Is it Smarter to Remodel Your Home or Buy a New One?
I know it is hard to really take a good look at whether or not to add on to your home or move out into something bigger. This is something you really should take a good look at. One may be a smarter decision financially than the other.
Do you love the neighborhood you are in but need more space? It might be smarter to remodel and stay or if you really want to leave, it may be smart while the market is slow, to rent your home out before selling it.
Whichever reason you have for thinking about moving, before you put a for sale sign on your house, look at all the numbers to make sure it makes sense financially to sell your home over remodeling it to fit your needs.
Most sellers don’t actually have to move. Most people become unsatisfied with their homes and sell based on desire as opposed to actual need. Really take a look at all the things you will have to do if you sell your home and buy another. Is it worth the time, lots of money and lots of energy you will have to put into selling, moving and buying again?
If you move before your existing home sells, you’ll need to cover two mortgages for an undetermined period of time. If you think it is hard making your mortgage payments now, imagine that doubled!! You don’t know when your house is going to sell? It unfortunately takes as long as it takes. Some homes are on the market for years! Some go quickly but you just don’t know which way it will go for you.
The Right Timing
The real estate market is getting better, but right now values are not yet back to 2006 levels – this means holding onto your home until the market rebounds is probably the smartest thing to do for most people right now.
RemodelorMove.com estimates the average cost of moving a typical $200,000 home (Charlotte’s April 2010 average sales price was $201,410, according to the Charlotte Regional Realtors Association), at a staggering $15,000 to $50,000. That includes moving preparation, the actual move, realtor commissions, up fits and purchases for the new home, and a possible increase of $0 to $10,000 in property taxes. That figure doesn’t include seller-paid closing costs, which typically run 3-5% of the sales price.
Expensive as it is to remodel, it is tempting to think moving is the safest bet. But that can be far from true.
In moving, there is no payback period. It is purely expense and that’s it. By the time everything is said and done you end up writing an average of $40,000 in checks give or take a little, and no matter where you move to, that money is gone. It doesn’t increase your net worth in any way — it is just gone.
You don’t know what hidden issues your new home may have. So you typically hire an inspector to tell you all the things that are wrong with the house. An inspector is not cheap. Then you hire a licensed contractor to tell you how much it will cost to have all of those issues with the home fixed.
Contractors usually charge for this service as well. So you already have to cough up a good amount of money to see how much money you will have to spend to fix up the new house you are moving into. Sometimes the amount of work needed is so great home buyers just have to back out and cut their losses because the investment isn’t worth it. If the current home owner is planning on making all the repairs needed himself, make sure he is using a fully licensed contractor who knows what he is doing. There is nothing worse than an attempted fix that is done substandard and ends up costing the new home buyer more a few months later down the road because the problem was never fixed properly in the first place.
Electrical, exterior wood, roofing, boxing, siding and subfloor structural issues often won’t become apparent for several months or longer, when the cost to re-repair correctly will come out of your own pocket. Now that really just isn’t fair in any way. So make sure you do your homework. More people than I would like to mention have at the mercy of substandard work that fell apart shortly after their move into their new home.
Choose A Licensed Contractor
We have fixed a lot of unlicensed contractors work over the years and we have seen some pretty sickening stuff. We believe in honest good work and doing things right the first time. We do not like seeing the after math of bad work. So make sure you use a fully licensed contractor who really knows what they are doing. Check them out on the web, do your research so you don’t become the adverse effect of your lack of knowledge in the area. There are good honest licensed contractors out there who do great work.
I hope this was helpful in getting you to at least take a good look at remodeling your existing home over just selling it. It may save you more time and money than you even realize. So do your research and find out for yourself if you would be better off one way or the other.
RWT Design& Construction