Hi Mark,
If you are doing it for re sale value I would say no. Here is a link to a blog post I did on the cost recouped on remodeling projects. http://cecilcountyconnection.com/blog.cecilcountyconnection/?p=28
If you are staying in your home and you are doing it for your own enjoyment than I say go for it.

Mark
I am going to go out on a limb..and I do not even know your market!
I would talk with a Realtor and find out what homes have sold in the last three months, and active listings.
Find out what the difference is in the absoprtion rate for two bedroom homes and three bedroom homes.
I am guessing that the three bedrooms have a better rate than the two bedrooms, so how could you make it three bedrooms?

Also, what is your timetable? Predicting the future is difficult because it has not happened yet.
We are already starting spring market, so you may need to weigh where you are going and when youj need to be there versus time to make improvements...which will impact yoru price.

There was a post about "the lowest price" It is NOT about price, it is about VALUE. In any market homes that buyers think offer the most VALUE sell first. A good Realtor should be able to sit down with you and analyze your situation and offer you some options.

Mark,
The answer to your questions depends very much on what your goals are.
First, whether or not you plan to stay in the house, and for how long. If you think you might be moving within the next few years, you might not get your investment back out of it, it depends on the market in your area. Many markets are in a correction around the country, the extent of which varies. If your market is like most, your house is worth probably close to what you paid for it, if not less. If you have a large inventory of houses on the market, then the time on the market is probably long, and the competition is probably high.
Finishing the basement will make your house more salable, and it will most likely stand out among the rest, but there is a chance you will probably not get your investment out of it. Again, it depends on how you finish it.

If your plans are to stay for 5 or more years, and you can afford to, why not make your home more livable for yourself. You will probably get your investment out of it, depending on how much you spend on finishing it, whether you do a basic job, or whether you go all out. And you probably will enjoy it more.

The subjective reasons are just as important as the practical, financial. Would you really enjoy and use the extra space? If so, then make the house what you want it to be, and enjoy it.

You should consult a local realtor to find out specifics about the market in your area. They can show you the numbers, and you can decide if the trend is downward, upward, or flat.

Here's a link to an article from a Home Inspection site about improving to sell: http://www.pillartopost.com/news/Remodeling-Makeovers-Home-I…

Statistics show that the top 3 improvements in terms of Return on Investments are;

Kitchen: Average ROI = 83% (minor remodel), 78.1% (major remodel)
Bathrooms: Average ROI = 78.3%
Window Replacements, all rooms: Average ROI = 81.2% (wood), 79.3% (vinyl)

Some tips: Aim for universal appeal
Avoid highly unusual designs, strong colors, and unique custom components that can be polarizing to potential buyers. Remodeled spaces should look great to the widest possible audience.

Don't over-improve
Homeowners should be careful to keep upgrades and improvements within the range of similar homes in their neighborhood. The most expensive home in the area, however attractive, is rarely the easiest to sell.

One last thought, in our experience, a 2 bedroom house is not easy to sell. Adding a third bedroom in the basement is going to make the house more salable.

Mark,

It does depend on your market, but the answer is probably not. It is unlikely that you will be able to recover the cost of the work involved to finish out the daylight basement. I recently had a client (who is a builder) ask me the same question and we decided that it just didn't make sense.

In slower markets it is typically best to keep the price as low as possible. The exception to this would be if your house is unusually small for the neighborhood. If most of the homes are near 4,000sq.ft. and yours is not, then you probably should finish it out to make your home more salable.

Best of luck on your home sale.

If the finished lower level is something you would want for yourself than consider finishing it, not for the re-sale value because I doubt that it would add enough to recoup your cost. However I do not know your area, so you may want to talk with an appraiser or realtor in your area as Bill suggested.
Kim Mills

I do not know the area you are in, but if the sales and amount of homes on the market there are like it is in Southern Maryland (Charles, St Mary's & Calvert Counties, I would not. Have you checked on the cost of finishing it off, and ask an appraiser how much value it will add to the home, if you get a positive and can afford to do it, then go ahead. By that I mean if it costs $100K and it will add 125K or more to the value, and it would be usable for you, then by all means go ahead.
One other consideration - when are you planning on selling? I have been through several of these slumps (this is by far the worst in my 35 years in Real Estate) and there is an end somewhere. In our area, it is picking up now - and if the media just backs off, the market will self correct.
For example, if you wanted the temp in Phoenix, you'd think them telling you what the average temp is in the US was kinda dumb - thats what they are telling us, what the average is or what the worst is - I want the local media to talk about what our local market is!

Good Luck