At its foundation, my job as a wealth manager is to help clients effectively allocate their hard-earned capital. While there are many important decisions along those lines, the decision to remodel an existing home, or move to a new home, is one of the biggest as it can prove costly if not well thought-out. When contemplating these two courses of action, follow the recommendations below to help make the best possible decision:
- Make a list of your priorities
Everyone is different, but when most people evaluate where to live, they often prioritize the following: affordability, size, quality of the school system, distance from work, distance from family members, etc. While this list is not all-encompassing, use it as a guide to come up with your own priorities. Recommendation: Make a list of what you want out of a home, and then assess how your home addresses those needs and where it is lacking!
- Evaluate the Costs of Remodeling vs. Costs of Moving
Costs of Remodeling: First, engage a trusted realtor in your area to review the changes you would like to make with your home (**You may have to pay them a small fee, but it is well worth it as a realtor can give guidance on how to get the most out of your remodeling dollars, and also ensure you do not overbuild for your neighborhood**). Next, receive at least three quotes from reputable contractors in your area to gauge the price of the recommended changes (**Make sure these quotes include total costs of the project**). Anticipate overages of at least 15% as it is rare construction projects come in at, or under, budget. Lastly, determine if you will be able to remain in the house, or be forced to move, during construction. If you are forced to move temporarily, this will add to the cost of the project.
Costs of Moving: Engage a realtor to determine what your current home is worth, and what the asking prices are for homes that meet your new needs. Do not forget that if using a real estate agent there will be fees associated with the sale of your home on the back end (**Typically 6% of the closing price**). In addition, make sure to account for these additional costs: 1) Costs of transferring furniture and belongs 2) Costs of temporarily owning and paying for two homes if the seller of the new home will not agree to a contingent offer on the sale of your current home and 3) Costs of furnishing the new home (**In my experience there is always furniture from the old home that does not fit, or goes with the décor, of the new home**).
- Compare the Two Options
Once you have established the costs for Moving and Remodeling, it should be easy to determine which of the two options best addresses the needs/priorities you listed above in #1. Remember that arming yourself with as much information as possible about your various options is key! If you have the information, you can make the best decision for you and your family.
Follow The Welch Group every Tuesday morning on WBRC Fox 6 for the Money Tuesday segment.
Fox 6 Talking Points:
- Make a List of your Priorities
- Evaluate the Costs of Moving vs. Remodeling
- Compare the Two Options
Marshall Clay CFP, JD, is a Partner and Senior Advisor at The Welch Group, LLC, which specializes in providing Fee-Only investment management and financial advice to families throughout the United States. Marshall is a graduate of the United States Military Academy in West Point, New York, the Cumberland School of Law in Birmingham, Alabama, and is a CERTIFIED FINANCIAL PLANNER™. In addition, Marshall is a frequent guest on local television stations as an expert on various financial planning matters. Visit The Welch Group Web Site at www.welchgroup.com. Consult your financial advisor before acting on this advice.