All homeowners have, at least once, been challenged by the question, "Should I add to my home or purchase a new one?" There is no absolute right or wrong answer, and the best choice is always one that fits your situation and strong preferences. Before making this major financial and emotional commitment, weigh these pros and cons of building a home addition.
Pros of Building a Home Addition
Enjoy a high cost-value ratio
If built correctly, your sparkling new addition may improve your home dollar-for-dollar, resulting in a higher sales price when you finally put it on the market. This, of course, assumes a "normal" real estate market. A depressed home market may or may not warrant building an addition if you plan to sell in the near future. In that case, you might want to concentrate on home shopping to take advantage of depressed prices.
Additions are cheaper
Even in a depressed home value market, building an addition will be a less expensive option than buying a new home with the floor space you want. Should you be strongly attached to your current home, this pro becomes even more significant. You might create your dream home right where you are.
Unlike purchasing an existing home, a new addition can be whatever you want it to be and look however you want it to look. It's like designing your own new home without all the expense of building an entire house from the dirt up.
Cons of Building a Home Addition
You risk "over improving" the home
Every neighborhood or location, regardless of how desirable it may be, has an upper price ceiling. Adding a fabulous addition can come back to bite you. For example, if your home becomes the most expensive home in the neighborhood, you may have trouble attracting buyers when you decide to sell.
Disrupted living quarters
Once you've decided to build your exceptional new addition, you are filled with excitement and enthusiasm. However, the construction noise, worker conversations and disruptions to your living space can destroy your positive emotions. You may just want the dirt, noise and construction to stop.
Extra costs and change orders
If you start with a tight budget, cost overruns and last-minute changes can destroy your carefully constructed financial plan. These events tend to happen whether you're building a medieval castle or simply adding an extra bedroom. Try to closely monitor progress and communicate regularly with your contractor to avoid this fate.
Additions shrink yard space and add utility costs
Homeowners sometimes have an unpleasant "ah-ha" moment when they realize that their prized lawn or yard has mysteriously shrunk because of the new addition. A similar unwelcome surprise is the realization that you're going to need to clean, heat and cool the new room(s). Only then do you realize that you should have given this more thought before the first nail was driven.
The Bottom Line
In most cases, if you like your home and neighborhood, it's wise to build the addition you want to get the space and look you crave. Be careful not to over improve your property and be aware of the other cons. This will help you have a relatively stress-free and enjoyable project. Don't forget, choosing to build an addition in lieu of buying a new home also eliminates the pesky costs that come with moving.
Stock AnalysisHome Depot has outperformed the market by a wide margin in the last 12 months. Is this sustainable?
Options & FuturesLearn the 10 steps that lead up to closing the deal on your new home and taking possession.
Home & AutoProperty taxes are calculated through use of the mill levy and the assessed property values.
Home & AutoA property deed is an instrument that enables sellers to convey real property to buyers, who become the new owners.
Home & AutoMany dream of home ownership, but the timing should be right. There are a host of reasons why you may want to put off homeownership for awhile.
Home & AutoA new home may be appealing in many ways, but it can also burn buyers with numerous hidden costs. Here are a few things to watch for.
Personal FinanceZillow lets property seekers look at listings for free through its various tools, so the company relies on ad sales to agents and others to make money.
Stock AnalysisClorox might not be the most exciting company, but sometimes boring is best for long-term investors.
Home & AutoMany people get shut out of the home buying process because of the down payment. But where there's a will there's a way if you think outside of the box.
Home & AutoIf you can't afford your mortgage, don't throw in the towel. You may be able to find a solution that works for your particular situation.
The Federal Housing Administration (FHA) does provide construction loans for both new construction and rehab projects. The ... Read Full Answer >>
A buyer can use an FHA-insured loan to purchase a foreclosure as long as the house will be the borrower’s main residence. ... Read Full Answer >>
A bank is not required to pay interest on any escrow accounts (also mortgage impound accounts) it holds for its customers. ... Read Full Answer >>
An escrow account is managed by an outside party in order to hold valuables, such as money, property deeds and personal finance ... Read Full Answer >>
There are two main strategies for paying off a mortgage more quickly, which can be used alone or in tandem: making larger ... Read Full Answer >>
The basic disadvantage of a simple interest mortgage lies in the fact that unless the borrower conscientiously makes all ... Read Full Answer >>