Home improvement projects can improve the look and value of your home dramatically. Though in some cases, using a home improvement project as a way to increase the value of your home can actually backfire and cost you money. So how will you be able to tell if the project that you have planned will add to the value of your home or decrease the value of your home?

The first thing that you need to know is the appraised value of your home. You must know the appraisal value, or estimated resale price, of your home before you can determine if a project will increase or decrease the value of your home. Although you may feel that your home is worth a certain amount of money, and that a home improvement will increase the value by X amount of dollars, your feelings will not set the final selling price, the appraisal will.

When completing a home improvement project that you believe will dramatically improve the resale value of your home, you need to consider your neighbors houses. If you have the nicest house in your neighborhood, but you are trying to sell it for twice as much as the appraisal value of other homes in the neighborhood, you will be disappointed.

A general guide is to not try to sell your home for more than 20% of what the surrounding homes will sell for. For simplicity, let us assume that the homes in your neighborhood are appraised at a value of $100,000. This would mean that you could expect to get about $120,000 out of your home if you make selective home improvements.

What this means for you as a homeowner is that you should seriously rethink any home improvement project that would cost more than $20,000 going by our above example. Using the above example, it is easy to see that a $30,000 home improvement project would cause you to lose money in the long run.

Now, if you can make a home improvement that costs very little, but results in a higher resale value, it may be a good idea to pursue that project. Going back to our example, if you can spend $5,000 on a project and this results in your home being appraised at $115,000, then it is a great investment idea.

You also want to consider the appeal that your home improvement project would have to a future owner. For example, swimming pools and hot tubs may be something that you enjoy, but would a potential buyer pay extra for those features? There are some fairly safe projects that you can pursue that other home buyers generally find valuable. Some of these include kitchen remodeling, adding or remodeling a bathroom, adding a new room, landscaping, etc.

Also keep in mind that maintenance projects do not usually result in an increased value for your home. Replacing a broken furnace or hot water heater usually will not improve the value of your home when selling it. These are considered maintenance issues that all homeowners expect the home to have working. Most people would not consider paying full price for a home that does not have these basic features in working order.

The bottom line is that if you are interested in increasing the resale value of your home you need to make smart decisions. Smart decisions on which home improvement projects to tackle can put extra money in your pocket when you sell your house.