A home addition can be a marvelous way to get the space and functionality your home needs without moving, but it may not automatically add value.

"The value of a home addition really is a case-by-case decision," stresses realtor Kevin Lawton. Return on investment depends upon how well the addition matches its surroundings as well as the quality of the work. "More square footage doesn't [automatically] mean more money – particularly if a renovation makes your home the largest in the neighborhood."

Don't plan an addition to your house if you expect to move in the near future. If you plan to remain in your home for at least five years, however, building an addition may make sense. Instead, consider a renovation "if you need more space but love your house and location," Lawton says.

Does your addition fit in with the neighborhood?

Building a home addition may add the space your family needs now but may end up being a hyper-improvement for the neighborhood, Lawton cautions. Rather than building an expansion in a starter-home neighborhood of first-time buyers and renters, buying a larger home elsewhere may be a better investment. Those who overbuild may find it hard to sell later.

Adding space that meets very specific needs may be hard to sell, too. For example, one of Lawton's listings, in an area of large homes, had a huge added-on mother-in-law suite. "Many [potential buyers] who toured the home weren’t sure what to do with that extra space," he recalls. The owners eventually lowered their price and didn’t recoup what they expected from the addition.

While it's important to please yourself, you should still consider resale value even if you plan to never move again. A well-planned home addition may not turn a profit, but if it brings your home up to neighborhood standards it can prove beneficial when refinancing a mortgage or applying for a home equity loan later.

Before you plan a home addition that's unique to your neighborhood, consult a realtor or home appraiser. Their insights will help ensure your plans are in keeping with the character of your neighborhood, and they can help guide your construction budget. "Constrain the search to the past six months," Lawton advises, to keep values relatively current. Look beyond your immediate neighborhood, if necessary, to determine the average cost per square foot of recently-sold homes. Use that as a rough estimate for what you can budget for the addition and what you can expect to recoup.

Does your home addition go with the rest of the house?

Making the home addition perfectly match the existing structure is difficult. Siding, stonework or window styles may be difficult to match, and rooflines may need to be altered to accommodate the new space.

"Rather than trying to blend the addition into the older structure, consider making a statement by introducing new, complementary material," Lawton advises. Contrasting stone or siding are two possibilities that can help the addition look as though it's always been there. That advice extends to roofs. "Increasingly, homes are blending shingle and metal roofs," he says. Steel or copper sheeting on a bump-out for a shingled house is one example.

Making the addition appear organic is integral to its aesthetics. For example, adding a sleek glass and steel addition in a neighborhood of Cape Cod bungalows may be visually jarring. In neighborhoods with lots of custom homes, however, conformity is less important.

You should still pay attention to neighborhood norms regarding square footage and interior and exterior finishes, however. That will help you get the most value for your home addition without overbuilding. To find the right mix of blend and bling, consider hiring an architect to visually tie the new addition to the existing structure.

Have you sufficiently planned out your home addition?

When designing your addition, don't be constrained by what you have and what you think is possible. Instead, determine what you really want. There are solutions to virtually every construction challenge, and what you really want may be feasible.

"Plan, plan, plan" is the mantra of remodelers, just as "location, location, location" is the mantra of buyers. Draw up building plans several months before you want to begin work, to give yourself (and your family) time to make changes.

Before finalizing, check with your local planning department to ensure your plans meet city or county zoning requirements. Buildings may be restricted by height; distance from property lines, streams and wetlands; and the percentage of land that can be covered with hard surfaces including buildings, driveways, patios or sidewalks. Your homeowners’ association will also need to approve your plans.

When you're ready to file for building permits, convert your rough sketches to plans that are drafted to scale, showing floor plans, elevations, footings, cross sections and other relevant details as required by your local planning department. Consider consulting an architect or builder to ensure you account for details such as wiring, outlet and switch placement, plumbing, ventilation and structural issues that may affect the form or function of your new space. Also, consider how to structurally integrate the new and old sections of your house.

While you're in renovation mode, think about whether other aspects of your house need upgrading. For example, if you’re adding a new electrical panel for your addition, it probably makes sense to upgrade circuit breakers to meet the newest building codes. Or, if you're bumping out the kitchen, this could be a good time to add a prep sink in the old portion of the kitchen. Also consider whether your old air handling system can manage the increased load the addition may cause.

Have you considered a green home addition?

"Green homes are becoming standard," notes Than Merrill, CEO and founder of the real estate investment education company FortuneBuilders and former host of A&E's "Flip This House." "Now, more than ever, is the time to opt for greener materials and items when remodeling homes."

"Everything from energy production to appliances can be made greener," Merrill adds. "Sustainable materials can reduce operating costs while helping to provide healthier living experiences and helping the environment."

Have you thought about other ways to gain space besides adding a room?

Building a new room isn’t the only way to gain space. Often, a bump-out can provide the space you need at a fraction of the cost of a whole-room addition. A bump-out is a good solution for adding a walk-in closet, installing a tub in a tiny bathroom or gaining elbow room in a cramped kitchen. Cantilever construction hangs the addition from the side of the home, generally without altering the roof or foundation. Consequently, a bump-out can be a cost-effective way to increase functional space.

Alternatively, "Finishing a basement or building up into the attic (even if that means raising the roof) can be smarter than taking space from your yard," Lawton says. Those options allow even townhome owners to expand their livable space.

Does your contractor have experience building your type of home addition?

Just because a contractor has a great reputation doesn't mean he or she is a good choice for your project. Choose a contractor with experience building your type of home addition. That person is more likely to be aware of any potential pitfalls hidden inside your walls (asbestos insulation or inadequate trusses, for instance). "Choosing the best-fit contractor is the most important decision you’ll make regarding your home addition project," says Bryan Clayton, CEO of GreenPal.

When interviewing contractors, Clayton advises asking them:
  • To recommend a local designer or architect for the project
  • Whether the addition needs planning commission approval
  • Whether a structural engineer is necessary
  • Whether the sewer or septic system can accommodate the addition
  • How the addition affects the existing air handling system
  • The approximate project duration
  • The estimated cost

Sign a written contract before beginning work. Read the document word for word – even the boilerplate – and understand the details of change orders, extra fees, payments and contractor responsibilities. Clarify any unfamiliar terms.

Have you set aside budget for extra costs?

Construction invariably costs more and takes longer than anticipated. Expect this, and budget your time and finances accordingly. It's wise to set aside a contingency budget of 15% to 20% of the estimated costs.

The true cost of a home addition isn't just the construction costs. For example, new additions add square footage that boost property taxes. Adding features such as fireplaces or spas also may increase taxes, along with utility and maintenance bills.

Plan to update your insurance, and the additional premiums, as a result of the increased size and replacement value of your home.

Have you considered financing your home additions with a home equity loan?

A home equity line of credit (HELOC) is a great way to get help financing your dream renovations. A HELOC is a home improvement line of credit extended to you partly based on your home value with flexible repayment options.

Home additions come in many sizes, from bump-outs to full rooms. Only you can decide whether an addition will truly meet your needs and, if so, which option is right for you. With thought and meticulous planning, you can turn your home into the home of your dreams.

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