Question: We purchased a home a year ago for $285,000. Since that time, we have invested about $50,000 in remodeling and landscaping. Since rates are so low right now, we decided to retrieve the cash we have put in and obtain a $50,000 home equity line of credit. After we applied for the loan, we were shocked that the lender's appraisal came in at only $300,000. Luckily, we still qualify for the loan, but we are wondering how a $50,000 cash investment can only increase our home value by $15,000. I think this appraiser ignored all the nice things we did to our house. Any comments?

Answer: Sure, I have comments on everything. Without knowing the specifics, let me make a couple of educated guesses.

Homeowners often don't realize that most home improvements don't raise the property value dollar for dollar. It depends upon what type of home improvement you do and how much money you spend.

You say that you spent $50,000 in remodeling and landscaping. Let's take the landscaping as an example. Creating a beautiful garden can be a literal bottomless money pit. You can take an average suburban back yard and create the ultimate garden showcase. Let's say you spend $50,000 on expensive shrubs for screening, mature trees, waterfalls and rock gardens -- certainly the garden of the neighborhood. But does that mean your property value will suddenly be worth $50,000 more? Definitely not.

The reason is that most folks who are likely to purchase a house are not likely to place a $50,000 premium on a gorgeous garden. They are perfectly happy with a simple but attractive yard with a nice fence and a swing set for the kids. I'm sure anyone would love to have a beautiful garden, but they're just not willing to pay $50,000 for it.

This applies to almost any type of home improvement project. What if you spent $15,000 re-tiling your front foyer because you used the finest imported Italian tile? Beautiful, yes -- but it's not going to make your house value increase by 15 grand.

Typically the types of projects that carry the best investment are those that add practical square footage to the living area. Finishing a basement is often a good idea. But remember it depends upon the cost and practicality of the project. If your basement has five-foot ceilings, it will cost a fortune to dig out the floor to add more height.

So the bottom line here is that if you're looking to make some home improvements as a financial investment to improve marketability when you decide to sell the home, keep two things in mind.

First, watch your costs. This includes making practical renovations that won't cost to much to finish.

Second, be careful not to "over improve" your house in relation to the neighborhood. Solid gold fixtures in your bathroom are real nice, but most people won't appreciate them to the extent of what they cost. Remember the old real estate rule: "Buyers seek the least expensive home in the most expensive neighborhood they can afford."

For more articles by Henry Savage, please press here.

Published: January 9, 2002

Use of this article without permission is a violation of federal copyright laws.

, the president of PMC Mortgage Corporation in Alexandria, VA, is a mortgage columnist whose work has appeared in numerous consumer, real estate, and mortgage publications. Mr. Savage welcomes your questions for possible use in this column, however because of the volume of mail received, Mr. Savage cannot answer questions individually.