The Home Remodeling Decision
Ask yourself what factors are most important to you:
- Do you love your neighborhood?
- Are you near services and schools?
- What is your commute time?
- Is there room to remodel - considering lot size, etc.?
- Have you built up enough equity in your current home to justify spending on a remodel?
Does it make sense to invest in a major remodel in your market? A remodel that will pay off in Los Angeles, may not pay off in Missoula. If you spend $85,000 on a kitchen remodel, you may recoup more than what you spent in L.A., but not where the housing prices are only double the cost of the remodel.
Timing and the Market
Remodel Decision PointsDo your research:
- Get an appraisal - find out what your home is currently worth
- Check comparables (recently sold homes) in your area to see what the baseline for selling is
- Estimate your remodeling project cost
- Determine how you will pay for the remodel
Appraise House and NeighborhoodPaying for a current appraisal is money well spent in the remodeling process. If your home is already valued high relative to the market, you will not recoup the cost of an expensive remodel. Research comparables using My Estimator to value your home among the others in the neighborhood - remodeled or not - to get a better picture of your possible financial gain. It is easy to spend over $10,000 on a bathroom upgrade without architectural changes, but will it pay off?
Remodeling ReturnsCheck out Zillow's home improvement valuation list for an idea of typical remodeling project costs and possible payoffs. Some projects will return 78 percent of your costs while others may return as much as 103 percent, but some financial experts caution that these numbers are only valid if you turn around and sell your home within a year of completing the remodel. The longer you wait to sell, the more the remodel value decreases.
Do you have the equity in your home to open a home equity line of credit, or apply for a home equity loan to pay for the remodel? If you have less than 20 percent equity in your current home, wait to remodel.
Paying for It
If you do have the equity, what will the remodel entail? If it is a large project - such as big structural changes and losing the use of your kitchen or your one bathroom, you may want to consider moving out during the hammering and drilling.
Trading Up and OutDepending on your area of the country, trading up to a new house with all the features you are looking for is often cheaper than remodeling. The trading up trade-offs are that you may need to move a distance from your current home and incur the time and costs of buying and selling again.
By Diane Tuman
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