Choosing to do an addition is a difficult decision.
Why we chose our addition:
- we liked our location
- we liked our neighborhood
- we liked our schools
- we didn't find ANY new houses we could afford that we liked half as well as our existing house
- we figured that by the time we paid realtor fees, moving expenses, and the much bigger mortgage for the new house that would actually be what we wanted, we'd spend tens of thousands more than what the addition would cost.
- we looked at our addition like putting in a pool. You put in a pool because YOU want a pool, NOT because it adds value to your house. Realistically, we don't expect our addition to add much value to the house at all when we sell it. However, it's already added TONS of enjoyment to us. Also, we have absolutely no plans to move.
We added on a new game room over our garage, so that our former game room could become my office (I work out of our house). We found a TERRIFIC contractor who completed the job in 7 weeks. That included recarpeting and repainting the entire inside of our house as well as the addition. We absolutely love the addition and have no regrets. We added on two years ago.
I worked with a guy who I suspect had a house situation similar to yours. They had an older bungalow in a neighborhood they loved. To add on, they added an entire second story. They moved out for 6 months while the work was going on because with two small children they just couldn't live in a house without a roof. If you add on a second floor, you ought to plan to move out while the work is being done. That will mean putting most of your belongings in storage, plus the rent on the apartment. My coworker's family said the experience was a HUGE hassle for those months, but they love their house and are glad they did it.
My advice:
Sit down and decide exactly what work you want done to your current house to make it worth it to stay. You need to know what you want out of a remodeling before you get estimates.
Next, get SEVERAL estimates -- at least 5. It can be cheaper to add on than to move, but remodeling is more expensive per square foot than new construction. The estimates can help you decide if moving or remodeling is more practical. If you're doing a big addition, ask if you can stay in the house during construction or if you would need to move out. If the work can be done 2 months faster because you're not there, that's something else to consider.
For a big addition, like adding on that second floor, or even a significant addition to the first story, definitely hire an architect. (We didn't for our job, but it was because we had a 2 story house with a 1-story garage. It was easy to rip off the garage roof and incorporate another room into the rest of the house.)
Ask the contractor where trash will be kept, what times workers will be working, how long you'll be without water/power/a roof, how they get permits for their work, etc.
Ask the contractor how they'll be paid! Most (reputable) contractors will want to be paid when a significant chunk of work is done. For our job, we wrote a check about every week to 10 days. For example, the first week we paid for demolition of our old roof, framing of the new room, and roofing. Second week we paid for walls, insulation, and wiring. The reason you want to pay in chunks like this is that you can be fairly sure that the subcontractors are being paid. The contract should be written such that, once you pay off a chunk of work being done (like the roof), then *you* are not liable if that contractor isn't paid. BE VERY CAREFUL. It can be very tempting for contractors to use cash from one job to cover late payments from another!! You want to be sure that *your* subcontractors are being paid so that they don't come after *you* for more money. And yes, we knew people who got stuck in this situation when the contractor's business went under during construction :-(.
Talk to both the contractor and your homeowner's insurance about liability during construction. Who pays if a worker is injured? Who pays for water damage if it rains while your roof is off? Find out what coverage you have.
I'm not saying any of this to scare you off of remodeling, but it *is* a decision that requires a lot of thought and a lot of groundwork if you're going to be happy with the results.