Move Or Renovate? Explore Your Options Carefully
If you're tired of inadequate closet space and the antiquated bathroom fixtures or if you're simply bulging at the seams, it may be time to make a decision about your home's future. Should you stay and renovate - or would it make more sense to pull up stakes and move on?
There's simply no right answer, and the pros and cons of each alternative should be considered before making your decision. In doing so, here are some factors to weigh:
The neighborhood in which you live. There is a principle in real estate appraisal called conformity that dictates that all homes in given areas be similarly sized and valued. If you upgrade your existing home and, in effect, over-improve for the neighborhood, the value of the less expensive homes surrounding yours will bring your value down regardless how much you invest in your property.
On the other hand, it's important to consider your level of satisfaction with the neighborhood and the surrounding area. If you're currently living in a safe area that suits your needs well and you have doubts as to whether you'll be as happy somewhere else, don't be quick to plant the "for sale" sign in the yard. If you plan to stay in your home for a long time as a result of an upgrade, you may be able to enjoy the improvements whether or not they bring any additional value to the property down the road when you sell.
The functionality of your remodeling project. Another consideration of professional appraisers is the functional obsolescence of your home. For example, if you use an existing family room to create a bedroom that results in an unconventional floor plan, the new room could be functionally hampered - thereby affecting your home value.
Other amenities in your home. If you decide to add on to your home, be aware that once a home gets to a certain size, prospective buyers expect upgraded amenities. Unless you update the entire house along with the addition, other features in your home may be outdated and affect its marketability and selling price.
Home renovations that usually pay off. According to Remodeling Magazine's 1998-1999 Cost vs. Value Report, there are certain renovations that are more likely to be recouped when your home is sold. At the top of their list is a minor kitchen remodel where you could potentially get back more than 150 percent of your investment. Other projects that may pay off are bathroom additions and remodels where you could recover your expenditure. The study suggests that one renovation to avoid may be the creation of a home office. Although it may be helpful to have a home office or required for tax purposes, the addition often will return less than half of your investment.
When it's time to move on. After weighing the pros and cons of staying put and moving on, you may decide that buying another home is the answer. If so, here are some ways to make your house more marketable and get a favorable price for it.
- Make your home appealing from the curb. The first impression a potential buyer gets is an important one.
- Give the interior and exterior a fresh coat of paint. It's an inexpensive way to suggest newness and freshness.
- Make all minor repairs. Leaky faucets, loose knobs and broken doors reflect poorly on your home's condition.
- Remove excesses furniture and stored items. The more empty your home, the more spacious it will appear.
- Rid your home of unpleasant odors. Last night's lingering spaghetti smell may be a turn-off to would-be buyers.
- Open curtains and blinds. Shoppers usually appreciate homes that are light and bright. If necessary, turn on lights to brighten up dark spaces
Since your home is one of the largest investments you'll make, it pays to consider your relocation decision carefully. Consulting with a trusted and knowledgeable real estate professional can make your transition easier. A financial advisor can also help make sure you are financially prepared to reach major goals like saving for a new home or a home renovation.
--Judy A. Rubino, CFP is a certified financial planner in the downtown Portland office of American Express Financial Advisors. The registered office address is 1800 SW First Avenue, Suite One, Portland, OR 97201. The office phone number is 503-525-2898.
