Covid has greatly inflated home values due to lack of supply. Do not count on today’s value being what your house can fetch when supply improves. Prices may fall quite a bit next year.

As to ball park prices additions cost a lot more than new builds per square footage. In my area, ct, 1000 ft addition with kitchens and baths included start at 250k but usually end up averaging closer to 500k .

You might want to consider an existing house that suits your needs.

You will most likely live in the house without the addition, and possibly for a very long time, unless you are a builder or have some kind of connection to one. In most areas right now, builders are overbooked and materials prices have literally skyrocketed.

I’m no pro but your best estimate may be to see what a new home of the design/style you want costs in your area, and that may be the ballpark for your home/addition (because additions can sometimes be more challenging to meld into an existing structure than a completely new build). Between that and still -rising costs, it may be a decent guess.

We're just finishing a 20x26 addition (only one story, above an existing addition) and everything the previous posters said is spot-on. We're in a high cost area and our bids for the 500sf addition and renovating some of the existing space ranged from $310k to $475k, and those were quoted just before the pandemic which has had a major impact on costs & contractor availability. Our actual costs were much higher than the bid, which didn't include fittings and fixtures or the inevitable stuff that needs fixing that wasn't originally anticipated, plus the stuff you throw in because you're already burning money like crazy. We're happy with the end result but if I could have turned back time, I would have bought a different house 18 years ago! Unless you have serious DIY skills or a contractor in the family, you are not going to save money buying a fixer.

Definitely live in the house first. You'll be amazed at how much stuff you really don't need. After the pent-up Covid demand has worked through the system, take another look please.

Oh my. Maybe buy it, rent it out for several years to allow someone to carry the financial burden of the price you are likely overpaying for, wait for the craziness to subside, then sell it for a tear down lot or fix it up depending on your personal financial situation.

My contractor friend is telling all potential clients he will work only on a cost plus basis now and expect to wait at least a year for any project to start. Architects/draftspeople/designers, permitting offices, materials, and labor are crazy busy and crazy expensive right now. There is no way to estimate what this will cost a year from now.

"Perhaps 20x26 or 1000 sqft.It would need ac and a furnace because the main house does not."

The existing has no heat or ac currently? Are you in a potential freeze climate?

Don't buy it unless you can live in it as it stands for at least two years. That is quite small but with a convenient storage unit nearby for out of season items and bulky sports equipment, the space could be enough for a small family.

A small house in a desirable location is always easy to rent. I have a 625 sq ft house with a large single car garage that is always rented without ever advertising. Another advantage is you can afford to use higher quality materials because the amount you need is limited.

@millworkman - the OP photo has snow on the ground. I do not know how it is possible that this house has no furnace. Maybe the OP meant the furnace is not working.

To the OP - I think this home is taking on too much. Are you prepared to deal with this for the next several years until a remodel is complete? And as mentioned earlier, melding old with new in a home is very challenging. To be frank, the home looks decrepit and not worthy of a $500k addition.

Is the neighborhood worthy of such an expensive improvement? You don’t want to be the most expensive house on the block. Look at the comps online.

Many older small homes used baseboard heat instead of furnaces. It would not be unusual at all in my area to find a small home with no furnace.

All real estate is local and it is difficult to advise what someone in a different area should do. In my area buying existing is usually cheaper but I have lived in areas where existing satisfactory homes were rare and additions or teardowns were standard. I would speak with an experienced real estate agent in your area.

As for the market, we do not appear to be on a bubble and I doubt real estate prices will come back down significantly. I do believe lumber will come down, so waiting on a renovation may be smart.

Thank you everyone for the great feedback! I decided we wouldn’t do the addition if we bought, we would just fix up existing structure

prices are crazy high right now. I’m not excited that this house is $300k and it is miniature, but, the area is well worth it and neighboring houses are 550+

Think about what you'll have in the end. What will a half old, half new house appraise for? What will an all new, all-of-a-piece home be worth? How much of the value here is just the land itself?