Question
I'm buying a Patio home - so I can have a small backyard to plant and have room to put my dogs outside.  Problem is my backyard slopes down to the fence, which I can see over from my patio.  Part of the wooden privacy fence has dirt that has built up on it from erosion over the 5 years or so since the house was built and now the bottom of the fence is rotting.  Both my neighbors have the same contour to their yards so my side fences follow the hill downward along the slope.  There are NO plants or trees in the yard - just grass.

I'd like beautify the yard and do something either terracing or something to prevent further erosion of the yard and soil piling up on the fence.  I'm planning on putting in at least one rain barrel to stop some of the flow of water off the roof but I'd like help with a design for the yard.  I've looked at it seems millions of pictures and can't find something that fits for my yard.  It is a patio home so the yard is small, approx 40 feet wide and approx 20 feet in depth.  I can get you exact measurements if you'd like.  I thought about putting in evergreens that would grow taller than the fence at the bottom near the fence to increase the privacy issue but not sure if I'd need access to the fence to keep digging it out.  I'd like less grass, more living space with planting around them.  I'm looking for a sanctuary feel.  Any ideas?

Answer
Sounds like your future 損rivacy?fence isn抰 very private.  Add some dogs, a slope to the neighbor抯 yard, no landscaping, and the problem isn抰 going to improve on its own.   20x 40 is an intimate size for a back yard.  How big are the dogs?  Most dogs need a place to do their biological 揳ctivities? so a touch of grass is important.  You can use other surfaces such as pea gravel, but like an indoor litter box, any surface would need periodic  attention.  

Wooden fences make poor retaining walls or planters, and what you described is fairly common in homes with sloping yards and close neighbors.   Any soil in direct contact with a wooden fence is not good ?it promotes rot and a pathway for termites ?as you抳e discovered!

As to structural changes to improve the fence erosion problem, you didn抰 mention if there was a patio or stoop, level with the rear of your home. It is a "patio" home, right?  If nothing else, some sort of stout base on masonry is needed to separate the soil from the wooden fence.  

http://www.wayraycontracting.com/images/upload/1159500803Fence%20with%20ret%20wa

If you have purchased a home in a subdivision with controls, your options may be limited, but if you can modify the fence with less oversight then it is just a matter of you & your neighbor coming to an agreement, as most likely any mechanical solution will require that you gain entry to their side of the property line.  In our area, you also need a permit to erect a fence. Check with your local building official.

Stepping it up a notch, I have successfully extended smaller patios and added a deck, planter, or planter/patio combination up to the property line, allowing for a sense of enclosure.  Here are a few pictures of the idea I抦 thinking of:

http://www.landscapingnetwork.com/pictures/retaining-and-landscape-wall_17/85750

http://concretethinker.com/Content/ImageLib/patio%20on%20top%20of%20cistern-recy

http://www.the-landscape-design-site.com/images/aw3-sunken-patio-planter-steps.j

You抣l get that feeling of 揺nclosure?and 搒anctuary?with more elaborate deck/patio improvements.   If budget allows, other components can complement this idea ?arbors, fire pits, a trellis, raised planters, even a bit of art hung on the fence.
  
Greenery is the last thing on-board, once the bones of the design are developed.  For a greater sense of  揺nclosure?and 搒anctuary? concentrate on the overhead ?tree canopies, arches, arbors.  

When planting trees in a smaller backyard, it takes time to achieve a proper canopy (even planting with larger stock), plus, you抣l get leaves & needles along with the tree.   A trellis is more instant.  Perhaps a tree, though.  South Carolina has quite a selection -- http://www.state.sc.us/forest/refsel.htm

I hope there were a few suggestions that could help you in there.  All the best!  

(Sorry for the delay - I forgot to turn on my "vacation" status)