Moving vs. Remodeling: Pros and Cons
Remodeling may not be as exciting as buying a new home, but it could be more cost-effective or is it?
Home prices have been rising dramatically. In 2019 home prices in Michgian were up 6%. Don’t forget to factor in how low-interest rates are currently though as this has a huge effect on your payment and life long cost of the loan. (Check out our previous post regarding how interest rates impact payment)
Obviously, rising prices are a huge consideration for anyone considering moving. Sellers may receive a higher sales price for their home, but they’ll likely pay more when they go to take out a mortgage for a new property. Plus, there are other costs to be aware of. Surging sales prices can also mean higher prices for other essentials, such as homeowners insurance and property taxes. All of those expenses can and will add up over time.
Should you move, or should you remodel? Experts we spoke to say you should consider the pros and cons of both options before you take steps in either direction. Here are some of the advantages and disadvantages to consider:
Advantages of Moving:
- You can physically move your location. Tim Bruce of HomeCraft Real Estate in Plymouth says one of the biggest advantages of moving is the fact that you get to select a new place to call home that will be a better fit for your family. Depending on your situation and preferences this could be a large home with more space, a smaller place with a first-floor master bedroom, or a different school district. Some features of a home can’t be changed including location and school district.
- You don’t have to live in a construction zone. If remodeling your home would require an invasive project like a bathroom or kitchen remodel, moving could save you from dealing with the mess and the stress. A major kitchen overhaul could leave you without a place to prepare food for months, after all. This can be inconvenient and costly. According to KBR kitchen and bath a kitchen remodel can cost between $40,000 – $70,000 and take up to 4 months.
- You don’t have to deal with contractors. While remodeling your home could seem ideal, dealing with contractors is rarely stress-free. There are always hiccups when you remodel or build, and not everyone wants to deal with the drama or the expense.
- You can purchase a home that’s 100% turnkey. Tim Bruce of HomeCraft Real Estate, says that moving gives you the option to buy a home that’s already been remodeled and upgraded to your specifications. If you buy a home that’s in great condition already, you can pack up your stuff and move right in after closing. Plus with today’s interest rates and the amount of equity most homeowners have this might cost less than you think overall.
Disadvantages of Moving:
- You may not get exactly what you want. One major reason home prices have been rising is the lack of inventory – and that means you may not have a ton of options in your desired area. According to Tim, it’s pretty common to find homes that check off some of the boxes you want — but not all of them. “This means you’ll probably have to compromise on a few wish list items,” he says depending on your budget.
- You may have to leave an area you love. If you love your current neighborhood and can’t find something bigger in your area, leaving the area to get what you want can be a major disadvantage. You may love your new house, but what if you don’t love your new neighborhood or your child doesn’t like their new school?
- Buying a home and moving can be time-consuming and stressful. Bruce says that sometimes making a move can be stressful especially with today’s inventory flying off the shelves with the most updated listing being on the market for under one week. This is where selecting the right agent can make the biggest difference as they bring knowledge, experience, and they know how to handle stressful situations even with the current changes in the real estate market.
- Moving is expensive. While you might find a “deal” on a new home that brings it within your price range, don’t forget the costs of moving can add up including fees that are required when you sell and closing costs when you purchase.
Advantages of Remodeling:
- You can plan a remodel to meet your exact specifications. Justin Sharer of Sharer Design Group in Plymouth says that you can create a comfortable and functional space for you and your family to spend time in. It’s also a great way to show your unique style and really put your own stamp on your home. Remodeling can change the entire look of your home and the way your family uses your home. Our design services are available virtually now if you’d like to get the process started.
- You have a partner through the process and can support local businesses. Justin Sharer says that with Sharer Design Group, we help our clients realize their home’s potential. We oversee the entire process, from design to installation. We coordinate all aspects of the project so that our clients can enjoy an easy and stress-free experience, while also completing the project in a timely manner. We also offer several lines of high-quality, Michigan-made custom cabinetry, allowing us to create spaces that fit the unique needs and styles of our clients. Visit www.sharervirtualdesign.com to get started with your project!
- You may be able to use home equity to pay for the renovation. If you have a lot of home equity, a home equity loan or HELOC would allow you to use your home as collateral and borrow against its value to pay for the remodel. Borrowing against home equity can be less costly and less of a hassle than taking out a new home mortgage as well.
- If you love your neighborhood, you don’t have to move. Remodeling lets you stay where you’re at, which can be a huge advantage if you love the local schools, your neighborhood, or the area in general.
Disadvantages of Remodeling:
- You’ll probably face some surprise expenses. Sharer says it’s extremely common to run into unexpected issues during a remodeling project. “This is especially true if you are taking on a large-scale project that includes tearing down walls, moving plumbing, adding gas lines and so forth,” he says. Unfortunately, these surprise expenses can cause your remodeling budget to increase but working with the right company most of these items can be budgeted for in advance.
- Remodeling can be a pain. Bruce says that the home improvement process can be mentally tough, especially when you’re dealing with budgets, contracts, contractors, product selections, and potential delays. Depending on how intrusive the remodel is, you might have to live in a construction zone for months or even stay with family or in a hotel during the worst of it.
- You may not get your money back out of your remodel. While remodeling your home can be cost-efficient, most remodeling projects cannot offer a 100% return on your money. According to the 2018 Cost vs. Value Study from Remodeling Magazine, a minor kitchen model brought an 81.1% return on average nationally last year — meaning a $20,000 kitchen remodel would only increase a home’s value by about $16,220. However, those who paid for a major kitchen remodel only recouped 59% of their costs during resale.
Other Issues to Think Through
In addition to the considerations above, there are financial implications that come with both choices. Tim Bruce says you really have to run the numbers on how much equity you have in your current house, the price point of what a new house will cost, and whether either option will leave you better off financially. Don’t forget that homes appreciate in value so moving to a newer or more expensive home usually means more appreciation per year.
On the flip side, there are times when you don’t have much of a choice in terms of what to do. Bruce notes that remodeling isn’t always an option, since there are times when even a full remodeling project won’t address the biggest problems with your home. If you live in a condo, for example, you probably can’t just add a room for more space.
Finally, don’t forget that moving may have tax consequences that could be either good or bad. For that reason, it may be wise to consult your financial advisor or accountant to see how selling your home or moving could impact your bottom line.
Move or Stay Put? Here’s How to Decide
While there are no hard and fast rules to determine whether you should sell your home or stay put, realtor Raad Alawan, EXP Realty in New Braunfels, Texas says there are plenty of questions you can ask yourself that will help you decide.
- What’s most important to you about buying or selling?
- What’s buying or selling going to do for you and your family?
Once you can answer both of these questions you can look at the process of moving more objectively and decide if it is the right move. I love talking through motivation with my clients so I can help them solve their problems by finding the right solution.
Also consider how your lifestyle will come into play — both today and tomorrow, says Raad. Are the kids now out of college and starting families on their own? If they are or soon will be, you may not need a larger home at all and could benefit from a simple remodeling project to improve your home’s flow or make it more comfortable.
Also consider your finances. Moving can be extremely expensive, but so can remodeling. Before you choose either option, make sure you can truly afford it. Money you borrow will ultimately need to be paid back, so you should be prepared to pay for your dream home for the long haul.
Finally a few tips from Raad on how to reduce stress during a move.
- Get any inspections done before you list so whatever needs to be done can be without you feeling rushed. For example, if you live in the country and have well water, and the well is outdated or has bacteria, then replacing it and re-inspection can take weeks.
- Have your new place picked out, or you’ll be homeless. This can be addressed by agreeing to occupancy with the new buyers, whether it’s a month or two or more.
- You want to make sure you box up everything you’re taking or put it aside somewhere in storage or get rid of it.
- Line up a moving company or any other contractors needed in advance. Make sure you know their availability and general pricing so you can have this budgeted.
Written by Robert Yoder at HomeCraft Real Estate