Cover story: Deciding whether to move or remodel

It’s always been tough for homeowners to decide whether to remodel their current home or move to another one that better meets their needs. In addition, the current housing market makes it impossible for some homeowners to move right now.

“Financially, the answer about whether to move or remodel changes based on the market, but the questions homeowners need to ask themselves don’t change,” says Dan Fritschen, author of “Remodel or Move? Make the Right Decision.”

Mr. Fritschen says an economist making a strictly financial decision might suggest moving. While people may have to sell a home for less money, they can buy a larger or higher quality home for much less than in previous years.

“In the heyday of the hot real estate market, the value of someone’s home in most markets was higher than in today’s market, but so was the cost of remodeling,” he says. “Today, the value of homes has dropped, but the cost of remodeling has also dropped by about 20 percent.”

Donald Lynch, president of Lynch Construction Inc. and the Home Builders Association of Maryland (HBAM) Remodelers, says the most important question for homeowners to answer is whether they like the area where they live.

“If someone likes their neighborhood but dislikes some features about their home, it might make more sense to remodel than to move,” Mr. Lynch says. “But consumers also need to give some thought to how long they intend to stay in their home. If they are expecting to move within a few years, it may not make sense to spend a substantial amount of money on remodeling.”

Financially, homeowners need to investigate the cost of remodeling and evaluate the potential appreciation in the home’s value after the work is complete. Balanced against that financial calculation should be the anticipated cost of moving.

Craig Smith, chief executive officer of ServiceMagic Inc., says homeowners need to sharpen their pencils to evaluate the costs and benefits of each possible action.

“The first consideration should be whether they are committed to their neighborhood. A major remodeling job should only be undertaken if you intend to stay in the home for five to 10 years. There is no financial benefit in the short-term for a large project,” says Mr. Smith.

On the opposite side, homeowners need to estimate the cost of moving.

“If you choose to move, you need to include the cost of the real estate transaction - which averages 6 to 10 percent of the value of the home including real estate commissions, taxes and closing costs. Homeowners need to determine how much they will spend to move and ancillary expenses such as making small improvements to their current home to make it sell faster and the need to buy new furniture or window treatments for the new home,” says Mr. Smith. “Then they should estimate what they need to spend to maintain and improve their current home to make a cost comparison.”

Mr. Smith points out that the emotional aspect of homeownership is extremely important.

“Homeowners should think carefully about their neighborhood, including schools, parks and commuting distance, because those aspects are an important part of the quality of life,” says Mr. Smith.

Mr. Fritschen says homeowners can start their calculations either with a remodeling estimate or with an estimate of what they can afford to buy, as long as they are comprehensive in their discussions. Consumers can use a free Remodel or Move calculator available at www.remodelormove.

com to determine which option might be better for them.

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