If you plan to sell your home in the next year, you’re probably keen on finding a few ways to gin up its value. For many people that means donning an old pair of overalls, pulling out the power tools and going to work on some ambitious renovation projects.

Here’s a smarter idea: Leave the work duds in the closet, the tools in the garage and the renovation plans on hold. Instead, get out a large trash can and a dust rag.

“Just clean up your act,” says Chicago real estate agent Zack Sudler. “Put your junk in a storage locker, neaten, fix the wobbly ceiling fan–and do it before you call your Realtor.”

An important point that many home sellers fail to realize: Their first sales job involves hiring a top-notch agent. Many of the best professional home sellers will shy away from putting a lot of time into selling your home if it’s a mess.

The only home improvement Sudler recommends is painting. Even there, he advises limiting the work to covering blemishes and repainting any rooms that have overly bright or outdated colors.

On the bigger pre-sale improvement projects, real estate pros tend to have a fairly uniform view: They’re rarely worth the money and effort. For most, the value added is a mere fraction of the cost.

To be sure, home renovations can have enormous benefits–to residents rather than sellers. Air conditioning or a new kitchen might dramatically improve your lifestyle. But the incremental amount a buyer will pay for a home after such projects are completed is likely to be well below the seller’s cost.

“We’ve seen homes where sellers have contractors still toiling away when the open houses start,” says Patrick Lashinsky, chief executive of San Francisco-based realty agency ZipRealty. “It’s a nightmare.”

The National Association of Realtors conducts an annual survey of its members in 80 cities that is created by Remodeling magazine and used to estimate the return on investment for 33 home improvement projects. The 2009 report concluded that, on average, for every $1,000 homeowners spend on projects, they get back $638.

Even projects normally hyped as sure bets for adding value generate surprisingly weak gains, NAR reports. Converting an attic into a bedroom, for example, is typically regarded as garnering interest among potential buyers who might have otherwise disqualified the home from their search. An extra bedroom will indeed add value–just not for the majority of people who spend on the conversion. NAR figures homeowners recoup $831 on average for every $1,000 they invest.

Kitchens and bathrooms remain two of the most popular upgrades, and do have among the best returns on remodeling investments. But even for these rooms, mid-range jobs, which offer the highest returns, yield only about $720 and $710, respectively, on average, for each $1,000 invested.

The only investment that tends to get more out of buyers than sellers put into it is a heavy, insulated steel entry door, according to the NAR/Remodeling survey. Spend $1,000 on such an upgrade and you’re likely to add $1,289 to your sale price.

If you’re looking for examples of ways to waste money on renovations, there are lots of choices. Remodeling a home office yields just $481 for every $1,000 invested. Buying a backup power generator (perhaps from the likes of Honda or Briggs & Stratton) will add only $589 for each $1,000 invested.

All this is anathema to retailers like Home Depot, Lowe’s, Bed, Bath & Beyond, Williams-Sonoma and Lumber Liquidators. They all benefit from the myth that pumping money into your house pays off later on the auction block. So do buildings materials firms like Chicago-based USG, maker of the popular Sheetrock brand of gypsum wallboard.

Lashinsky says that on occasion, buying a new appliance for your home can pay off–if the one being replaced is so horribly out of date that it unsettles potential bidders. The agent has a long list of bad ideas to avoid. Among them: Converting a bedroom into a home office and yanking out the closet to make the room look bigger.

“In quite a few states, you’re not allowed to list that as a bedroom anymore,” he says. Such renovations can be expensive and result in the loss of bidders who need the extra bedroom.

Article adapted from Stephane Fitch, Forbes.com
Jun 17th, 2010