What Are the Deciding Factors?
Edited and published as a community service by Windermere Real Estate
PERHAPS YOU NEED ANOTHER BEDROOM or your dream is
to have a bonus room off the kitchen where your family can
gather for meals and homework. Maybe avocado green and
harvest gold are no longer your favorite colors.
Regardless of your motivation, you're not alone if you are
considering remodeling. American homeowners spent more than
$92 billion on remodeling last year, according to the Harvard
Joint Center for Housing Studies. Here are some things to
consider if you're evaluating remodeling versus packing up and
moving.
The case for remodeling
Location still remains the biggest selling point in real estate.
What were the reasons you bought your current home in the
first place? Good schools, a short commute to work and
convenient shopping and entertainment are all good reasons
for buying and staying in a home. If the only thing that has
changed since you moved in is the need for space, remodeling
and expanding your existing home may make sense.
There are plenty of statistics available that describe the
return on investment for different remodeling projects. For
example, a Remodeling magazine survey says that minor
kitchen remodels return 82 percent of their estimated costs, a
bathroom addition will return 72 percent and the addition of a
family room will return 71 percent. On the lower end of the
cost-versus-return ratio are window replacements (57
percent), deck additions (54 percent) and the addition of a
home office (51 percent).
Another way to determine if your remodeling plan adds value
to your home is to compare it to others in your neighborhood.
For example, if your home is worth $200,000 and you are
considering investing $100,000 in remodeling, go visit homes on
the market for $300,000 and compare them to what your home
will feature once the work is complete. Or, if you have a
two-bedroom, one-bath home and want to expand it to three
bedrooms and two baths, look up sale prices for similar homes
in your neighborhood to see if you are overspending to increase the size of your home.
The case for buying a new home
Depending on when you purchased your current home, interest rates may favor an investment in a new home rather than remodeling a home with a higher interest rate.
If your neighborhood is on the decline or it did not turn out to be what you thought when you bought your home, moving instead of
investing in a property that may not recoup what you will put in is a better choice.
The construction industry is facing a nationwide labor shortage and people in all areas are having a hard time finding contractors who are available to take on their remodeling projects. Because of the demand, costs for laborers are increasing rapidly as well. That means the cost and time it will take to complete a remodel can be much greater than you anticipate.
If you need a larger space quickly, because you have a child on the way, for example, you may need to consider moving to accommodate the needs of your growing family. If you can afford to wait in line for a qualified contractor, understand that the remodeling costs may increase over time due to the expanding cost of labor.
Consider time and cost of repairs
Finally, before taking on any remodeling project, find out what building permits you will need and if any work has been done on your home without permits. Idaho, Oregon and Washington require that homeowners disclose to prospective buyers any work they have done without a permit. You could be on the hook for the costs of bringing the property up to code if you decide to sell your home later, and appraisers may not give full value to additions or renovations completed without the proper building permits. Your contractor or a local government building inspector can provide information about the repairs and upgrades that require a permit.
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