A master suite is always a winner it is one of the highest returns on investments in real estate although it is well under 100%. Going down to 3 bedrooms is another story what is the makeup of your community mostly 4 bedrooms?
A big consideration is what going on in your market most of the US is still declining. You may lose all of your improvement $$ in one year if the rate of decline exceeds the costs. There are so many great deals in "short Sales" that selling and buying a larger might be the best choice. You can sell at a lower price and make it up on the buy side if you are flexible on loaction and time. We did it this summer lost a little on the sale a made a kiiling on the buy.
My wife and I live in a home we recently purchased as a "Short Sale" it was alot of paperwork and time for me the agent. But in the end the bank reduced the amount they were owed on the loan by $325,000 we got a great deal. The home did not need any repairs as most foreclosures do it was move in beautiful condition. With "Short Sales" be flexible with the location and your time to get the best deal.
Remember your agent will be doing a ton of work to put and keep the deal together but his/her effort will pay in the end many thousands to you
Bill Carey, Broker/Realtor
Certified Short Sale Specialists
Bill.Carey@HendersonProperties.com l http://www.HendersonHomesCharlotte.com