At some point, you may find that your home doesn’t work well for you anymore. You may need more space or a reconfiguration of the floor plan. The decision to remodel or move can be relatively easy in some cases and difficult in others.
In one example, homeowners in Berkeley, Calif., needed more space for their growing family. They looked at more expensive houses to buy instead of facing the hassle of renovating. They discovered that they couldn’t afford to buy a larger home in a prime location. But they could afford to add enough space to their home to make it work for them. Luckily, their home was already in their preferred location.
Since they owned one of the smaller homes in the neighborhood, they could afford to invest in an expansion without overimproving for the neighborhood. They intended to stay in the home indefinitely.
Another couple with children, living in an Oakland, Calif., neighborhood they liked, talked to an architect about redesigning the space in their home to make it more user-friendly for their family. The plan didn’t give them exactly what they wanted. However, it would be an improvement over the existing floor plan, but at great expense.
The plan didn’t include an expansion of the living space, so the owners would have ended up with a very expensive home for its size. It would have been overimproved for the neighborhood. They wouldn’t have recouped the investment when they sold unless the property appreciated enormously over a decade or so.
HOUSE HUNTING TIP: Before you make a commitment to a large renovation, take a look at homes for sale in areas where you’d like to live that offer the space and amenities you want or need. Depending on the projected cost of the renovation, it may be less expensive and easier in the long run to sell your current home and buy one that better suits your current lifestyle.
Given the limited amount of homes for sale in many areas around the country, this sort of a move may require an interim move to a rental. Offers made contingent on the sale of another home won’t fly in a high-demand, low-inventory neighborhood where you have to compete with other buyers.
An interim move would be no more inconvenient than staying in your house while it’s being renovated, although it would be less expensive. A huge renovation, like the one described above, would have required the family to more out for six to 12 months. This means paying the mortgage while you pay for the renovation and for the interim rental.
It’s not a sin to treat yourself to a costly renovation as long as you understand that what you’re paying for is a lifestyle you desire, and you may not be able to recoup the costs when you sell.
Smaller remodel projects to make your home more enjoyable, like a new master bathroom or eat-in kitchen, could be a lot less expensive and disruptive than moving. And it would make your home more marketable when you do move.
Just make sure to do tasteful upgrades that will have a broad-based appeal. Ask your real estate agent to give you input. You are doing the work for yourself, but you don’t want your home to be one that buyers wish you hadn’t touched. Bad renovations don’t increase the sale price.
Make sure that your contractor takes out building permits for work that requires it. Lenders’ appraisers often don’t give credit for an addition as livable square feet if the work was done without a permit.
THE CLOSING: Don’t do a complete bathroom or kitchen remodel if you’re planning to sell soon. You’ll improve the net proceeds from the sale if you restrict your fix-up work to cosmetic improvements.