You’ve outgrown your starter home. It seems a good time to move up.
But might it make better sense to stay where you are and remodel? There are several factors to take into consideration when making a decision.
“The market nationwide is unbelievably good,” says Daryl Jesperson, president of RE/MAX International, which franchises 3,000 offices and 50,000 sales associates in 29 countries.
Because there are no high inflationary pressures currently, Jesperson says that properties are moving well.
“This is driven by low interest rates, a great economy and very low unemployment,” he says. “There’s a lot of prosperity out there…We have the highest homeownership rate in the history of our country” — 65 percent.
So before you remodel, consider: location, location, location.
Jesperson laughs about the decision to move up or to remodel.
“There’s another choice,” he says, “and that is to renovate or to step down.”
Because of changes in the capital gains tax, more and more baby boomers are selling high-priced properties and buying “down,” investing their capital, or perhaps buying a second or resort home. Some are giving excess equity to children, allowing them to enter the housing market.
Jesperson suggests the family sit down together to make what he terms a very individual, personal decision based primarily upon looking at where they want to be in five to 10 years.
“If you invest in renovation,” he says, “it’s going to take you probably five years to get the full value of your investment back.”
You must look not only at your house, but also at the neighborhood. Are you happy with the amenities in your neck of the woods? Satisfied with the quality of education in local schools? The shopping? What social amenities do you enjoy right where you are? These lifestyle considerations are extremely important.
“Once you determine you’re in a location you’re really, really happy with, you look at the house itself and decide what to do with it,” Jesperson says. “The more grandiose your renovation plan, the longer you’ll have to be willing to live there to enjoy it.”
Jesperson predicts 50 percent of your renovation dollar comes back to you immediately; the other 50 percent takes longer. When making your decision, Jesperson suggests you look to the horizon. Might you be transferred? Do you anticipate significant family changes? The kids are going to college, or moving out. Grandma and Grandpa may be moving in.
There are always stories about the couple who have a beautifully renovated home, then get pregnant with triplets and no longer have enough house.
Before you consider a move, think about your reasons for moving up. They might include a job promotion with attendant pay increases, an increase in family size, a need for more family or entertaining space. Provided your location is a good one, these might be remedied by a good, well-planned renovation.
Bear in mind, however, that home remodeling is often complicated, inconvenient and expensive. Make certain to avail yourself of trusted advisers, and reputable, licensed and bonded contractors. Check your prospective remodeling firm with your local Better Business Bureau.
“Some are brave and will have everything knocked down to the studs,” says Jan Atkins of Santana Properties in Santa Barbara. “More often than not, they are surprised how long it takes to finish this new masterpiece and how much it costs.”
Complaints about remodelers are the most frequent category of grievances made to the American Homeowners Foundation, a nonprofit independent educational and research consumer organization. The foundation offers a 227-page home remodeling organizer for $15.95.
In conjunction with remodeling contractors, attorneys, architects and homeowners, the foundation has also developed a comprehensive, six-page home remodeling contract that includes two pages of general provisions designed to provide fair and equitable treatment to all parties. That one costs $7.95. The association can be reached at (800) 489-7776.
Say you want to move up to a vintage fixer-upper. Take my friend Robert’s advice and buy the worst home on the best street in the best neighborhood. Several years ago, he purchased an older home that needed lots of work. Thoughtfully, he remodeled kitchen, pantry and living space, knocking out walls and refurbishing hardwood floors, all the while carefully preserving the period flavor of the home.
The result is certainly a treasure whether he decides ultimately to sell or to stay. Robert has a most beautifully renovated classic property in a fine old neighborhood. And the market is hot.
If you’re not creative and handy like Robert, it’s best to hire an architect or a design-building contractor, says Atkins. “You need advice about how simple you want this project to be without going beyond your budget.
“If you have a fresh, renovated home,” says Atkins, “you may be accosted on the street by a buyer.” And if it’s your “old” house you decided to stay with and remodel, you have yet another chance to ponder a change. Change is scary, though.
“It takes some serious life planning if it’s going to work out perfectly,” says Jesperson. “It’s not a perfect world.”