In the Current Market, Remodeling Trumps Moving

But in the suburban Washington, D.C., market we live in — often described as "frothy" during the real-estate boom — trading up appreciably would've cost about a million bucks. We had neither the million dollars nor the gamblers' gumption to take on an adjustable-rate mortgage. So we tabled talk of moving and agreed instead over the winter to remodel the basement, turning 600 or so square feet of raw space into a home office/den.

When it comes right down to it remodeling is a numbers game. While you want to be comfortable in your own home, spruce up a house too much and you run the risk of pricing it out of the neighborhood. An old real-estate adage holds that it's better to buy the worst house on the best block than the best house on the worst block. The key is to keep up with the Joneses, not bash them over the head with a two-story solarium.

We felt safe on this front for several reasons. Neighboring properties were either new constructions or older homes with large additions. Finishing the basement would at best bring us up to par with similar decades-old places on the street and still leave us in the shadows — quite literally — of the McMansions that have cropped up nearby at an alarming rate. What's more, it's a lousy time to sell if you don't have to. Even though prices are down and it's a buyers' market, we'd also need to unload our own house. Moving created a Catch-22.

That's where another old adage — real estate is local — comes into play. Some remodeling projects pay off better than others, depending on where you live. According to Remodeling magazine's 2006 "Cost vs. Value Report," a whopping 91.2% of the cost of a midrange basement remodel in our region, the South Atlantic, would be recouped at resale. In other words we'd ultimately be out less than nine cents on every dollar we put into the job. That's about as good as it gets, according to the report. By comparison, a similar remodel in New England would recoup just 61.9%.

The decision to remodel looked like a smart financial move, but it was just the start. Finding the right contractor to do the work at the right price plays an equally big role in the numbers game. Overpaying would certainly eat into our return on investment. Like many homeowners, we started the search by asking neighbors. As luck would have it the couple across the street had their basement redone a few months earlier. We got the name of the contractor, set up an appointment and received a quote: $50,000. It was an absurdly high sum, and a testament to why consumer advocates hammer home the wisdom of getting multiple bids.

With the only personal recommendation we could muster a bust, Plan B led us to ServiceMagic, a web site that links would-be remodelers to contractors. There's no cost to homeowners. We were skeptical at first, but the fact that the eight-year-old company was owned by publicly traded IAC/Interactive (IACI) offered some reassurance. So too did the vetting done by ServiceMagic to ensure the contractors listed on its site were licensed and insured. After providing details on the scope of the job we were soon emailed the names of three contractors. All called within 24 hours to set up appointments.