1. Introduction
  2. How Do You Want to Live?
  3. Can Your Current Home Handle the Renovation?
  4. What Would Remodeling Cost?
  5. What Would Moving Cost?
  6. Other Considerations for Renovating vs. Moving
  7. The Bottom Line

If you’re faced with an expensive remodel, moving might seem cheaper, but you’d be surprised how expensive it can be to sell one home, buy another and move all your possessions.

Transaction Costs to Sell Your Home

Moving means selling your house, and selling your house means paying a real estate agent’s commission. The customary commission has long been 6%, of which 3% goes to the seller’s agent and 3% goes to the buyer’s agent. If your house sells for $300,000, a 6% commission will cost you $18,000. You may pay less if you can find a reputable discount agent.

Another possible cost of selling your home is capital gains tax, if your home has appreciated significantly since you purchased it. Single taxpayers don’t owe anything on the first $250,000 of capital gains from selling their primary residence, and for taxpayers who are married filing jointly, that figure increases to $500,000. Nonetheless, some sellers might still find themselves with a tax bill. If you had a $100,000 gain that was taxable and you were subject to the 15% long-term capital gains rate, moving would cost you $15,000 in taxes. For more, see Will Your Home Sale Leave You With Tax Shock?  and Is It true that you can sell your home and not pay capital gains tax? 

Other Costs

Other factors that could reduce the amount you expect to receive from selling your home are as follows:

Low appraisal. You and the buyer agree to a contract price of $300,000, but the appraisal comes in at $290,000. You may have to lower the price to $290,000 so the buyer can get a mortgage and close the deal.

Seller-paid closing costs. Many homebuyers will ask the seller to pay part or all of their closing costs. While you might be tempted to say no, some buyers simply won’t be able to afford to close the deal without the help. (Maybe they shouldn’t be buying a home at all, but that’s not your problem.) 

The flip side is that if you’re selling your home and buying another, you’ll have to pay closing costs when you purchase your new property (unless you can talk the seller into it). The fees for getting a new mortgage will total in the thousands of dollars. Expect to pay 2% to 5% of the purchase price in closing costs. That means if you’re moving up to a $500,000 property, your closing costs could range from $10,000 to $25,000.

Repairs. If anything significant is wrong with your home (like a leaky roof or termites), or if any of your design choices offend buyers sufficiently (for example, bright paint colors), you may have to either pay to have these issues remedied or give the buyer a credit at closing to handle them.

Staging. Hiring professionals to decorate your home in a way that will highlight its best features and downplay its worst ones is known as staging. This may help you sell your home faster and command a higher price, but you’ll also have to pay the stager’s fee and possibly additional costs for things like new paint, new fixtures and furniture and decor rental. Expect to pay anywhere from $200 to $5,000 for staging. (Alternatively, you can consider doing the staging yourself.)

Moving expenses. Moving can cost as little as your own time if you don’t have a lot of stuff and you can move it yourself with your own vehicle. Renting a cargo trailer or moving truck for a DIY in-town move might cost $15 to $40 per day, plus mileage. You could have a moving pod delivered to your old home, fill it up yourself, then have it moved to your new home; the cost will depend on the size of the pod and the distance of the move.

At the high end, hiring full-service movers to pack, load, transport and unload your belongings for an in-town move might cost around $6,000 for a four-bedroom house (this estimate was based on a move within Chicago).

If you can’t move directly from your old home to your new home (perhaps because you haven’t found your dream home yet), you may have to pay to move twice and to rent a temporary place to live, possibly at a month-to-month rate that’s more than what a year-long tenant would pay.

New Home Costs

In addition to the costs specifically associated with moving, you’ll have to consider the costs of the new home itself. If it will be a more expensive home, can you qualify for the mortgage and afford the monthly payments? Can you afford the potentially higher property taxes, insurance, utilities and maintenance that will come with that home? Moving up can also entail costs for additional furnishings and decor to fill your space.

Next, we’ll discuss some other factors that could affect your move vs. remodel decision.


Other Considerations for Renovating vs. Moving
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