By the Silicon Valley Association of Realtors

As the market changes, many people are deciding to stay put. Remodeling is one option that makes sense. No matter what type of remodeling project you select, it’s important to make certain the improvements not only provide comfort and convenience but also increase your home’s resale value.

It’s not a good idea to assume that the money spent on sprucing up a home will automatically be recovered. To maximize the return on investment, it’s necessary to consider how long you’re likely to live in your home. If it’s going to be just a year or two, it’s wise to limit remodeling to relatively inexpensive touch-up projects that homeowners can do on their own. Cosmetic improvements give a home a fresh, clean look, add to its market value and create a favorable impression that will make a home easier to sell.

On the other hand, if you are certain you will stay in the home for a minimum of three years, a more extensive renovation can be considered. However, guard against overdoing it - or spending more than could possibly be recovered upon resale. The market value of a home is determined mainly by the value of the homes around it, regardless of renovations. Of course, if you plan to stay in a home forever, recouping costs is not a factor. Imagination and budget are the only limitations.

Once you have decided what to accomplish, the next step is financing. There are several options available. For instance, you might consider refinancing your current mortgage to cover the home improvement costs. This may be the most practical way to borrow for the long term at market interest rates. If the outstanding balance is low on the current mortgage, refinancing could free up a considerable amount of cash. Another option is a second mortgage. The interest rate is typically higher on a second mortgage than on the first mortgage and the term is shorter. For relatively minor home improvements (less than $10,000), you might consider an unsecured personal loan. The term is generally short and the interest rate is higher than on a secured loan. In addition, you should check whether the contractor offers an installment payment plan.

When choosing a contractor, it’s important to do your homework. By following the tips below, you’re likely to control both cost and design while minimizing the risks.

Obtain at least three separate bids for all work needed and avoid firms that offer substantially lower prices than the others. The quality of the work may be as low as their prices.

Before signing a contract, obtain several references from the contractor and check them carefully. In addition, contact the local office of the Better Business Bureau to check on the reputation and dependability of the company.

Check whether guarantees are offered. If so, find out whether the guarantee covers all work or is limited to certain materials.

Obtain a written copy of the price quotations and the specific work to be done.

Never pay a contractor in cash, particularly before the work is started.

Obtain a certificate of the contractor’s liability insurance coverage limits, policy and company.

Information in this column is presented by members of the Silicon Valley Association of Realtors. Send questions to Real Deal, c/o SILVAR, ppompei@siliconvalley-realtors.org.