Moving or Remodeling: Which makes more sense?

They like their house, but with their first child on the way, Pete and Kathy Haduch feel they need more space.

The upper level of their Cape Cod-style house in Baltimore County was used mostly for storage expansion. But they weren't sure that improving their 50-year-old dwelling was a good investment.

"I'm comfortable in the house," said Pete, an avid collector who owns nearly two dozen pinball machines.

Kathy also was not unhappy in the house. "I like the neighborhood," she said.

The Haduchs were facing a classic housing dilemma:

Remodel or move to get the features you want?

The answer is as individual as the people involved, but there is some research you can do and some guidelines you can follow to help you make a decision.

Ron and his wife Charlotte recently went through the same process of deciding whether to build an addition on their 70-year-old house or to move.

The two most important factors to them were cost and location, Ron said.

They liked their neighborhood, and they didn't want to commute two hours a day to work. They didn't want to uproot their children from their schools, friends and activities.

"We thought about looking for a more suitable house in the same community," Ron said, "but then we would most likely be sinking some money into it, anyway."

The other factor, and maybe the most important one, is cost. Ron figured that a new house with the features they wanted would cost at least $180,000. A 15-year mortgage at an interest rate of 7.5 percent would carry payments of $1,668 per month; a 30-year loan would cost $1,258 a month. Their current payment was $890. If they borrowed $40,000 for 15 years at $370 a month, the payment would total $1260. The numbers said they could have what they wanted without moving, for the same cost per month as a 30-year mortgage on a new house.

The Haduchs decided to find out what it would cost to expand their second floor to include a master bedroom suite, a child's room, a good-sized bath and some storage space. They had set a tentative budget and were somewhat taken aback when the estimate was nearly twice as high.

Kathy asked a friend who works in real estate to send her figures on what similar houses in their neighborhood had sold for recently (these are called "comps," for comparable sales). And she asked for information on what new houses with the features they were looking for would cost.

One complicating factor was that the Haduchs were in the midst of refinancing their mortgage. Pete figured they were spending about $4,000 in fees and other costs to do that, and that it would cost about $5,000 to finance a mortgage on a new house.

They would have to find the house -- looking in the range of $140,000 --- and add time and moving and other expenses.

"It all added up to about $15,000 in upfront costs," Pete said, "and the floor space (of a new house in their price range) was not really all that much bigger."

Kathy got conflicting advice her parents -- her mother thought remodeling was not worthwhile, while her father thought it might be a good idea to mprove the house to the level of other improved houses in the neighborhood.

"Other improved houses" are often a deciding factor. Ideally, a house should be improved, but not over-improved.

The question you have to ask is, "If I invest $40,000 in this house, how much of that can I hope to recover when I sell it?" If you end up with a $160,000 house in an area where the typical sale price is $120,000, will you be able to sell it for what it's worth? And if not, should you remodel anyway?

You will get varying opinions on the subject.

There is something to be said for getting the space you want in a house you love, but it's probably not a good idea to improve more than 25 percent over the prevailing prices. If you don't overimprove, you will likely recoup most, if not all, of your investment. If you overimprove, you will have to hope that if you do sell the house, you can find a buyer who likes what you've done, likes where it is located and is willing to pay your price --basically the same reasons you remodeled in the first place.

The Haduchs decided to remodel. With the new family member due in August, they felt some time pressure as well and are happy to be staying put.

Ron and his wife also decided to stay and remodel. Charlotte noted that they already made a lot of changes that made the house a particularly personal place -- separate areas for activities for the children, a particularly impenetrable fence for a leaping dog. Those are tiny touches, but when you add them up, they spell home. And that made remodeling the best choice.

To find out how much you can recoup for a particular project versus your cost, for your own area, go to "The REMODELING's Cost vs. Value Report"

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