Upgrade home or buy bigger one?

skinut2234March 15, 2007

We bought a small ranch 3 years ago- It's getting too small for our family of 5. We think it's probably worth around $425,000 (we live in the Northeast)- We estimate it will cost over 100,000 to add second floor and more bedrooms etc etc. Are we better off buying a bigger house? I'm not sure what would be more of a strain financially. There is a bigger house for sale down the road for 550,000- The way I figure it- I'm up around that much now with the amount of $$$ I need to make mine bigger

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Lots of questions:

- Do you know for sure that you could add a second floor to your current house? If that's not a for-sure, you're house-shopping or expanding the footprint (if that's possible).
- How much equity do you have in your current house? As the housing market ices up in some places, prices are easing and what you may be able to pull out of the house after sale minus selling costs minus moving costs minus the cost of a mortgage loan for the new house may leave you in good shape for another house ... or it may not. You might want to run some numbers to figure out just how much the new mortgage will cost you.
- Do you know that a $550,000 house will work for you? Is that house down the road typical or either surprisingly cheap or surprisingly expensive? I'd suggest doing a little quiet house-hunting (open houses, scan newspaper classifieds, etc.) to determine what the price is for a house which actually will work for you.
- Don't forget also that the bigger house may cost you more in property taxes (depending on how they're calculated in your area), heating/cooling, and maintenance (bigger roof, more paint in more rooms, etc.)

    Bookmark   March 15, 2007 at 10:06AM
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First, the amount that you estimate for upgrade seems way low in my part of country to add the second story. here, for a reasonable remodel/add on is around $150 to $250 per sq ft.

Almost always, it is cheaper in terms of "human energy consumption" and "marriage good will" to move to a move-in condition house than to a large remodel of a current home.

Finances is another matter entirely.

    Bookmark   March 15, 2007 at 12:09PM
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a few things to consider:
1) how much would you have to spend to get your house to sell? Another thread has a discussion on how much people had to shelll out to get their house to sell and it is not always helpful (i.e., the houseee is still on the market)
2) how long would the house be on the market? The market is cooling off rapidly right now and you may have to carry 2 mortgage paymnets for a while
3) how much would you have to pay the real estate agent to sell the house? Typically 6% in fees.
4) How much to pay in closing costs? In this part of NE, it is typically ~4K. Also add the the inspecttor fee, etc.
5) Moving cocts - packing, furniture, etc.
6) I don't know about you, but I would want to do some re-decorating if i would move into an exisitng home. That may include paint, toilet replacement, even little things like new bathroom decor.
7) Now think about all the work you did around your house, landscaping outside (be that a flower patch you started, or a fruit tree). Would you like to leave that behind?? I wouldn't.

So, even if it would cost you $150,00 to build an addition, it is still a better deal (financially and emotionally) to stay in your old house rather than to move to a new, larger one.

good luck!

    Bookmark   March 18, 2007 at 4:05PM
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Adding an extra storey to an existing home is a much bigger undertakng than having built it that way in the first place ... so it seems to me that your cost per square foot of added space would be much higher than the average cost per square foot of the original house, consequently of the amended house as a whole, when you're finished.

So - I hope that you're planning to live in it for an extended period, after upgrade, for you might be hard pressed to get that much extra price, should you choose to sell in the next (quite a) few years.

Also, what's the possibility that there may be cost over-runs, not unheard of in such situations?

Would your budget be stretched to cope with such an eventuality? Could you handle such?

You have a big tent that you can pitch in the back yard, to partially inhabit while the work is going on .......??

If you don't plan to live elsewhere during the upgrade ... is your marriage impregnable? There'll almost certainly be substantial added strains - and for an extended period.

On the other hand ... switching would probably involve in the neighbourhood of $10,000. real estate fees ... which add nothing to the ongoing value of either house.

Quite a number of facets to this project.

ole joyful

    Bookmark   March 19, 2007 at 1:09AM
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