Tough Seller's Market? Use Home Equity to Spruce Up Your Home

With foreclosures hitting all-time highs, it takes additional creativity to successfully market a home. But a home equity loan can help you dress up your property and complete a sale, even in a highly competitive market.

Dressing up your home before listing it for sale is always a good idea, but in today's market, it's absolutely essential. The Reuters news agency reports that approximately one out of every 135 households in the U.S. is now affected by foreclosure, and the glut of inventory puts extreme pressure on prices. Homeowners trying to sell in this soft market need to add cosmetic appeal and perceived value in order to attract the attention and interest of qualified buyers.

Home facelift

Experts recommend cosmetic improvements such as fresh paint, landscaping, or refinishing of hardwood floors as the most cost-effective measures you can take to inspire a sale without cutting into your delicate profit margin. Financing even small projects can be difficult, especially if you're already trying to set aside funds for moving expenses, so tap into your home equity to create your budget for sprucing things up. You can use a convenient home equity line of credit (HELOC) for relatively small projects, and you'll have to pay interest only on the amount you actually borrow. For major improvements, like room additions or kitchen makeovers, a home equity loan may be more appropriate. But if you're only borrowing to do a facelift on your property, it's best to stick to simple, inexpensive projects that have high impact in terms of "curb appeal."

Begin with the entryway, because it's the focal point of any home. Replace a tired looking door with a new one, or just sand it and apply three coats of paint or an impressive wood stain to make it look like a million bucks.

Trim back unruly shrubs, mulch the flowerbeds to give them more shape, definition, and color contrast, and plant a few low-maintenance (but colorful) flowers.

Paint is the least expensive and most effective improvement you can make, and many paint jobs-especially on interior surfaces-can be do-it-yourself projects.

Use semi-gloss on door and window frames to make them easier to clean and give them added visual appeal. Stick to neutral colors throughout the house so that you don't turn off any potential buyers whose tastes or interior decorating styles may not agree with your color choices.

If kitchen appliances or bathroom fixtures are outdated, consider replacing them with new off-the-shelf products from your home improvement store. The expense of upgrading them should pay for itself, as long as you avoid the higher-end designer brands.

When your equity-financed improvements generate a sale, the money you borrowed will be paid off at the closing table. You'll incur little or no out-of-pocket costs, while gaining the upper hand in a tough real estate environment.