It’s Wednesday and you know what that means...
Words of Wisdom from the Real Estate Mom!
Today I’ll answer one of the wonderful questions I’ve received from a reader.
Remodeling can be a pain. Your house is in disarray, you’re doing the dishes in the bathtub while the kitchen is destroyed, you have to go to Wendy’s to go to the bathroom, you can’t find your socks, the wallboard dust has seeped in between the pages of all your books, and there’s no place to sit down let alone have anyone over for a nice cup of tea, the contractor has just yelled “Uh oh!” for the fourth time today as he discovers the plumbing isn’t connected to the sewer and it’ll be $5,000 more to fix the problem, and you know all the contractors better than family members because they’ve “lived” with you for so long! Well, you get the drift.
“How do you know when it's smarter to buy another house vs. fixing up or remodeling what you've got?”
However if you LOVE your home and your location, if you have an artistic flair and want to create your own space, if buying another home in your area with the amenities you're seeking is not a reality, if your remodel would not put your home out of the price range of the other homes on the block, and if you have a high tolerance for pain, then remodeling may be for you.
If you do opt for the remodel make sure to budget 20% above the quoted costs for over runs. Take a page from Steph and Bob’s book. Their remodel cost them all of their cash reserves and then some and the project took twice as long as they anticipated. The results were beautiful and the area they lived in could normally support a home of greater value just not in this market.
My advice- and remember this is coming from a die hard remodeler- in today’s world it is probably cheaper and smarter to buy rather than remodel. Now this is just MY opinion but here’s why I say this. Money is cheap right now to buy a home. If you have good credit you CAN get a mortgage at 5.3% 30-year-fixed rated with no points. The market nationally has adjusted downward about 20% making wonderful homes available for about what you would have paid for them in 2000. You may be able to move up to an area that was out of reach before. There are many short sales and foreclosures out there that are great opportunities if you have patience (waiting for the bank's approval) and are willing to buy a home without any warranties. Your costs in moving are a known while the remodel holds many surprises. I remember reading an article that said most people who remodel move within 5 years of that remodel, because the project didn’t meet all their needs.
But do remember, your current home has to be priced realistically for the market today. If you bought your home between 2004-2007 you probably paid top dollar for it. In order for a home to sell today it must be priced competitively AND in perfect condition. We’re calling the current market a “Price War and a Beauty contest” but that’s another post.
I suggest having three Realtors do a Comparative Market Analysis (CMA) on your house that will give you an idea of value in today’s market. At the same time, describe to the Realtor you chose, what you’re looking for in your next home so they can send you listings of what’s available. You can also go on Realtor.com (the site of the National Association of Realtors) Zillow, etc and look at available listings in your area yourself.
Hope that answers your question, Gabrielle. Please keep the questions coming, and I’ll do my best to get the answers to you.
On another note, I just want to say that I'm getting so much from reading the comments on Steph's last post - B is for...- about Bankruptcy. Thank you for the thoughtfulness in your comments and the great tips about what works for you in budgeting and managing your finances!
Until next Wednesday,
Pam- The Real Estate Mom
P.S. Make it a great day (my dad's favorite saying that I'm adopting)!
Photo Credit: Bob took this picture of their kitchen during the remodel. Needless to say, they used their microwave A LOT!