Your home, which you’ve loved for years, is starting to feel too small for your needs. Maybe you’ve expanded your family. Or maybe, like 26.7% of Americans, your job has gone fully remote over the last year.

Regardless of the scenario, you’re ready for more space and facing a dilemma: Should you add on to your current home or buy a new, larger home?

We’ll explore essential considerations for both options with expert guidance from top real estate agent Micah Pearson, who has 17 years of experience helping homeowners navigate this decision.

Architects draft blueprints for a home addition, a cost to consider when deciding whether to add on or move.
Source: (Pedro Miranda / Unsplash)

Option 1: Stay in your home and add on

A home addition creates more livable space for you and your family. However, there are many factors to consider before calling your contractor.

Home addition costs

Depending on the type of addition you’re looking at, extending your home can be a costly endeavor. For example, HomeAdvisor estimates that homeowners spend between $11,500 and $18,000 on a 12-by12-foot room addition and between $32,000 and $80,000 on a 20-by-20-foot addition, on average. And if you’re looking to add even more square footage, you could be looking at upwards of $120,000 for an addition.

Addition Size HomeAdvisor HomeGuide
Average cost (all sizes) $21,075 – $69,887 $22,500 – $74,000
Average cost per sq. ft. $80 – $300 $86 – $208
12 x 12 (144 sq. ft. ) $11,520 – $28,800 $12,400 – $22,300
15 x 15 (225 sq. ft. ) N/A $21,000 – $52,000
20 x 20 (400 sq. ft.) $32,000 – $80,000 $34,400 – $83,200
600 sq. ft.  $48,000 – $120,000 $51,600 – $124,800
800 sq. ft.  N/A $68,800 – $166,400
1,000 sq. ft.  $80,000 – $200,000 $86,000 – $208,000

Methodology: HomeAdvisor collected survey responses from 4,120 members who recently completed a home addition. HomeGuide tracks millions of estimates from local companies to create reports based on project averages; they do not specify how many projects were compared for these home addition averages.

If you have a sizable budget for an addition, channeling those funds, plus whatever proceeds you would get from the sale of your current home, would likely allow you to upgrade your living situation without the hassle of going through a renovation.

Cost considerations

Contemplate the following factors when estimating the cost to build a home addition:

  • Permitting: You’ll need a permit from the city to build an addition and update existing electrical and plumbing.
  • Architectural plans: When you add on to your home, you must submit architectural plans to the city. If you live in an area with a homeowners association, you may need to submit plans to them, as well.
  • Excavation and foundation: If your addition is on the ground floor, your contractor will need to dig holes, level, grade, and prepare the site for the foundation.
  • Materials: The type of materials you choose for your new room or room expansion significantly influences project costs.
  • Labor: Depending on the type of addition you’re doing, you may need to hire multiple professionals to handle electric, plumbing, excavation, framing, drywall, and roofing.
  • Additional and unexpected expenses: If you talk to someone who has recently done a remodeling project, they’ll most likely say that there was some expense that they didn’t account for when planning out their project. A good practice is to include a cushion of around 15% to deal with any surprises or hidden costs that may pop up.

Return on investment

You should also consider whether or not a home addition will boost your property value.

“The typical rule of thumb is that your best return on investment is when you’re updating bathrooms and kitchens,” says Pearson.

“If you’re adding square footage, it’s going to increase the value of the home, but construction costs are probably going to be a wash.”

According to Remodeling Magazine, an upscale owner’s suite add-on only averages a 47.7% return on investment, while a deck addition offers a 63% average return on investment.

New price tier

When looking at return on investment, determine whether or not the addition will bump your home into a new price tier. Consult a top real estate agent in your area to determine if the asking price for a three-bedroom home and a four-bedroom home in your area differ enough to make an impact on your decision.

Your home vs. your neighborhood

As strange as it may seem, if you have one of the nicest or largest homes in your neighborhood, building an addition may not be in your best interest. For example, adding onto your home to increase the value to $300,000 may seem like an exciting idea — but not if you live in a neighborhood where the home prices are around $150,000.

If you over-improve your home, you may struggle to sell the property down the road. In many situations, buyers do not want to purchase the best home in the neighborhood because there’s a possibility that the property will not appreciate as fast as the others in the area.

Desire for a custom space

When searching for a new home, you have a list of “must-haves” and “nice-to-haves,” but usually, you have to compromise in one way or another. Adding onto your home means that you can plan exactly what you want in your new space.

Just remember to be realistic about the budget for your dream addition; you don’t want to find yourself stuck halfway through because you’ve run out of money splurging on luxury elements.

Capacity for handling project logistics and complications

While the timeline for buying a new home is relatively straightforward, any remodeling project requires patience and flexibility. Things go wrong, contractors need more time, costs change, and you could be dealing with a project that goes on for weeks or even months longer than you originally planned.

“I think the task of adding on or doing large remodel projects while in the home are, a lot of times, overwhelming,” explains Pearson. “I have a client that’s staying with family while their home is being remodeled because they simply don’t want to live through the remodel.”

Overall satisfaction with your home

If you love your neighborhood and the thought of moving away leaves you in a panic, adding on to your current home could be the perfect solution. Assess your situation carefully and consider what you love and don’t love about your home. If space is the primary issue, adding on to your home is a smart choice. However, if you’re unhappy with many of your home’s attributes, you may feel dissatisfied with your property, even with the extra square footage.

Financing options

If you’ve lived in your home for a long time, you probably have some equity built up. Using home equity to pay for renovations is a common practice, and it comes with the bonus of most likely being tax-deductible. There are several ways to tap into your equity to fund your remodel, including HELOCs, home equity loans, and cash-out refinances.

Building up versus building out

You can either add a level or build out onto the property. Both options come with their challenges.

If you build out, you gain space in exchange for yard space. Additionally, there may be excavation and foundation work needed, which means dealing with higher costs, more contractors, and other hassles.

If you build up, you may need a more intricate building plan to ensure the addition suits the style of the home. You’ll also need to configure a staircase to connect the addition to the rest of the property.

A family packs up their moving truck, a factor to consider when deciding whether to add on or move.
Source: (sirtravelalot / Shutterstock)

Option 2: Sell your home and move to a larger house

The prospect of moving can be exciting and daunting. Depending on your market and timeline, the process could be a breeze, or it could be a bear. Here are some factors to think about when considering “moving up.”

Cost of selling

Selling a home costs money, and many people don’t realize just how much when starting the selling process. HomeLight’s research reveals that it costs over $31,000 on average to sell a house when you factor in home improvement costs, taxes, and commissions.

Of course, the cost to sell a home skews higher or lower depending on the market you’re in. In San Francisco, one of the most expensive real estate markets in the country, our data indicates that it costs upwards of $111,000 on average to sell, whereas, in St. Louis, it only costs around $15,000 on average.

Moving logistics, costs, and stress

According to OnePoll, a majority of Americans say that moving is the most stressful life event, and 43% said they’d never do it again. It takes weeks to pack up, move, and unpack — a process that’s even more challenging if you have kids and pets in tow.

Moving can also be expensive. According to the American Moving and Storage Association, the average cost to move a household locally is $2,300.

Current market conditions

If you’re considering whether to move or add on, look at your housing market conditions. In a hot seller’s market where buyer demand exceeds houses for sale, you’re more likely to sell your home quickly for a fantastic price — a tempting option. Just note that it may be more difficult to purchase your next home once you’re in the buyer’s seat.

On the flip side, if you’re in a strong buyer’s market, it may take longer to sell your home for a solid price. In a slow market, you may be better off improving your home and selling later once the market recovers.

Consult a top real estate agent for insight into your market conditions; they can help influence your decision to move or add on.

Your desire for a new property

“A lot of my clients love the size of their home, but they don’t love the layout. There may be no easy fix to that, and it could turn into a much bigger project,” Pearson notes, advising these clients to sell and move.

On the flip side, if you love your current home, finding a new home that you love just as much might take time — or never happen at all.

School district

If you have children or are planning to have children, consider how adding on or moving will impact their schooling. If your current school district is not the best, you may feel more motivated to move rather than add on, and vice versa.

Commute to work

Is a new home going to cut down on your morning commute? Or do you currently live within walking distance of the office? As many Americans have found over the last year, your commute can have a significant impact on your quality of life. According to a study by Business Insider, adding 20 minutes to a commute makes you as miserable as taking a 19% pay cut. That’s a pretty hefty price to pay and could take a serious toll on your well-being.

No renovation pains

Moving means you can skip planning a renovation, hiring a contractor, and living next to a major construction site. Plus, you won’t have to worry about going over budget or your addition’s return on investment.

Trading pros and cons

Rolling the dice on a new home is a gamble, and you may have to compromise on your ideal vision and settle for something less than what you envisioned. Even if you secure a larger home, you may not love the location or the design as much as your current home. Moving doesn’t necessarily mean that you’ll have to settle but may need to make concessions to gain square footage.

Your long term plans

When thinking about adding on versus moving up, think about your five- and 10-year goals. Are your kids going to college soon? A move to a larger home may seem like a mistake in the rearview mirror once you have an empty nest. On the other hand, if you have plans to expand your family, then moving before you have more kids may be a wise move.

A woman checks off a list of tasks while deciding whether or not to add on or move.
Source: (KomootP / Shutterstock)

Decision time: Add on or move

Deciding whether to add on to your home or move is a major decision. Take your time to weigh your options before pulling the trigger.

Stay in your home and add on if:

  • You have plenty of yard space to accommodate an addition
  • You have the funds or a source of funds for the renovation
  • You don’t mind living in a construction zone for a while
  • You love your neighborhood, school district, and commute time
  • You plan on staying in your home for the long haul

Sell your home and move up if:

  • Your home’s size isn’t the only thing that bothers you
  • You don’t have the yard square footage to add on
  • You don’t want to deal with the hassles of packing, movers, and uprooting your family
  • Your commute is long, and you want to be closer to work
  • You want to be in a different school district and neighborhood

Header Image Source: (Greyson Joralemo / Unsplash)

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