Is It Better to Relocate or Renovate?

home renovationWhile the housing market continues to rebound, it is not as stable as it was prior to the bursting of the bubble in 2006.

When space becomes a premium in a home, owners face a dilemma – do they move or remodel? Both have the potential to increase living space, but which is best suited to the situation?

 

When to Relocate

According to a Money Magazine/CNN report, the first step is to assess the local housing market, by “comparing three key metrics: price increases, speed with which homes are selling, and inventory of places for sale”. The idea is to have more price increases and quick sales, but a low inventory. Real estate agents will do this, but homeowners can do this themselves on Trulia.com or Zillow.com. If the area meets the three criteria, then selling has its benefits.

An existing home that has maximized the existing space makes relocating the better option. In an msn.com interview, housing economist Robert Sheehan stated that many homes are built to their maximum dimensions for total square footage. Homeowners in this situation need to decide if they can live with the current situation or move.

When to Renovate

Dan Fritschen, author of Remodel or Move tells msn.com that those owning homes in a desirable area usually do better renovating. By remodeling to make a home to similar others in the neighborhood, homeowners are making smart a financial decision.

Fritschen says that moving is an expensive proposition since it is pure expense. Unlike renovating, a move creates no increase in net worth. In comparison, remodeled properties can appreciate by up to $150,000, depending on the changes made, which offsets the investment of the remodel. Homeowners must also consider the upfront cost. If the cash is not readily available, does taking on more debt make sense?

Remodeling Magazine and the National Association of Realtors publish an annual list outlining the return on investment for various remodeling projects. Projects like installing energy efficient windows or upgrading bathroom sinks and vanities bring the greatest return for the renovation dollar, as much as 80 cents per dollar spent. According to Fritschen, the true expense of the remodel is revealed after factoring in the increase in the home’s value. The difference between what was spent and the increase in value is the actual expense of the project.

Ultimately, the decision to relocate or remodel comes down to money and emotion. If the remodel will reap financial benefits and homeowners can handle the stress and mess of a remodel, then it probably makes sense to take the plunge into the realm of remodeling. However, if homeowners can get what they want in a home by purchasing a new home without creating additional financial issues, then relocation may be the best choice. Either way, looking at the choices with a critical eye, while being honest with oneself, is the best way to make the decision.