The decision to remodel or buy a new house is a complex one that involves many factors. During the housing boom, between 1997 and 2006, many people thought nothing of buying a new home because their original home was likely to sell quickly and at a profit. That changed when the housing market crashed in 2007, and many people started to remodel instead of buying a new house.
If you like your neighborhood, consider remodeling. Think about the people who live near you, the school district and your proximity to the places to which you routinely go. If you are happy with all or most of those elements and if you do not need to move for at least five years, remodeling is probably is a good idea. If you are dissatisfied with any or all of those aspects of your current home and can afford to buy a new house, that might be the best option.
If you can take out a home equity line of credit for a low interest rate, you can use it for home improvements. When the housing market is slow, builders have less work and might give you a better deal to remodel than during a housing boom. In February 2011, Bernard Markstein, senior economist for the National Association of Builders, told Josh Garskof of CNNMoney that many contractors were bidding 10 percent to 20 percent below what they had charged when the real estate market was strong. Moving, even when housing prices are low, is more expensive than improving. The commissions you would pay a real estate agent could go toward remodeling.
It is typically unwise to remodel to the point of making improvements that exceed the other homes in the neighborhood. Obtain an appraisal of your home. Then, look for homes nearby that have recently sold with improvements similar to the ones you want to make. To determine whether remodeling will be worth doing, consider how much your improvements will cost and compare that with the price your home will likely bring. You also must factor in the cost of moving. If it will be cheaper to remodel than to buy a house with the features you want, then you might want to remodel. Choose your project wisely. For example, if you just don’t like the colors or style of your kitchen, but it is only 10 years old, it might not be worth it to remodel. But if the kitchen is from the 1970s, then it probably would be worth it.
If you already have a buyer lined up and a home you want to buy, it probably makes sense to buy the new home. Remodeling can be an uncertain process, and it can cost more than your original budget projection. Unexpected problems could occur, and materials that must be delivered could be delayed. Having a buyer and a home already set could drive a decision to buy the better one.
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