There are times when a home, like a car, is essentially totaled. That is, it would cost you more to repair the home than it would to tear it down and start over.
Can You Handle It?
There are logistics to consider and numbers to crunch. But here's what it really comes down to: Are you feeling overwhelmed by the whole project? When you fix one item in the house, does another seem to break immediately? Are you up nights worrying about what's going to go wrong next? Are you spending more time on the phone with contractors than you are with your family?
There may be times when it’s not worth the headaches — even if you can afford the repairs. So, before you consider the hard math of your home's value and the cost of repairs, you should take a moment to consider whether the project is worthwhile for you personally.
Can You Afford It?
If you determine that repairs are worth the effort, then it's time to consider the economics. Whatever you're estimating the repairs at right now, remember that it’s a very, very conservative estimate. If your home needs new ducts, new drywall, a new roof and new plumbing, then it probably needs a dozen other things repaired as well. If you recently bought a fixer-upper that has spent years in disrepair, these problems can to pile up and compound one another. So, consider that you could be spending three times what you're looking at right now. And you need to be able to comfortably afford repairs. That means that repairing this home is not going to sink your retirement savings.
Is It Worth It?
Finally, is it worth the expenses, both personal and financial, to repair the home? You need to consider why you're repairing the home in the first place. If you're hoping to sell it at a profit, then you need to be realistic about the repair costs as compared with the potential sale price. You could be better off leveling the home and selling off the land. Plus, if your home was ruined in a disaster, your home insurance check probably covers the rebuild costs and even temporary housing arrangements. As such, it may be wiser to take advantage of that rather than try to salvage what's left.
Also Read: What is Replacement Cost in Terms of Home Insurance