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Tonight I was watching one of those shows on HGTV called My House is Worth What? which featured a couple that was trying to decide if they should buy a new house or try adding on and remodeling their current home. Since I didn’t agree with their real estate expert’s opinion to remodel, and it’s a question I’m often asked by friends, relatives, and potential clients also, so decided to share my thoughts on making the decision to remodel an existing home or buy a new one.
Deciding to remodel or buy new is a tricky decision – many people are emotionally attached to their homes (this is where Junior took his first steps!) and even more are concerned about current housing values and how their decision will ultimately affect them. Instead of telling people a clear cut answer of “you should do this or that” – I usually have them consider the following to help them make the decision on their own, which, after you answer these questions is usually pretty clear to make.
Here are some tips for deciding if you should remodel or buy new:
1. Look at Your Local Market: It’s easy to be panicked when national home prices are down drastically and every news channel has only grim news about the real estate market. However, national real estate trends don’t always apply in every market – many see steady prices and relatively little fluctuation from year to year. Researching the local market can help you decide what trends seem to be steady, and which might only be temporary.
2. Estimate Costs: Estimating costs might seem pretty easy (new house price compared to remodeling price) – but there’s a lot of hidden costs many people don’t consider at all. How much will it cost you for your house to sit unsold on the market? Do you really think you will stay within budget while remodeling?
3. Is it a Buyers or Seller’s Market? If its a sellers market in your area, selling your home will be easy – but buying a new one may be a little more expensive or competitive. If its a buyer’s market, you may be faced with selling your existing home for less than you hoped or losing more money the longer your home sits unsold.
4. Don’t Over Improve: If you’re living in a neighborhood with home values less than $200,000 there’s a good chance you may never see a return on investment if you decide to go with upgrades such as granite counters or other remodeling projects. Many people are wary of buying the “biggest and best” house in a neighborhood, because they know the other homes in the area are not comparable and could potentially negatively affect the home’s value. Over improving is one of the biggest mistakes people make when remodeling their home – and it usually only means money lost.
5. Consider the Needs: The needs of every homeowner are different. Some needs can be fixed easily and inexpensively, such as adding more shelving for storage space. However, if you need additional bedrooms or yard space, it’s likely it will be difficult to add these things to your home without falling into the over improvement money pit or never being truly satisfied. Other needs, such as location, can only be fixed by moving somewhere else.
In general, I think its best to fix up a home to be a well priced comparable sale and if what you really want is available and within your financial means, you should buy new. There are many horrible remodeling jobs that go wrong or get delayed and/or cause more stress and hardship for a family than putting the home up for sale. It’s important however that each situation is handled on a case by case basis, since no two homeowners – or their needs and desires – are exactly alike.
What are your thoughts? Is it better to remodel an existing home or buy a new one?
4 Comments
I was looking about getting into this kind of thing… I was speaking to someone the other day that’s into this kind of stuff, and he says it’s a good time because the prices are so low at the minute, but it could also be a massive gamble and have a lot of property on your hands and you can’t get rid of it!
I think I’ll hang out a little while first
I guess it really depends. The area that we wanted to be in had no new construction at all, so we really had no choice. I think that lots of people are against remodeling because they can’t “picture it” before the project begins.
The fourth point is very important. Many people decide to remodel and go way over the top. Sometimes it’s though to explain that putting in that Brasilian marble doorknob costing $ 4000 is not going to improve the value of the house for $ 4000. Not even close…
You have great points to consider before remodeling. I’ve seen too many homes that have been poorly remodeled, or overly-remodeled for the neighborhood where they are located. I’ve also seen some really great remodeling jobs that brought the seller every penny back, plus some, when they sold. It mostly depends on the neighborhood and the quality of the remodel.