Can't trade up? Then fix up! But spend wisely when making home improvements By Brian J. O'Connor Detroit News Finance Editor Springtime is becoming home fix-up time again. According to a new estimate from the Joint Center for Housing Studies at Harvard University, Americans plan to increase their spending on home improvements nearly 5 percent this year, the first rise in activity since the recession. In some cases, the urge to splurge on a home is the result of pent-up demand from worried homeowners who sat on their wallets during the worst of the recession. Fixing up also is on the rise as sales recover, and new owners want to feather a new nest to their liking. But in other cases, improvements are being made because people are stuck , notes Vince Peters, a partner with Dexter Builders and a chapter president of the National Association of the Remodeling Industry. Since so many homeowners can't trade up, he says, they're fixing up. 'Their perspective is that if they can't sell their house, they might as well make it better,' Peters says. According to a survey from American Express, 49 percent of homeowners are making improvements to their house. Nineteen percent are making repairs that can't be put off, while 11 percent want to increase home value, and 5 percent are fixing up to sell . From a financial perspective, an improvement makes sense only if you're going to stay in the house for a few years to enjoy the upgrade, says Bob Taylor of Caldwell Banker Weir Manuel in Birmingham and president of the Michigan Association of Realtors. 'For people who can't afford to move up, improving their home to accommodate their lifestyle makes a lot of sense,' Taylor says. 'But understand that there can be a point where you over improve.' If your aim is to make up lost equity, or to boost the price on a house where you owe more on the mortgage than the home is worth, forget it. Home fix-ups never return dollar-for-dollar value, experts note. In the best case, homeowners got back an average of 87 percent on improvements in 2005, at the height of the real estate boom. These days, says Remodeling magazine, it's closer to 64 percent. Still, if you're improving a house, it's smart to do so with an eye toward how a new bathroom or bedroom will help you sell for a better price , says Mandy Walker, senior project editor for Consumer Reports Money Adviser. 'You're not going get back as much as you used to,' Walker says, 'so it makes sense to use your dollars extra wisely and get the most bang for your buck.' The first focus should be structural flaws that could create bigger problems, and will most certainly lower any sale price, such as a leaky roof or basement. Another strategy is to add to energy efficiency and qualify for tax credits, says Darlene Breen, the National Association of Realtors' regional vice president for Michigan and Ohio. 'In the meantime, you're going to save on energy and have a better-looking home, as well as the tax credits,' she says. You also should put more emphasis on adding to the practicality of your home, rather than on glitz . 'You can spend $100,000 on a kitchen, but you expect a house to have a stove and a refrigerator,' says Taylor of Caldwell Banker. 'Whether they're top of the line or the stuff at Home Depot isn't going to matter in the overall value of the house.' When it comes to financing repairs, you may not be able to tap home equity as in years before, notes Peters of the Remodeling Association. Instead, many contractors are offering their own financing. 'For contractors, it's just like the car companies,' he says. 'If you want to sell it, make it so they can buy it.' If you are fixing up to help sell , focus on low-cost things like cleaning, and touching up paint or tile grout, says Walker . The only big consideration is to add a bathroom if your house has just one full bath. You won't get back all the value, but the house should sell faster. For a final touch, says Breen , add the one thing that can pay back more than its cost at sale time: a new entry door. 'It isn't that expensive,' she says, 'and a new front door makes all the difference in the world.' boconnordetnews.com (313) 222-2145 