If you’re asking yourself if you should remodel your home or just move on to a new one, there are probably a few things about your home you don’t love — and that’s no surprise. No home is perfect! But when you’re asking yourself that question, you’re really asking: Can my dislikes be changed with a remodel? Would that make financial sense? Is remodeling worth the hassle?
With low inventory nationwide, more homeowners are renovating their current homes instead of moving. According to Zillow research, 76 percent of Americans surveyed would rather use a set amount of money to upgrade their home to meet their needs rather than use it as a down payment on a new home.
Everyone’s home, budget, real estate market and priorities are different. So, settling the remodel-versus-sell debate always varies, depending on who you ask. But, if you’re trying to make the decision for yourself, follow these five key steps.
You’ll incur costs no matter which path you decide to take, and what makes sense for you might not make sense for another homeowner. For some homeowners, moving is cheaper. For others, it makes more financial sense to renovate the house they already have. To find out the more affordable option for you, make sure to consider all possible expenses in order to make an accurate side-by-side comparison.
Most sellers are focused on the profit they’ll make when they sell, and they sometimes overlook all of the expenses related to selling. Keep in mind the following common expenses.
If you’re selling with a full-service listing agent, and if your buyer is using their own agent, be prepared to pay 6 percent of your sale price in agent commission. You can cut back on some of these expenses by using a discount broker, but you’ll have to do much more of the work yourself.
Whether you’re doing a DIY move (and paying for boxes, storage and a rental truck) or a full-service, cross-country move with a professional moving company, everyone pays moving costs in one way or another.
Even if you’re not planning on making any sweeping changes to your home to get it ready for listing, there are always touch-ups and minor repairs that need to be done so your home can attract buyers that will pay your desired asking price. According to Zillow research, U.S. homeowners spent an average of $4,985 getting their homes prepped for selling. This includes things like carpet cleaning, painting, lawn care, staging and cleaning.
Unless you’re deliberately downsizing, you may be considering trading up to a more expensive home. If you decide to sell instead of remodel, and if you want to stay in your same neighborhood or a comparable one, you may find yourself spending more money when you factor in the down payment, monthly mortgage payment and taxes.
Another often overlooked factor to trading up is the cost of both utilities and maintenance, compared to your old home. More square footage? Expect to spend more money heating and cooling your home. Moving from a condo to a single-family home? You’ll probably spend more in lawn care and exterior home maintenance.
Compared to selling, the costs associated with remodeling are a bit more straightforward. It’s all about how much the renovation is going to cost you when all is said and done. And speaking of costs, you’ll want to make sure you set a budget and avoid overspending on the room you’re remodeling. Here’s an example: If your home is worth $200,000 and your kitchen is 10-15 percent of your square footage, you shouldn’t spend more than $20,000-$30,000 remodeling it.
The first step in figuring out how much your renovations will cost is to get an estimate (or three) from a contractor. Make sure you have a specific estimate for each of the following items.
Depending on regulations where you live, you won’t usually need a permit for interior cosmetic fixes, like painting or refinishing floors. But you probably will need a permit if you’re making structural changes, adding square footage, or making updates that involve plumbing or electrical. Also, if you live in a community that regulates the look of your home’s exterior — like paint colors — you’ll need to check into permits and restrictions. In general, your contractor should know which permits are required based on the work you’re requesting.
When you do a project that requires a permit, you’re often also required to submit architectural plans to the city, so make sure to account for these costs. And if an HOA board is reviewing your renovation plans (say, if you live in a condo), you may need to submit plans to the board, even if the city doesn’t require them.
The materials you choose for your renovation project can dramatically increase the cost of your renovation. Dreaming of an upscale kitchen with quartz countertops and custom cabinetry? It’s going to cost a lot more than laminate countertops and builder-grade cabinets. And make sure you decide on exactly what you want before construction starts. If you change your mind mid-project, it’ll cost you.
If your upgrade is anything more than a small DIY project, you’ll probably hire a professional, whether that’s a plumber, electrician, landscaper or general contractor. Labor costs can add up quickly, so keep an eye out for costs you haven’t planned for, like demolition, or time-intensive requests, like intricate tile work.
You’ll want to plan ahead for other renovation-related expenses, like a hotel room if you need to temporarily vacate the home for major work, off-site storage space if you’re refinishing the floors, or dining out if your kitchen is unusable.
You should also decide how you’re going to pay for the remodel. If you’re not paying in cash, calculate how much you’ll pay in interest and how it will affect your finances in the long term. Some of the most common ways people pay for renovations are:
Your local real estate market, and even your specific neighborhood, can make a difference when it comes to deciding whether to sell or renovate. If you live in a hot real estate market, it may make more sense to sell. Here are a few ways to gauge the state of your market:
There’s more to your sell-versus-renovate decision than just money. If you’ve put down roots in your current neighborhood, moving might not be the best idea. Consider these factors:
When you decide to move and once you get an offer, the timeline is pretty much set, with the exception of an unexpected change to the close date. Get a feel for the average time it takes to to sell a house by observing your local real estate market. The biggest question mark is typically how long it’ll take to get an offer. Once your home is under contract, you should be able to predict the time to close with relative certainty.
But remodeling requires more patience and flexibility. Your contractor might tell you the renovation will take eight weeks, but could then end up extending it if they run into changes, issues or delays.
If you’re leaning toward moving for timing reasons, but the prepping, listing and negotiations still seem like a lot of work, consider selling your home through Zillow Offers. We’ll make you a cash offer on your home, and you can schedule a close date so the timing works well for you.
It’s easy to think that a remodel will solve everything you don’t like about your home, but in reality, it’s not a magic bullet. There are some things that a renovation just can’t fix.
Of course, you’re renovating your home so you can enjoy living in it, but someday you’ll probably want to sell, so factoring in how much of your remodeling budget you’ll recoup at resale is important to deciding if you should remodel or sell.
One helpful tool in calculating which renovations will give you the most bang for your buck is the 2018 Cost vs. Value Report, which can be filtered by region. Search through 21 common home improvements to find the ones that will be the most worthwhile in terms of resale value. In the tables below, we’ve chosen mid-range improvements — renovations with middle-of-the-road materials, not luxury finishes.
|Manufactured stone veneer||$8,221||$7,986||97.10%|
|Entry door replacement (steel)||$1,471||$1,344||91.30%|
|Deck addition (wood)||$10,950||$9,065||82.80%|
|Minor kitchen remodel||$21,198||$17,193||81.10%|
|Master suite addition||$123,420||$69,807||56.60%|
|Major kitchen remodel||$63,829||$37,637||59.00%|
|Deck addition (composite)||$17,668||$11,239||63.60%|
Your ROI is important, but so is your happiness, so keep that in mind when deciding on your renovation project. If you love to garden and would get endless hours of enjoyment out of a backyard greenhouse, but it’s not likely to be a feature that appeals to the majority of buyers down the road, that’s OK — you should enjoy your home while you’re living in it.
If your tastes have outgrown your local market, it might be time to consider a move. There are financial risks in creating an extravagant luxury home in a mid-priced neighborhood — when it comes time to sell, you’re unlikely to recoup very much of the money you put into the project.
If a top-of-the-line, luxury or custom home is what you’re dreaming of, you might think twice before renovating your existing home, because there’s a financial risk in over-improving for your area.
Unless you live in a pricey neighborhood already, you can easily over-improve your home, which means that when you go to sell it, you’re unlikely to recoup much of your cost. If you want that high-end home and you can afford it, you might be better off moving into a luxury home in a neighborhood where the market can support the price.
Read original article here: https://www.zillow.com/sellers-guide/should-you-remodel-or-move/