Question: It doesn’t appear that interest rates are going to go down anytime soon. I’d love a brand-new house, but I am not sure if I should remodel my current home instead. What are your thoughts about buying new vs. remodeling when the interest rates are so high?
Answer: Interest rates are expected to rise over the next 12-18 months (currently 7.74% for a 30-year fixed mortgage). There is also a decrease of new home-building permits. Because of those factors, the trend is for homeowners to stay put and invest in their existing homes, as a new one will be much more expensive in light of the last decade of appreciation and today’s interest rates.
Millions of homeowners across the country are weighing the same considerations. Sure, the interest rate is still high for a home improvement loan, but that loan is likely to be considerably less than a new home loan.
If not buying a new home and staying put is what you decide to do, the conversation then becomes what are the most critical areas of improvement or modification that should be the priority? What seems the most broken? Is it dated finishes, a clumsy floorplan or a re-purposed space?
Who can help with this analysis? Realtors, showrooms, distributors and referrals you collect from others who have already gone through this process can help you determine whether buying a new home or remodeling your current home is the best option.
If you decide to remodel
Before hiring a contractor, start the process with Rosie’s How To Choose A Contractor Consumer Guide (available at tucne.ws/1mek), which outlines the steps from checking the Arizona Registrar of Contractors website to interviewing, and digging deep into a prospective contractor.
There are some critical questions you need to ask a potential contractor.
One of the most important questions is whether they are licensed by the ROC. Choosing an unlicensed contractor leaves you without recourse should the contractor fail to keep a timetable, provide poor-quality workmanship by cutting corners, or simply take your down payment and never return to the job. Besides, contracting without a license in Arizona is illegal.
A contractor that skips the permitting process will, not maybe, will, cause project delays that last months, if not years, and potentially cloud your home with hidden dilemmas and problems.
A lot of important work goes into the project’s preparation and design phase. This is where every detail, every material and every fixture, such as cabinets, colors and finishes, are decided. Sounds like an ominous task, but with the right designer and contractor, you will be led step-by-step through the process of making your home look and feel brand new.
The design phase takes time. Your designer and contractor must be with you every step of the way, helping you make choices and decisions as they show you what your project looks like.
A qualified remodeler will convey what your remodel will feel like when completed. When choosing a contractor, selecting a firm with in-house design capabilities is important. Communication between the designer and builder must be clear and timely.
Considering that you went this route to save money, creating and staying within your budget is critical. Squash your inner cheapskate. Don’t shop for the cheapest price.
If you are shopping for the cheapest price, there is nothing I can say to help you choose a good contractor.
Check out Remodeling Magazine’s Cost vs. Value Report at tucne.ws/1ocg to establish the likely costs associated with several projects in your area. One piece of information you can glean is the potential return on investment, typically within a year or two from the date of the project’s completion.
Always do your homework. Whether you buy a brand-new house or remodel your current one, this is a huge investment that needs a lot of consideration and protection.
