Home Improvements Don’t Always Add to Sales Price : Renovation: Think twice before investing in home upgrades, especially in an unstable market.

The young couple loved their suburban neighborhood, and their three children loved the local school. Believing they would stay in the four-bedroom contemporary indefinitely, they spent $60,000 to add a spacious family room with skylights, top-of-the-line carpeting and a marble-faced fireplace.

The new room proved wonderful. But as the family grew, the home’s bedrooms, bathrooms and living room seemed to shrink. Two years after the family room was complete, the family moved to a far larger home.

The move brought with it a lesson.

For the $60,000 spent for the handsome family room, the couple got back just $20,000. There were many deep sighs at the settlement table as the young couple looked back on their costly miscalculation, vowing mentally not to repeat the error.

“The moral of the story is that before you commit to making a major investment in your home, give it a lot of thought and make sure it’s in your interest both short and long term,” says Dorcas Helfant, president-elect of the National Assn. of Realtors.

Call it the basic human impulse to improve one’s nest. Call it self-delusion. Whatever you call it, a lot of otherwise rational people get trapped the way this suburban couple did--believing that elaborate home renovations will pay off, when in fact they won’t.

“There’s a tendency to over-improve the wrong things,” observes Monte Helme, a vice president with the Century 21 realty chain.

The tendency may be especially strong in the present market, in which sellers outnumber buyers in most communities, says Joan Cochran, a realty agent with the Virginia-based Long & Foster chain. Some people who would otherwise sell their homes are postponing, convinced they won’t get the best price if they sell now.

Others, like the suburban couple, make a mistaken estimate of their staying power. Those in either category may commit the error of over-improvement.

Cochran urges anyone contemplating major renovations to answer these questions:

--How long do you believe you’ll stay in the home?

--How much is the house worth now?

--How much would the improvement cost?

--How much will the house be worth when the renovation is done?

If it’s tough for you to estimate what an improvement would yield, consult a realty agent in advance of your decision. You needn’t be ready to sell to solicit the opinion of a professional or two.

Finally, you may want to tour a few homes up for sale in your vicinity. Seeing what you could get for your money if you move rather than improve should help you gain perspective. That could help overcome the tunnel vision people often suffer in the home improvement process.

If you still want to proceed with the renovation, one good rule of thumb is to limit improvements to the medium standard of your neighborhood.

Suppose, for instance, that yours is a red brick house in a community of 30-year-old homes. Like yours, most of the houses have three bedrooms and a single-car garage. Like yours, most have no family room. Unlike yours, most have renovated kitchens and bathrooms. In this case, it would be worthwhile to give your kitchen and bathrooms a face lift but it probably wouldn’t pay to add a family room.

Helfant cautions strongly against the temptation to convert a garage into a family room, unless there’s an experienced contractor or architect involved. “Otherwise what you wind up with is neither fish nor fowl,” she says. “It’s an absolute disaster.”

Generally speaking, a homeowner can count on getting repaid for modest improvements to a kitchen. New kitchen flooring and counters can give an old kitchen a fresher look for a relatively small sum.

Next in importance are kitchen appliances. Assuming you don’t buy the top of the line, it’s usually worth it to replace older appliances. These days home buyers prefer white or almond-colored appliances over the avocado and gold that prevailed in past decades. If your appliances are in good working order but a passe color, you may want to get them professionally painted, an option cheaper than replacement.

On the other hand, it’s generally unwise to spend a fortune to upgrade a kitchen, just as it doesn’t pay to undertake elaborate bathroom renovations that involve walls being moved or tubs and showers replaced. Still, limited bathroom upgrades, such as new faucets and light fixtures, can be worth it.

Realty specialists are nearly unanimous in saying a swimming pool is a bad investment.

“For most people, a pool is a turnoff. People are afraid of pools. They’re dangerous and very expensive to operate,” Helme says.

Remarkably, investment in a pool is unlikely to pay you back even if your property is located in an expensive community with large yards, where pools are the norm. A better idea is to invest in a tennis court, a less pricey improvement that will nevertheless yield more when the property is sold, Helme says.

In thinking about home expenditures, don’t forget routine repairs. You may be loath to spend several thousand dollars to replace a leaky roof or worn-out downspouts. But failure to do so could cause your home to deteriorate so much you’ll have to sell at a discount one day. The same applies to basic plumbing, heating and electrical problems.

The worst combination of all is the home in which basic repairs and upgrades have been ignored, though a big fancy addition is added, Helfant says.

“Then what you have is a very strange animal and very tough to sell,” she says. “It’s really a covered wagon with a V-8 engine sitting next to it.”