local agent or appraiser can tell you what buyers in your market tend to value.

Should I fix things before I sell?

Often the place to begin is anything affecting safety, structure or major systems, since those can come up in a buyer's inspection. Ask a local agent which repairs and upgrades make sense for your price range and timeline.

Can I finance a renovation in the same loan as my mortgage?

Sometimes. Renovation mortgages from Fannie Mae and Freddie Mac can include renovation costs in a purchase or refinance, subject to program rules and an approved plan. Whether yours qualifies depends on your property, your file and the project.

Is a home equity loan a good way to pay for a remodel?

It can be one option, but your home becomes collateral. Compare it with savings, a renovation mortgage and a refinance, and make sure you can handle the payment.