Moving vs. Improving

When is it time to move and when is it time to remodel? It's largely a question of doing the math. But the decision also depends upon your unique situation at a given point in your life.

Moving around town

Experts generally agree, it's cheaper to renovate your current home than it is to move to another resale house in the same neighborhood.

When you add up the commissions and other costs to sell your old home and buy the new one; the cost of a new mortgage, including escrow costs; and the cost of the physical move; unless you plan to tear down your old home and rebuild it from the foundation up, improving is much cheaper than moving.

This is especially true in hot markets.

"If you buy a house in today's market you pay the same price for a crummy house as you do for a good house," says Montara, a California-based general contractor, Tim Perry, author of "The Book of Home Purchase" (Bergamo Publications, $19.95).

Assuming you are moving from one resale home to another, according to Perry, "If you are going to move across town or across the street, you are going to pay a premium."

Wall Street Journal study found that when you include not just remodeling cost, but factor in what you can expect to pay in maintenance and upgrades on a resale house over the next 30 years, you'll have a money pit on your hands.

"In fact, some experts say that it may actually be cheaper to buy a new or fully remodeled home every 10 years than to deal with the mounting repair problems that occur as materials fail," the Journal reported.

Moving out of town

If you must move, to take a new job or to be closer to loved ones, should you make improvements in your home before putting it up for sale?

"If you are going to move out of area, don't even think about remodeling. You are not going to get back all the money you spend in any market," says Kimberly Brangwin, managing broker at Coldwell Banker Bain Associates in Seattle.

"Besides, in this case, it makes more sense to put that money in the new home," Brangwin added.

It's also not a good idea to make major improvements in your current home if there's a good chance you'll move within or out of town in the next few years, unless you are willing to gamble the cost vs. return will be in your favor when the time comes to move.

The market could be favorable, pointing to high cost-vs.-return values today, but no one can predict how volatile your real estate market will be tomorrow.

Though each homeowners situation will be different, in today's resale market a "move up" has the potential to be a big financial step down. Baring a compelling reason to move, the smart money may well be on remodeling.

--Broderick Perkins