Stay Put and Remodel — or Move?
A New Year ushers in new resolutions, which often includes changes on the home front, but deciding what to do with it can be tough for home owners, financially and emotionally.
As the real estate market rebounds and buyers increase in number, help your contacts make a well-informed decision on the direction they should take with their home. Your insight is valuable when customers are torn between selling in order to upgrade and remodeling their current space to add value and meet their needs. Even those who don’t list and sell with you now may do so later, and even refer friends and family because of your attentive service.
Here are seven key steps to help clients arrive at the best solution:
1. Ask home owners to share what bothers them most about their home, such as the traffic pattern, lack of a certain room, or absence of light.
Help clients analyze how they use their house and determine what features are missing that they want. Changes can often be made within an existing footprint, even without adding square footage. Walls can be taken down, doors removed or changed, and windows enlarged. Home owners who have been in their house for years are often only using certain rooms because of a pattern they established early on.
“Many fail to use 30 to 40 percent of their space,” says contractor Randy Tapper of RHT Design and Construction in Deerfield, Ill. He tries to guide clients toward changing their layout, so they use all spaces, before he suggests adding. Architect Duo Dickinson, author of Staying Put: Remodel Your House to Get the Home You Want (Taunton Press, 2011) concurs, and says removing walls and adding openings rather than increasing the home’s footprint can tackle a great percentage of challenges.
2. Help home owners study how their house is sited.
Discuss together the land your clients’ house sits on — both the topography and condition — as well as how it’s oriented toward views. If the site always leaks ground water, has absolutely no trees (or terrible ones), or includes hideous views, then remodeling likely won’t fix your clients’ issues, Dickinson says, and selling becomes a more viable option.
3. Ask clients to talk about their neighborhood.
If they’re very attached to their neighborhood, including the area's retail, schools, and, perhaps, proximity to major thoroughfares, it may be worthwhile for your clients to “build their way out of their home or site’s challenges — and stay put,” says Dickinson.
Sometimes, pleasant memories, such as where they raised their children or watched a daughter marry in the backyard, may outweigh the option of moving.
4. Remind clients to factor in their time frame and family needs.
If your clients plan to be in their house a long time — at least five to 10 years — making significant changes, such as adding rooms, building a sunroom, or finishing a basement, may provide a worthwhile payback and incentive. If, however, they’re empty nesters and ready to downsize, then remodeling may not be the most prudent financial decision. Here’s where a good financial planner can help them assess their home’s value in relationship to the rest of their assets and needs; a mortgage lender also should be tapped to discuss the costs of a new mortgage, if they need one.
But, exceptions abound, even for empty nesters. Some may decide to stay put. If their children and grandchildren visit regularly, they may decide that remodeling, or even adding on, will be the magic bullet for them to enjoy their home for years into the future.
5. Suggest that clients consult contractors, designers, architects, or structural engineers, and get multiple bids, for a realistic estimate of what changes might cost.
It’s worth paying professionals for an hour of their time; some will even provide it gratis, says Dickinson. These professionals can look at a home owners’ current house, listen to what they want, appraise its condition –—including what an untrained eye may not see — and estimate costs of new work.
In addition, if the house was built more than 30 years ago and hasn’t been updated, it may require new wiring or plumbing, a new HVAC system or roof, and better insulation. A new survey may also be worthwhile depending on what changes might take place, especially if it’s dated.
6. Compare the appraisal and remodeling costs with other neighborhood homes for future resale.
Even though home owners should base decisions in large measure on enjoyment and not wholly on resale value, it’s smart to have an idea of how changes will affect the house compared with others nearby, says real estate attorney and Brooklyn Law School Professor David Reiss.
It’s never smart to overbuild for an area. The type of improvement can also affect the value. Remodeling changes may add to the house’s worth without changing real estate taxes, while an addition will probably cause an uptick in taxes.
Help home owners by showing recent comps for homes of a similar size and quality and in a similar area, says Dickinson.
7. Seeing is believing: Besides showing clients comps, take home owners to see what’s available in their price range in neighborhoods they like.
A new house may offer a better layout, the right number of bedrooms and bathrooms, an updated kitchen, or a nice yard. But clients should also remind clients that even the home they buy may need some remodeling tweaks, like new paint, carpet, or an overhaul of an outdated master bathroom. Help your home owners factor in the cost and time of these changes as they weigh their final decision.
Here, too, it might prove worthwhile to bring in a contractor or architect to estimate costs of any big changes such as new insulation, removing some walls, or finishing the basement.
Dara Shlifka and her husband Aric went through these paces when they decided they needed additional space for a home office in their 1968, Colonial-style, 2,400-square-foot suburban Chicago home. Initially, they were convinced they’d move, since remodeling and bids for additions came in sky-high — $250,000 and above. They house-hunted in a broad price range, from $400,000 up to $800,000, Dara says. But before they found a house, they asked one more contractor for ideas. He suggested converting their living room to an office and building a 600-square-foot addition with a bigger kitchen and a new family room, powder room, and laundry and mud rooms, and his bid came in at only $120,000, which convinced them to stay. “We’re almost done, but already I feel I’m living in a different house,” she says.
Bottom line: Advise home owners to make this big decision carefully based on all of the facts. In the end, they’ll be happier, and happy clients are your greatest asset.