Deciding whether to renovate your current home or buy a new house can be emotionally fraught and financially complicated. As well, there may be aspects of the “stay vs. go” equation you may not have contemplated.
To figure out the factors involved, we spoke with real estate expert Brendon DeSimone. DeSimone has more than a decade of residential real estate experience across the U.S, and is the author of “Next Generation Real Estate: New Rules for Smarter Home Buying & Faster Selling.”
Here’s a quick rundown of considerations:
Early Estimate: Ask a realtor to provide you with a comparative home analysis, to estimate the value of your current home. Next, obtain a preapproval from a mortgage specialist to find out how much you can afford. “Then ask your agent to show you houses at that price point for a few Sundays,” DeSimone suggests. Are they superior to your house, or only a little? Is it better to renovate your current home? “Are you going through a lot of stress just to get an extra bedroom?” DeSimone asks.
Location Limits: Do you love your where you live right now? If you adore your neighborhood or town but your house just isn’t right-sized, consider adding on, whether that’s another bathroom or second story, DeSimone suggests. On the other hand, families may weigh the desire for a new school district with better academic programs, and some individuals might want to move closer to work.
Renovation Reality-Check: Hire an architect or contractor to help pinpoint issues with your current house and decide what you need from your home, he suggests. Get estimates on how long adding a second story might take, how much it might cost and “whether you have the stomach for that,” DeSimone says.
Stress Tolerance: Buying and selling at the same time can be stressful, DeSimone warns. It can take months to organize your home and put it on the market. “There’s a lot of financial and emotional uncertainty when buying and selling,” he says. “You may not get the sale price you want, or end up in a smaller house. There are so many unknowns.”
Contingency Acceptance: In some markets, contingency offers are allowed, where your bid for a house is contingent on the sale of your former abode. In other markets, home-buyer feeding frenzies can prohibit contingent offers. “When you put your house on the market, you have to decide if you’ll buy a new house first,” DeSimone says, or make a contingent offer. If contingent offers are out of the question, a temporary rental may be required after selling, while looking for your next home.
Closing Costs: It may be much less expensive to stay in your house and renovate, after figuring in closing costs, commission, title insurance, and additional transaction costs involved in your home sale and purchase, DeSimone notes. Don’t forget to calculate those costs.
Rate Realities: If you purchased your home years ago and have a higher interest rate, compare keeping your mortgage – perhaps refinancing to make upgrades – or possibly finding a lower interest rate and a new house, DeSimone says.
Move Motivators: Who are the individuals most content with a decision to sell? Those who’ve completely outgrown their current house and adding on isn’t an option, or who are too busy to manage a big reno project, DeSimone observes. As well, those who have a small lot, need to move closer to work, or don’t want to invest in creating “the best house in the worst neighborhood,” DeSimone says.
Downsizing Decisions: Those in their 50s and 60s are often uniquely ready to leave behind the maintenance (and lawn) of their current home, DeSimone says. Trading in the three-bedroom home for a low-upkeep city condo provides more opportunities for enjoying the retirement years.
Making a final decision is as personal and individual as the home you’re thinking about giving up (or buying). But with the right calculations and information, you’re closer to finding a solution that works long-term for your financial, physical and emotional health.