To Remodel or Buy New?

Tonight I was watching one of those shows on HGTV called My House is Worth What? which featured a couple that was trying to choose 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 questioned by friends, relatives, and potential clients also, so chose to share my thoughts on making the choice to remodel an existing home or buy a new one.

Deciding to remodel or buy new is a tough choice – 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 choice 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 choice 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 simple to be panicked when national home prices are down drastically and every news channel has only grim news about the real estate market. But, national real estate trends don’t always apply in every market – many see steady prices and relatively small fluctuation from year to year. Researching the local market can help you choose what trends seem to be steady, and which might only be temporary.

2. Estimate Costs: Estimating costs might seem pretty simple (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 reckon 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 simple – but buying a new one may be a small 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 excellent chance you may never see a return on investment if you choose to go with upgrades such as granite counters or other remodeling projects. Many people are wary of buying the “largest 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 largest 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. But, if you need additional bedrooms or yard space, it’s likely it will be hard 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 reckon 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 incorrect or get delayed and/or cause more stress and hardship for a family than putting the home up for sale. It’s vital but 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?