Several years ago, if your home no longer suited your needs, you bought another one that worked better. Generally, listings sold quickly, so many homeowners bought first and then sold the old home. Today’s challenging residential real estate market makes this process more risky. For some homeowners, it’s impossible due to tight credit markets.

One option is to remodel your current home so that it better suits your needs. This can work provided the neighborhood isn’t the most compelling reason for your move. If you just need more space, adding an extra bedroom, bath or family room might solve the problem.

Keep in mind that remodeling also carries a financial risk if you overimprove for the neighborhood. To keep from making this mistake, consult with an architect and/or contractor to find out the feasibility of the project and approximate cost. Be sure to factor in unexpected cost overruns.

Then check with your real estate agent to find out recent selling prices in the neighborhood. You’ll want to know about sales of homes similar to yours in its current, and in its proposed post-renovation condition. If the margin between the current and the renovated values for your home is much less than the renovation cost, it’s may not be wise to proceed.

Also, if you find yourself having to sell within a few years of completing a major remodel and the market is soft as it is today in many areas, you might not be able to sell for enough to cover what you paid for your home plus the remodeling costs. For most homeowners, a large-scale renovation doesn’t make sense, unless you plan to stay in the house for the long term.

HOUSE HUNTING TIP: Financing a renovation can pose problems today. In the past, many homeowners used home-equity lines to finance home improvements. Recently, many lenders announced that they would be cutting back or closing some equity line financing. So, even though you may have a large untapped equity mortgage secured against your home, you may not be able to rely on it to cover your renovation costs. Check with your lender before finalizing any plans to move ahead.

What’s your opinion? Leave your comments below or send a letter to the editor. To contact the writer, click the byline at the top of the story.

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