Remodel or Relocate?
Smart Solutions • March 2014
Upon the realization that their house no longer fits their needs, homeowners are faced with two choices: remodel or relocate. Until recently, both options might have been considered a financial risk for many homeowners. But 2013 saw the strongest gain in home prices in eight years,5 giving owners the confidence — and the equity — they need to make their next move. If your current property falls short of your dream home, answer the following questions to help determine if it’s time to break out the toolbox or the moving boxes.
Once you have a realistic idea of what your house is worth, consider how much you still owe on your mortgage and how much you would need to spend to find a suitable replacement. If you have less than 20 percent equity in your home, it might make more sense to stay put.6
To ensure your renovation is a smart investment, consider these tips:
- Appeal to the masses. You probably won’t recoup your cost on projects that will only appeal to a small percentage of buyers, like safe rooms and wine cellars. However, high-end kitchens, spa-style bathrooms and walk-in closets are features for which most people will pay a premium.
- Think long-term. Trends change, but extra space is almost always in high demand. Structural modifications that increase livable square footage tend to hold their value longer than style-based updates.
- Don’t cut corners. Buyers expect to get their money’s worth. Low quality materials and craftsmanship can drag down the value of your project.
If you do find a potential contender home, a simple cost-and-value comparison can help you decide if the move is worth it. Examine:
- Cost of renovations (materials, labor, refinancing/loan fees) versus cost of moving (agent fees, closing costs, movers)
- Cost per square footage of each home
- Market value of each home
Interested in learning more?
- "Credit Limit Tricks: Keep a High Score While Still Using Your Card," Dana Dratch, CreditCards.com, accessed April 18, 2014
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