You love where you live. Your home has a lot of history in it; there are memories around every corner. Some of your neighbors have even become longtime friends. But the size or layout of your home just doesn’t suit you or your family any longer. You don’t want to leave the neighborhood, but what are your options?
It’s a problem that many families face: Do you sell and move, do you simply add a room or move a wall to try to fix a few of the issues, or do you commit to a large-scale remodel that costs more but will allow you to live in the house for decades longer? And does one option make more financial sense than the others?
Let’s say your home is worth $200,000. You have saved another $100,000. So the choice is: Will a $100,000 remodel turn your home into your dream home? Or are you better selling your current home and buying a new one for $300,000?
Here are some steps to help you figure out the answer:
- List your goals, is the issue one of space, as in simply not having enough? Perhaps your family has outgrown the number of bedrooms you have, or you need a playroom for the kids, or a guest suite for an older parent. Maybe you have issues of function: The kitchen has always been organized poorly, or you don’t like how all the rooms are closed off from one another, or you’d like a master suite downstairs instead of with the kids’ bedrooms upstairs. Maybe your windows don’t properly take in a view, or you badly need a third garage. All of these things and more should go on your goals list. (Include “staying in the same neighborhood” if that’s important to you.)
- Decide how long you’ll live in the home, whether it’s the custom-remodeled home or the new home you buy. It can be hard, but you really need to think this through. Is this your forever home, or just until all the kids are through college? Do you plan to live here in retirement, and if not, how far away is that? If the home is truly your forever home, it makes more sense to change it and make it exactly what you want. If it’s not, this is something you’ll need to weigh against the comparative costs of the options.
- Establish how important your location is to your happiness. Being comfortable with your community is an intangible benefit that can’t be replaced when you move. If you love where you are and depend on your neighbors, it probably makes more sense to remodel.
- List the realities of renovating. “Renovating is time-consuming: waiting for permits (which may not always be approved), inspectors, communicating with your general contractor and picking out finishes and fixtures,” said Evelyn Clifford, a broker in Chicago who spoke with the Chicago Tribune. She advised that the budget for a remodel should be about 20 percent more than the estimate because of unforeseen issues that can arise. The length of time you will be out of your house is iffy also; you’ll have a general idea, but with most major renovations, you’re going to have to move out and live somewhere else for at least a few months.
- List the realities of selling. “Take a look around. Have a lot of your neighbors expanded? Or are they mostly staying in the original square footage? Unless you’re planning to stay forever, Families should make sure they're not adding on in a neighborhood with smaller homes. Why? Because it’s hard to see the most expensive home in a neighborhood; buyers are taught to do the opposite in order to build in the most value to their purchase. Interview a real estate agent you trust (perhaps one recommended by a friend or neighbor) about comparable homes in your neighborhood to see what they’re selling for and how the agent would view the improvements you are considering making. You also need to take into consideration the price of any repairs and updates you’ll need to do to sell the home, the real-estate agent’s commission (typically 6 percent of purchase price) and moving expenses.
- Talk to an expert in renovations. That person should be able to sit down with you, listen to your goals, examine the home, and help advise you on the best ways to accomplish the things you want to accomplish if you renovate. Do this earlier in the process rather than later; the right builder should be able to give you a good estimate of costs (and then remember to add that contingency fund).
- Calculate your return on investment (ROI). This can be difficult, because every home, every potential buyer, every homeowner and every neighborhood is different. But Zillow does a good job of breaking down some of the post popular remodeling projects in terms of the most-cost-effective and least-cost-effective mid-range home improvements. It will help you see how much remodeling a certain area might increase the value of your home, should you sell it later.