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Should
I Renovate or Move?
Is your family outgrowing your current home? Do you
still love the area and don't want to leave the neighbourhood?
Then you may want to consider renovating or adding to
your current home rather than moving. Take a close look
at both choices, so you can make the best decision for
your needs.
Decide exactly what you're looking for.
First, compile a list of features, separate your needs
from your wants, and rank them in order of importance.
Next, compare the cost of adding the features you're
looking for to the cost of purchasing a home that already
has them.
Consider the value of the other homes in your neighbourhood.
You should take surrounding home sales into account
when you decide whether to make improvements, especially
if you think you may sell your home within the next
few years. Renovating your home to the point where its
value approximates the values of other homes in your
neighbourhood can be a wise investment. However, "over-improving"
your home relative to others in the area may make it
more difficult for you to recover your improvement costs
when you sell. You may want to speak with a real estate
agent to determine your home's current market value
and to help you project what the value could be once
you renovate. Your home's market value is driven largely
by the market value of surrounding properties, and even
an improved home is unlikely to generate a sales price
significantly higher than the value of the other homes
in the area. To get a general idea of the financial
risks and rewards of renovation, try the following steps:
- Contact a REALTOR®
to get recent sales price data for comparable homes
in your area.
- Add your projected improvement costs to the current
market value of your home (you may want to consult
a real estate agent to get an accurate figure),
and compare that dollar amount to the average sales
price of homes in your neighbourhood.
- If the cost of your renovation project plus the
current value of your home comes to less than what
other homes are selling for, there is a good chance
you can recover the cost of your improvements when
you sell. Conversely, if neighbourhood homes are selling
for significantly less than what you've projected
as your home's value after improvement, then recovering
your renovation expense is less likely.
Home improvement can offer great rewards, as long as
you take all these factors into consideration. Not everyone
wants to renovate for the same reasons, so let your
priorities as a homeowner point you toward the option
that's best for you.
Consider the cost of selling and moving.
If you bought your home for $400,000, and it sells for
$500,000, you've made a $100,000 profit, right? Well,
not necessarily. Sometimes you have to spend money to
make money…
Below are some of the expenses you might incur when
you sell your home. (Your situation may vary depending
on where your home is located and other factors.)
Repairs and improvements - Before you put your home
up for sale, you might decide to spend some money to
make repairs and improvements to help increase your
sale price or even decrease the taxes you pay on the
profit you make.
Real estate agent - Your real estate
agent's sales commission will vary depending on where
you live and the sale price of the property.
Professional inspection - Buyers will usually have their
own inspection done, but it's useful for you to have
one done before you put your house on the market.
And, once your house is sold, you will have added moving
expenses, such as:
Moving - Professional movers, moving insurance, moving/packing
supplies, food and drinks for movers and helpers
Utilities - Deposits, phones, alarms (if applicable)
Travel - Air fares, pet transportation, car/truck rental,
meals, hotels/motels
Consider the commitment.
Compare the time, effort, and inconvenience of buying
a new home to that of renovating. You've been through
the home buying process before. How much time and effort
did it take? Think about the current housing market,
and the availability of homes in the area where you'd
like to live. Also consider your financing options and
how they fit into your current financial situation.
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