Renovate Or Relocate? That Is The Question Middle Tennessee
Almost everyday, the news agencies are reporting that home prices are on the rise. Or that mortgage interest rates are the lowest they have every been. So how do you decided if you would be better off renovating your current home or purchasing another home? After the roller-coaster economy of the last few years, it can be a difficult choice.
Many homeowners are still wary from the market crash. Let’s face it, until recently most of us have put off thinking about selling or renovating our homes because neither option seemed to be a smart move financially. Selling was slow and prices were often lower than our mortgage balances. And it did not seem like a good idea to put more money into a home that had already lost so much value. So we have been just sort of in limbo waiting to see what will happen in the real estate market.
But we Nashvillians are a optimistic, hopeful group. And now that the real estate market is looking brighter, we are again thinking about new family rooms or bigger back yards. But how to decide which direction is the best option? Renovate or relocate? Fortunately, a recent article at Money.com called “Renovate or relocate? 5 Key questions to ask” can provide some assistance. Here are the highlights:
Is Selling A Realistic Option?
Start by assessing the prospects of your local housing market. While the biggest rebounds have come in places that were walloped by the real estate crash, they’re not necessarily the best bets for long-term gains. Instead, experts say, many buyers are gravitating toward areas with key quality-of-life features. Good school districts have long been equated with strong home values, says David Figlio, director of Northwestern University’s Institute for Policy Research, adding that “people pay more attention to these things during times of tighter housing values than they do in go-go periods of real estate.” To see how your neighborhood stacks up against others in the area, compare three key metrics: price increases, speed with which homes are selling, and inventory of places for sale (you want a number that’s higher than that of nearby neighborhoods for the first two, lower on the last).
Answer: If you can sell but will walk away without the 10% to 20% cash needed to put down a deposit on a new place: Renovating is the better choice.
Is Remodeling The Better Choice?
During the boom many people threw the old “don’t over-renovate“ rule out the window, but now buyers are again focused on features that fall within local norms. So you’ll also need to determine what changes your house can practically accommodate. A contractor should evaluate your home in person, says Judy Mozen, president of Atlanta-area remodeling firm Handcrafted Homes, to be sure you have the necessary structural support for the project. Keep in mind that certain changes, like adding a story or digging into bedrock, often rack up unexpected costs. Whatever your house can handle, remember that if your goal is attracting future buyers and boosting your home’s value, the bigger projects are less likely to pay off. While simpler, more practical projects, like finishing attics and basements will add value.
Answer: If you can remodel but will need to change the house enough so that it is no longer in keeping with the neighborhood: Relocating is the better choice.
Is The House You Want For Sale?
Another factor to consider is whether the kind of house you want, in the neighborhood you want it, is even out there. Housing inventory is tighter than it’s been in eight years, according to the National Association of Realtors. To find out what’s available, devote a few weekends to hitting the open-house circuit. Even if you don’t end up buying, you may come away with renovation ideas, says broker Wilkie. The search is likely to be particularly difficult if you’re looking for a type of home that’s unusual in your market.
Answer: Be patient and look at what inventory is available in your target areas. Have a clear idea concerning what features are most important in a new home and which you would be willing to compromise on.
What Are The Hidden Costs Of Renovating?
It’s no secret that many remodeling jobs end up coming in over-budget. To get the most accurate estimate, do your own research on the types of materials and finishings you want to use. You may pick very different items — with very different prices — than your contractor would otherwise include in the bid. Shrink that number further by negotiating, offering to pay subcontractors directly, or being flexible on timing may help bring down the bids. And once you’ve settled on an estimate, build in an extra 10% to 20% to cover any unexpected expenses. One big cost that would-be renovators may forget: temporary housing.
However, planning to sell one home and buy another, is not necessarily inexpensive either. Plan to pay real estate commissions (generally 6% of the sale price) and closing costs (an average of $3,754 on a $200,000 mortgage, says Bankrate.com). Even relocating nearby can be pricey; hiring pros to move the contents of a four-bedroom home a few miles away typically costs between $1,000 and $2,500.
Answer: Be sure to include all the costs involved with either renovating or relocating to make a more sound financial comparison.
What Does Your Gut Say?
Finally, don’t force yourself into a decision that really doesn’t feel right. The housing market is still in a state of flux, and you could find yourself in a very different position in, say, six months or a year, when prices may be higher and more homes will likely be sporting FOR SALE signs. Indeed, for some the answer to the renovate or relocate question might be “sit tight.”
Answer: Only you will know the right decision for your family.
Lee Barroll is a Loan Officer at First Community Mortgage in Brentwood and a long time Franklin resident. If you would like more information regarding a home mortgage loan, please contact Lee @ 615-243-1301 or email lee.barroll@fcmhomeloans.com .
