Love It or List It: Deciding Whether To Renovate or Sell Your Home

, Mar 2, 2022

A family stands outside a house next to a “for sale” sign.

Homes are a unique type of investment. Not only can owners build equity and earn a profit when they sell, but they can also build a personal connection to the property.

This factor complicates one of the most common arguments among homeowners: should you sell your home or renovate any glaring issues to raise the value?

There are pros and cons to remodeling versus selling and buying a new home. Each situation is different, so homeowners will have to weigh these factors on their own and come up with the best option for their specific circumstances.

Currently, more people are deciding to renovate because of economic uncertainty and to build more equity while staying comfortable within their own homes. However, the real estate market is booming right now, making selling a more profitable option.

Here is a look at the facts you need to consider when deciding whether to buy or renovate.

Financial Considerations

First, homeowners need to consider the practical aspects of the selling versus. remodeling debate. Renovations often cost less, but you need to have more cash on hand or take on additional loans. If you sell, you need to consider the cost of a new house versus any remaining mortgage payments you have on the old one.

In short, the financial considerations are not as simple as seeing which of the two options is less expensive.

Budget

First, you need to get an estimate of the costs of each option. A renovation will take money out of your pocket now, but it could lead to equity later when you sell. If you have equity built up and the market is good, you can get money in your pocket when you sell. However, there are plenty of costs to consider before you list your home.

Here are some of the costs associated with selling.

  • Commissions: You will have to pay approximately 5% of the sale price to your real estate agent.
  • Pre-sale repairs: In many cases, you need to make some touch-ups to get your house ready for sale. These costs may be anything from a few hundred dollars for paint, to tens of thousands of dollars for major repairs.
  • Buying a new home: The largest factor is the cost of a new home. You will need to estimate the cost of the type of home you want and the monthly mortgage payments.
  • Moving costs: Moving can be quite expensive, especially if you are moving to another city or state.

Here are some of the costs associated with renovating.

  • Labor and materials: Unless you’re doing something very basic, you will most likely have to hire a contractor to handle your remodel. The remodeler will charge you for materials and labor.
  • Overage: Even the most tightly controlled renovation projects can go beyond the budget. There are hidden or unforeseen costs and disrupting events that can drive the price up. Whatever estimate your contractor gives you, you should have an additional 20% more on hand.
  • Permits: Depending on local regulations, you may have to pay for permits to do your renovation. For some major renovations, such as adding square footage to your home, permits may be difficult to obtain.
  • Alternate accommodation: If you don’t like living in a construction zone, you will have to factor in hotel costs for the duration of the renovation, or arrange to stay with family or friends until the job is complete.
  • Financing: If you borrow finances for the renovation, you will have to factor in the interest and the monthly payments on this loan.

After adding the costs, you can consider which option best fits your budget and your current financial situation.

Current Housing Market

It makes more sense to sell your home and move to a new one if you’re in a seller’s market. A seller’s market is when you can sell your home for a higher price because demand exceeds supply.

The flip side, of course, is that you will become a buyer in a seller’s market after selling your house. However, if you move to a different location with lower prices or purchase a smaller home, this factor may not have as big of an effect on your final decision.

Buying another house may also affect your mortgage rates and payments which you should also consider.

Home Equity

If you’ve lived in your home long enough and paid your mortgage faithfully, you’ve probably built up a significant amount of equity. You can estimate your home value by looking at recent sales of similar properties in your area.

Consider these sale prices when evaluating the timeline of your mortgage payoff. A profit from your sale will be the difference between these two figures.

On the other hand, renovations can also add equity, although you won’t see the return on these investments until you sell. If you have not built up much equity, renovating can help speed up the process. First-time homebuyers who have not been in their house for long can use renovations to build equity in this way.

Amount of Renovations Needed

In general, larger renovations are less likely to offer a positive ROI. According to the National Association of Realtors report, major renovation projects do not immediately pay for themselves. For example, the value added to a home after a kitchen renovation is 57% of the project’s average cost.

On the other hand, simpler repairs, including those you can do on your own, will not require as much of an investment.

If you want to change multiple rooms in your home, consider purchasing a home that already has those features.

Economic Growth

The economic growth of the area you’re living in should also factor into your decision to buy or sell. For example, if you live in a city with stagnant or declining economic activity, it is unlikely the price of your house will go up over time.

On the other hand, selling your home and moving to an area with higher economic growth will help build your home’s equity as it grows at a similar pace to the local economy.

One of the economic perks of living in a city or a suburban area, for example, is that they have better economic growth potential than in rural areas. According to the Pew Research Center, urban growth in the past two decades is double that of rural growth. Suburban economies, meanwhile, have tripled the growth rate of outstate regions.

Property Taxes

No matter where you move though, property taxes are an ongoing cost. If your neighborhood has high property taxes, the tax savings can offset the immediate costs of moving to a low property tax area. However, if you do not consider tax rates before purchasing your new home, you could be surprised by higher tax rates.

Personal Preference

The choice between renovating and selling your home isn’t purely financial. There are other factors to consider, such as your personal preferences and feelings about how you want your home to look and function.

Location

Where you live matters a great deal, not just to your pocket, but to your mental health as well. There are a variety of factors within a location that impact your overall life satisfaction — from the actual integrity of your house, school districts, crime ratings, to even the weather.

If you like where you live, you may prefer to renovate or move nearby. At the same time, if there are things you would like to get away from in your current setting, a move to another location could be your best option.

If you are hoping to relocate, consider searching for an area that appeals to you more. If you want to move to the suburbs, for example, Southwest Austin is a family-friendly area known for offering a high quality of life to residents. You can also consider moving to a place like Lake Austin, with beautiful natural scenery and outdoor recreation spaces that offer health benefits.

If you are going to invest in relocating, consider all the possibilities and find a place that suits your preferences and has the amenities you want.

Customization

Renovation offers the chance to customize your home to fit your preferences in terms of functionality and looks. While this is a primary advantage of renovation, taking the upgrades too far can turn it into a negative.

Furthermore, you should consider if a remodel will fix what you dislike about your property. Noisy neighbors, crime problems, or traffic will not move away, no matter how much you improve your own home. If outside factors cause dissatisfaction with your home, moving could be a better option.

Amount of Work

Both selling and remodeling involve a lot of work. However, if you choose a good contractor or a solid real estate agent, the process will be easier and less time-consuming.

A good real estate agent can help you with staging your home for showings to potential buyers. While working with such a professional, you will often be able to live in your home normally until it sells. This will limit the disruption.

Consider Remodeling Then Selling

Remodeling versus selling doesn’t have to be an either-or issue. While an extensive remodel can produce a low ROI, the right balance can add value to your home.

Ultimately, if you like your current location and modest remodeling can provide you with your desired setting, a renovation will likely suit your needs.

About the Author

Last updated: 04/13/2023

2300+ Client reviews!

Sally was referred to me via a business network when I first moved to Austin in 2022. She helped me understand the area, evaluate my options, and find the perfect spot in a tough market. Sally has been a joy to work with because she creates partnerships + friendships with her clients!

I was impressed by Sally’s expertise in selling both my investment property and my primary residence, and in helping us buy our dream home. At our initial meeting, we found Sally knew the real estate market, but found even more impressive her emotional quotient in understanding and navigating the differences between my partner’s and my very different personalities. For my investment property, she timed the showings and sale perfectly and created a helpful Excel spreadsheet comparing the many offers. She was also savvy enough to suggest we pay the tenants a fair amount of money to make the property available for viewing from 9am – 5pm on the first weekend to make it as easy as possible for potential buyers to get through, and we let her deal directly with the tenants because we could tell her people skills would serve us well

We got multiple offers by the deadline on Monday afternoon with one outlier that was $150K higher than what we had unsuccessfully listed the property for (with a different realtor) a year earlier!

When it came to selling my primary home, Sally’s expertise in the luxury market, and in historic homes in particular, truly shone. She understood that selling a high-end property, with various restrictions, required a different approach. Sally crafted a listing for the home that perfectly captured its unique character and premier location. Her marketing strategy was well timed and appropriate for the more limited market, attracting the right buyer pool and creating a sense of exclusivity around the property. She suggested listing it on the private market for a week or two before sending a message that it would be listed on the MLS. She organized private showings that allowed buyers to experience the warmth and charm of the home and the neighborhood, which I believe was instrumental in securing a sale.

The pricing and marketing strategy Sally recommended was spot-on, and we sold the home at a price that far exceeded our expectations. Sally helped thread the needle perfectly.

Sally is also accessible. We found more well-known realtors would respond to our email days later, whereas she was always available right away to answer my questions, and provided us with regular updates, making sure every detail was handled with care. Selling a high-end property can be a stressful experience with fewer potential buyers and some downtime inherent in waiting for the right buyer, but Sally made it a smooth and surprisingly easy process encouraging us to be patient while giving us enough information on what was happening to satisfy both me and my partner. In the end, we were thrilled with the results

Sally’s rep of us as sellers could not have been more professional, but her work repping us as buyers is the most memorable. We were trying to be our dream home in an overheated market, and Sally gave us advice that at each turn proved invaluable. She recommended offering just the right amount above the offer price for us to make it to the next round of offers. She handled a very difficult appraisal process by advising us on financing sources, even offering to help us put down a higher amount by loaning us money herself! We were able to finance the home without taking her up on that offer, but how many realtors make that kind of offer to their clients? In the end, we closed on the house ontime and ended up with the home of our dreams, thanks to Sally’s world-class advice and service.

We cannot say enough good things about Sally’s technical knowledge, people skills, and responsiveness. You won’t find a better realtor in Austin.

I have lived here in Austin for more twenty-five years, and have bought and sold several homes and rented others during those years. I have worked with five realtors during that time. SALLY IS BY FAR THE BEST OF ANY IN TOWN. Her work ethic is simply unmatched. She hides her competitive streak underneath a layer of Austin hip and friendly, but she will absolutely get you the best home, the best deal, and stop at NOTHING to get your home sold as well!

Sally loves real estate. She has a genuine passion for Austin, too, and for her client’s well-being. She took time to understand my needs and was always available to answer any questions and provide me with honest and insightful advice.

We toured many homes in Barton Hills and settled on a great home that was hotly contested by builders and homeowners. Sally understood how we could be the preferred buyer without getting into a bidding war. She knew the motivations of the Seller and we maneuvered and negotiated the contract and secured my dream home.

Furthermore, at the 11th hour, the day before we were set to close, our lender said we needed to put a fence around the pool before they would release the funds. The seller was not inclined to extend the closing again. We were out of town. Sally saved the day by racing to Home Depot and getting the largest tarpaulin available and then securing it over the pool at the house. Sent pics to the lender and we were set to close.

In short, Sally will work harder and smarter than anyone. She’s simply the best.

Sally is incredible! She spent nearly 2 years with us – understanding our very specific preferences and needs – to help us find our dream home. She was the first agent to reach out when the home was listed and negotiated the contract astutely so that we secured the home. The home was only in the framed stage, still had a few months until completion. Once it was completed, however, our plans had changed and we needed to get out of the contract. We were expecting to have to relinquish our very considerable deposit. But Sally spent the entire weekend working on a way to get us out of the contract AND get our deposit back. Everyone we have spoken to about this extraordinary outcome has been surprised that Sally managed to get our deposit back for us. Thank you Sally, we can’t recommend her highly enough.

Sally is reliable, diligent in her research, prompt on exchanges, creative in deal making, and has a tremendous work ethic. She is the sole reason we were able to close on our primary residence, which has been our dream home and a fantastic investment. From there, we’ve gone on to close on multiple rental property purchases in Austin together. Thanks to her astute analysis, we’ve passed on many deals as well, which has proven just as valuable. I cannot recommend her highly enough.

I highly recommend Kiel if you’re looking to rent a place in Austin. We originally met him to look around a particular unit, and when it was not to our satisfaction, he was able to quickly take us around many more units that day. He also set up a whole day of viewings for the very next day! Within 48 hours we had done enough viewings to be confident in choosing a new home. The landlord accepted our offer and Kiel handled all of the paperwork, even stopping by our hotel to pick up the needed checks. We couldn’t be happier.
Kiel is highly organized and unlike some realtors in the Austin area, he is responsive and ready to move quickly. We were always able to contact him and never left waiting.

Kiel has your BACK!! We are so grateful to have had his guidance and knowledge while navigating the intense, frustrating and way competitive Austin rental market. He quickly picked up on our taste and designed a game plan to help us push through the clutter and get to the properties that best suited us. He was ALWAYS available to us and answered our emails, calls and texts with great speed. We’re so grateful to have had him on our search team. Because my goodness, it really is a crazy market out there!

Kiel was amazing to work with! He walked us through everything, explained anything we didn’t understand, and he is is just a great guy to work with. As a first time home buyer, his knowledge was invaluable. 10/10 would recommend!

Kiel was referred to me by a friend, and we were so pleased with his services. He jumped in and guided us through the entire process, made himself readily available for us during the whole process, checked in with us via text every step of the way, and provided any and all information we requested. As a first time home buyer, I was not totally familiar with the process. Kiel helped me through the lending process, walk through inspection and closing procedures. It was such a pleasure to work with him, and we look forward to hiring him again when we purchase our next property.

I’ve never met anyone as knowledgeable and hard working as Kiel. Everything he said he was going to do, he did it. Kiel is a very easy person to get along with. He made us comfortable with the process and also made it fun. In 5 words…HE GETS THE JOB DONE!

It was great working with Kiel. He understood what we really wanted in a home. When it came to the process of the contract, it was obvious how knowledgeable he was. He did exactly what we wanted while giving great advice.

We had the pleasure of working with Will Mackintosh as our agent, and couldn’t be happier with the experience. From start to finish, the process was incredibly smooth and easy, thanks to Will’s expertise and professionalism. He guided us every step of the way making what could have been a stressful experience surprisingly enjoyable. Will’s attention to detail and dedication to finding the perfect property for us truly stood out. We couldn’t have asked for a better agent. I highly recommend Will and Bramlett Residential to anyone buying or selling a home in the Austin area.

Click Here to Read All Reviews