Renovate versus buy new?

In the last few weeks, one topic has come up repeatedly among people I've talked to who are thinking of buying a new home, so I thought I would mention it here. With home prices rising so fast, people are really excited to hear about the values of their own home, but when they think of what the money they will clear in a sale will actually buy them in today's rising market, the excitement tends to fade a bit.

In a lot of cases, people ask, "well, what if I stay put and take the money I might have used to buy a new home and use it to renovate the one I'm already in?"

The answer from a realtor's point of view is that it depends why you are doing it. Do you want to stay put because you love the house, love the location, love the schools and can't imagine living anywhere else? Are you thinking it will increase the value of your home? Or are you doing it because you are concerned about the cost of a new mortgage?

Whether you decide to renovate or move, the cost to do either can be considerable. Some factors to consider in your decision include:

• Do you need more space, or a larger yard?
• Do you want better schools, parks and community facilities?
• Do you want to be closer to family or friends?
• Are you looking for less expensive housing or wanting to downsize?
• Do you want a better neighborhood or a new lifestyle?

Before deciding to renovate, make sure the improvements you are considering are not overimprovements. Consider the neighborhood and market prices of comparable homes in the area. If your home is currently worth $300K and you are considering spending $80K to renovate, will the home be marketable in the $380K range? If not, you may be taking on a great deal of additional debt that you may not be able to recover upon sale. It might be time to accept that this home may have met your needs once, but perhaps it is time to consider moving to a home that fits your needs now.

My advice as a realtor to those faced with this choice is to speak with a contractor and get a valid cost estimate for the improvements you are considering. Then speak with a realtor to find out whether there are any homes currently on the market that meet your needs better than your current home, and ask whether the planned improvements would add enough to the value of the home to merit the cost.

A general rule of thumb is to never spend more than 25% of the value of your home on renovations or improvements. Kitchen and bathroom renovations are usually a safe bet, because they often add more to the value of the home than they cost to accomplish, but other types of renovations can be riskier.

Some guidelines for those considering renovations include:

• It costs 50 percent more to demolish a brick wall than timber
• It is cheaper to extend out than up
• Swimming pools rarely add value (especially in Seattle!), though in some parts of the country, most notably Florida and California, not having one can detract from value
• Architects cost less than you think and can actually save you time and money
• Get at least three quotes from reputable builders and contractors, check references, and check their work
• Consider all your options thoroughly--including moving to a new home--before making a decision.
• If you are doing the work yourself, be sure to get a permit! This will ensure that you don't run into any marketability issues later--and this point is absolutely critical for those on septic considering adding bedrooms to their home.

Here's some more information on the cost vs. value of a variety of remodeling projects.

Seattle Mayor Pulls Support From Monorail Project

Transportation issues aren't really my forte, but there is something about the whole monorail project that has never made sense to me. I don't have an issue with the cost, because it seems like any large-scale transportation project of this nature, whether it's monorail or light rail or roadway improvements or whatever, is going to cost a lot of money and take a long time to pay off. The problem I have had with it is that the proposed monorail project would not really do very much to alleviate what I perceive to be the major traffic problem facing the Seattle metropolitan area.

Combine that with the fact that we have a light rail system also going in. Now to me, as a person living in the 'burbs, it makes more sense to have one mode of transport capable of alleviating our traffic problem not just in the city, but out in the 'burbs as well. And, as a person who has at one time or another done just about every commute you can think of (Eastside to Seattle, Queen Anne and Capitol hill into the city, Capitol Hill to Eastside, Bothell to Kirkland, Fremont to Kirkland, Mukilteo to Kirkland and even Whidbey Island to Seattle!) I don't think the in-city commute is the most pressing transportation problem. The more pressing problem is the people sitting in stop and go traffic from Seattle or Bellevue to points as far north as Marysville and Arlington, as far east as North Bend, and as far south as Pierce County.

People who do those commutes don't do them just because they like their cars, they do them because decent affordable housing is hard to find in Seattle. A family looking for a 3 bedroom house with a yard and in a good school district that only has $300K to spend is going to have a hard time finding that in the city. So they feel they are forced to make the longer commutes. Snohomish county is now one of the 5 fastest growing counties in the nation and Pierce is right up there as well. So you end up with more and more people making these long treks every day. Bus service out to these areas exists but it can literally take hours both ways, only runs at limited times, and just isn't a very viable option for most people.

So, we have these huge traffic jams on I-5 and I-405. It's even a problem for businesses like Boeing that have to use the roadways to move products around. So, it isn't just a quality of life issue for the people who've "chosen" to live in these areas, it's a jobs issue as well.

So just to throw my hat into the ring on this, I'm in favor of the light rail system, and would rather see us spend 11 billion to make that a viable option (for instance, more service on the north-south lines so that it actually becomes convenient to use, and getting the east-west lines built), than continue putting that money into a transportation system that only benefits a small number of neighborhoods.

Over-improvement

We had my husband's parents in town last week, and it is always fun when they come to visit. Went to Whistler for a couple of days and hiked around, watched crazy mountain bikers...it was lots of fun.

While they were in town, we got to talking about the house they just built. It's a beautiful log home, built overlooking a river and 200 acres of federally protected original prairie that the family owns. My parents built the home for a retirement house, because it's near their parents and brothers and sisters. The area has great pheasant hunting as well, so there is some business potential for using the house as a hunting lodge.

Sounds great, right? The only downside is that building costs overran their original loan and when they went to the bank to try to get a second loan, the bank would not lend them any more, since they already had a loan out for about the max of what comparable properties in the area were selling for. It had nothing to do with whether they were good for it or not, or how nice the house was, it simply had to do with the bank being unwilling to take the risk on further improvements to the property in a market that might not support it.

People over-improve their homes all the time, and that's okay as long as they are clear that the improvements are for their enjoyment and that they may not recoup their costs. It's important to remember that there are improvements the market will bear, and ones that it won't. If you have the nicest home in the neighborhood, that may not mean that you can sell your home for significantly more than your neighbors. The value is in the enjoyment of the property while you live there.

To know if your improvements are over-improvements, it helps to make sure you understand whether the local market will pay for the work you have in mind. Talk to a real estate agent or appraiser that specializes in your neighborhood and ask what the value of your planned project will be when completed. Then decide if you want to do the improvements for your own enjoyment or not.