At this time it is not worthed to put your money in that house. All you have to
do is to do only those items that cosmetic not to improvement again do not
try to do IMPROVEMENY.

If you like living in the house, and can withstand the neighborhood, make improvements that make you more comfortable living in the home. Ride out the down-turn; next upswing sell, for a profit. The reason your place appraised for $485, but others are selling for $330K is becuz they may be foreclosures, short sales and/or REOs, which is not the true Fair Market Value.
To be able to stay in the home until the next upswing Refi or Loan Modification. Gov site no charge, http://www.makinghomeaffordable.gov/ Probably best to be 7 days late on a payment before submitting info to them because in my opinion they give highest priority to those who have already missed a payment, they have more than they can handle that are many months late. Be prepared for a credit score plunge.
Best of Luck,
Mary at http://www.plentifulrealestate.com

Hello Russ,

Before you spending your money to improve your home you need to take very close serious look at the property and its environment so you can get some ideas what you you need to do. There are some suggestions I would like to give you. I hope it will help you to stay within your budget and also you can reap the profit later when you resell your home.
1. Observe and study your neighborhood to see if there any improvements since its original first build. How much improvement ratio in the neighborhood? Any extension, remodeling, landscaping were done lately? if the ratio is less than 25% and you are planning to sell it in the ext 2or 3 years, you just only need to do limited improvements to add value to the house. The common mistake that owners often did was overdone it.
2. Think neutral. Buyer likes to feel the house will be their future home. The house has to give them the cozy feeling of a warm, sweet home that they will fit right in and live happily ever after. Buyer buy based on their emotions. If they like the house, they will try to get it by all means. What I have been trying to say is to keep all the exterior and interior in neutral color palette but it also has to be trendy. Give buyer the blank canvas when they come into your home so they can pain the picture of themselves living in the home ( I put the in front of home here instead of the word " your" ) because I would like you to see with the buyer's eyes)

3. You have to determine your intention in your improvement. Are you doing it with your personal taste and for your own enjoyment? or you want to remodel it for sale purpose only? it is a very important issue that you can't ignore or overlook because it will effect your resale value a great deal. For inspiration how to improve your home to fit buyer need, you can visit the model homes in the area and get some ideas how the trend goes with the home interiors and exteriors. Then when you are ready to sell your home, you will know your home will get sold for the top dollar without breaking your account.

4. Put your money in improvements of kitchen, bathrooms, especially master bathrooms, and exterior walls and landscape. A good clean, organized professional look landscape will add at least 10 to 15% of value to your home. Well planned kitchen with update cabinet and new counter and new floor are essential in the improvement. Light color coats of paint give the freshness and light to the buyers. That's all you need.

I hope you will find my answer is useful. I am working to reconstruction my website so I can help more people like you with ideas on home improvement. Until then if you have any question you can email me so I can give you more precise suggestions to help you to save money.
Good luck.

I had an amazing 5.25 30yr fixed when I first bought the house but had to come up with a salvage solution during a divorce. Currnetly have a 5.25 interest only that ends in May '09. I had planned , of course, to refi at that time. The 60k from my second has largely gone into the house (which i would very much like to keep) but am just getting by now. I have done the windows, central heat & Air, insulation, landscaping, flooring, kitchen & cosmetics. It's a 3/1 and If I am to keep upgrading, next would be adding a half bath, or going full tilt and do a master bed/bath suite

Russ,
You didn't mention if you were planning on staying in the home. If so, improvements that you can afford and want for your quality of life, should be the deciding factor. The following link shows which improvements pay back the most.
http://www.chicagotitlesd.com/september05/Improvements.pdf
The market will recover at some point though probably not before 2009.
You should, as others have said, discuss a note modification with your lender now.

Do you know what rate/payment your mortgage will reset to in May? What kind of loan is your 1st mortgage? It will reset to whatever index your loan is based upon + your margin. Will you be able to make that payment? Since you are upside down you won't be able to refinance unless you can get your lender to agree to modify your loan.

In terms of remodeling, I'm not sure how much that is going to help value in a declining market. You may want to keep that cash to make payments until the market recovers.

Your first call should be to your mortgage company before you start spending any money. Most banks will rewrite your loan now into a fixed mortgage, you have to ask, be persistent and it mnay not happen the first call. be firm but polite. Ask for the home retention team at your mortgage company, if you feel passed around or not getting anywhere,. dont hesitate to ask for a manager. tell them your problem, tell them when teh mortgage resets you will not be able to afford the mortgage and you are trying to take care of it before it becomes a problem. If you choose to make improvements make sure they will gain you equity and not jsut be a wash, for instance if you do $20000 worth or work and it increases your value only $20000 then you have wasted your money. Stick with roof, siding, windows, heating system, kitchen and bathroom.