The decision to remodel or move is a personal choice. However, before you fall in love with the idea of renovating your home, carefully consider all financial costs and implications. In order to make the best decision, you should compare and contrast the cost of purchasing another home with the cost and future value of remodeling. When considering options, factor in the total cost of selling your current home, such as real estate commissions, points and loan fees. Also factor in the costs of purchasing a new home, including escrow costs, moving costs and aesthetic improvements costs.
Now consider the hard and soft costs associated with remodeling. Hard costs consist of the actual construction costs incurred, while soft costs consist of all the other non-physical expenses involved in the completion of your project — which include but are not limited to professional fees such as architectural and engineering fees, permitting fees and mortgage origination fees.
Formulating a realistic remodeling budget and determining how to finance a remodeling project are important steps in the home renovation process. The Remodeling 2013 Cost vs. Value Report* (available at www.costvsvalue.com) is a great benchmark for reality checking your proposed budget. This report contains detailed descriptions of common remodeling projects and their associated construction costs in major U.S. housing markets. When developing a remodeling budget, don’t forget to factor in a contingency reserve to cover unexpected costs such as termite damage or a water leak.
You’ll also need to consider carrying costs if you intend to finance your home renovation project. Work with an experienced home loan advisor who can match your unique needs with the appropriate home loan options available. And remember, the bottom line is how much your budget will allow you to spend.
Remodeling can be a smart investment…if you choose the right project. So, if resale value is a major factor in your decision to remodel, consider the payback for remodeling. Review the Cost vs. Value Report to compare and contrast construction costs for common remodeling projects with the anticipated value those projects add at resale. You should also consult with an experienced realtor familiar with your neighborhood, as well as local remodelers regarding construction costs for proposed projects.
After comparing the cost of purchasing a new home with the cost and value of remodeling, you may find that improving the aesthetics and space of your current home may prove to be more valuable…and more convenient.
*© 2013 Hanley Wood, LLC. Complete data from the Remodeling 2013 Cost vs. Value Report can be downloaded free at www.costvsvalue.com.
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