Let's say your current home doesn't work quite as well for you now as it has in the past.  Perhaps you need more room, or a room on the main level, or perhaps you'd like a nicer (newer) kitchen, or deck, or flooring, etc., etc.

As a result, you may be faced with a decision of whether to improve your current home (to make it work better for you, or so that you like it a bit more) or to sell your home and buy a new one.

Perhaps the improvement(s) you would make would cost $100,000.  Yikes!  That's a lot.  Your next question may very well be whether you will see a $100K increase in your home value -- and the answer is -- probably not.  Most home improvement projects do not increase the value of a home by the total cost of the improvement.

Perhaps the $100K improvement would only increase your home value by $50K.  Hmmm... maybe you should sell your home and buy a new one instead to avoid losing the $50K difference between the improvement cost and the increase in your home value?

But... maybe not... let's take a look at why it might make sense to stay and improve your home -- despite not recouping the full cost of the improvements via an increase in your home value. 

For this fictional example, we're pretending you own a $450K home and you might spend $100K on improving it, after which time it will be worth $500K. 

$24,000 = approximate transactional cost of selling your $450K home

$15,000 = approximate transactional cost of buying the $500K home

$11,000 = approximate cost of moving to the new home and making any needed improvements

These three costs add up to a total of... $50K! 

So... you could spend $100K to improve your $450K home to make it worth $500K... and "lose" $50K. 

Or... you could sell your $450K home, buy a $500K home, have $50K of transactional costs and thus still "lose" $50K. 

As such, even if the improvement cost of your home exceeds the increase in your home value after the improvement... it still might make sense to make that improvement rather than selling your home and buying a new ones.