It’s ironic how a dream house can turn into a nightmare. I’ve heard too many horror stories. But the one I’m about to share could have easily been avoided.

It seems that a local doctor, determined to build his dream house, applied for a construction loan. Now a construction loan is a loan you draw on as needed  … and only pay interest on what you borrow. Since it was determined that the finished house would be valued at $1.7 million on completion, the bank gave him a construction loan for 80% … or $1,360,000.

A year and a half later his house was finished in more ways than one. The market had dipped severely. The completed home was now appraised at $300,000 less. And that would have been bad enough. But here’s the rub.

The doctor in question hadn’t gotten a construction-perm loan … which would have automatically converted to a permanent loan once construction was finished to pay off the construction loan. Instead, he was now faced with finding a permanent loan for 96% of the new value to pay off his construction loan…and no lending institution even in good times will make a loan that size with so little equity.

Now, the doctor in question has the option of facing foreclosure on the dream home he’d just built … or coming up with enough cash to bring the new loan down to 80% of loan-to-value. In short, he was suddenly on the hook for about a quarter of a mil just to be able to get a permanent loan!

So why am I sharing this particular horror story. Two reasons … both sadly ironic. First, I learned about it when a competitor of mine, another Realtor, called me for advice. It happens all too often …  because few Real Estate professionals are also Mortgage savvy. Second, had the doctor been properly advised to begin with, he wouldn’t have had the problem. With a construction-perm loan he’d have been covered, even with the dip in value.

Unfortunately, the end of this story has yet to be determined. But the moral is clear. Numbers don’t lie. But sometimes people do. So don’t just take anyone’s word that you’ll find the right loan when the time comes. Consult an expert up front and your dream won’t become the proverbial nightmare.

It’s simple common sense. Fix up your home and you’ll make it sell faster. But, you may be asking, where should I invest the money. In this economy, with money tight and buyers savvy, you want to be sure to get the most bang for your buck.

So go for things that create emotional appeal. Things that make a buyer fall in love. Take kitchen appliances, for example. If the fridge is white, the stove is stainless and the dishwasher is old, you want to rethink them. All one color makes a pretty, strong statement. And that’s a smart place to start.

You can always find William hard at work in Valencia. Love that green, Willy!

Yes, this is serious investment spending. But it will likely generate a 50% to 500% return…depending on the paint job, your home, and local real estate market. Given that return, it’s smart to hire a pro for the type of paint job that will color your outcome.

So start by repairing those dings in your walls. Caulk gaps in the trim before you start painting. Choose neutral colors that appeal to more buyers. And make sure you paint all the trim…baseboards, door casings, window frames…with a finish that’s smooth and even. Then redo your front door in a color that draws the eye without screaming… and leads buyers right into your home.