It happens suddenly, over a cup of coffee and the morning newspaper, or perhaps as you make your way across the obstacle course of clutter that was once your living room. Your house doesn't fit your needs, and you can't deny it anymore.

It's time to make a hard decision, one potentially worth thousands of dollars. Should you move, or should you remodel? Dan Fritschen, the author of "Remodel or Move," says the typical family faces this decision several times in life. The first milestone tends to be when children arrive. "The standard American lifestyle is to buy a starter house, but when kids come along that starter house may not be big enough anymore," Fritschen says.

Children become teens, and shared accommodations soon feel more like an invasion of privacy than a slumber party. Within a few years a third challenge hits: college. As children move away for school or into their own apartments, the large, teenager-friendly house suddenly feels too big. It may be time to downsize or perhaps convert Junior's bedroom into that hobby utopia you'd always dreamed about.

Finally, families often face the prospect of becoming caretakers for an aging relative, or perhaps a spouse falls ill and the home needs to become more accessible. Time for yet another change.

Should I stay or go?
The problem is that there is no single motive for each choice and precious little reliable professional help in making that decision. "Contractors won't give you an unbiased opinion because they want the work," Fritschen says. "Real estate agents have a financial stake in you moving. They aren't paid to help you make decisions."

Housing economist Robert Sheehan, the president of Regis J. Sheehan and Associates in Woodbridge, Va., says the best place for a family to start its evaluation is with the physical layout of its existing property. Many communities put limits on how big a house can be in relation to its plot of land.

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"A number of homes are already being built to the dimensions of what can be done," Sheehan says. If your house is as large as it can be, planning an addition would be out of the question -- you will need to work within your existing footprint or move. On the other hand, just because you are able to expand your home doesn't mean it's a good financial move.

First, get a cost estimate. Then figure how much that work would add to your home's value. Finally, compare your new value with comparable home prices in your neighborhood. "In some neighborhoods, you just won't get your investment back," Sheehan says.

What's your home worth?

Home values are falling across the country now, too. Homeowners should tread with extreme caution if they own one of the most expensive houses on the block. "You don't want to create a white elephant," says Ilyce Glink, a syndicated financial columnist. "White elephants are worthless. You have to look out and say 'I don't want to put $300,000 into a house if in five years the house won't be worth $250,000.' "

Fritschen agrees. "Almost without exception, if you have a viable neighborhood and if you are bringing your home up to or slightly above neighborhood standards, from the financial side, you almost can't go wrong by renovating," he says. "On the other hand, if you already have the biggest, nicest house in the neighborhood, then to go in and change that house has some drawbacks. You won't get it back on resale."

That's because neighborhoods support only so much expense for a particular house. If homebuyers want to spend $500,000 on a house, they will spend it in a neighborhood filled with other $500,000 or even $1 million homes, rather than $250,000 homes, Fritschen says.

The worst-case scenario would be doing a renovation and ending up with a home worth less than you put in plus an outstanding mortgage balance, and then being forced to move because of a job change or other life event. "It really depends on where your market is. You might not get your investment back," Sheehan says.

When to remodel
Expensive as it is to remodel, it is tempting to think moving is the safest bet. But that can be far from true.

"In moving, there is no payback. It is a pure expense," Fritschen says. "You end up writing an average of $40,000 in checks, and no matter where you move, that money is gone. It doesn't increase your net worth -- it is just gone."

People often underestimate the true costs of buying a new home. Real estate commissions, financing charges, moving costs, utility deposits and other unexpected bills pile up. Then there's the tax shock: "A lot of places don't necessarily reset your property tax every year for every homeowner," Fritschen says. "When you move, it may go up dramatically. That may still be a consideration when you remodel, but generally not as much."

Comparatively, a remodeled home could appreciate by $100,000 or even $150,000, depending on what changes the owner makes, offsetting the expense of sprucing things up. The remodel could end up being financially neutral even after borrowing a huge sum to pay for renovations. Even if renovating makes sense, ask if you are financially ready to lay out the amount of cash required to do the work. A $100,000 addition might increase the value of your home dollar for dollar, but if you can't afford that cash upfront, you will never get the job off the ground.

Home affordability calculator

One way to ensure you keep your remodeling job in touch with reality is to consult the annual list published by Remodeling magazine and the National Association of Realtors. The list evaluates how much return you can expect from a given home improvement. Some jobs, such as regular maintenance, better siding and minor bathroom renovations, for instance, return more than 80 cents in value for every dollar spent. Others, such as adding a sunroom or a pool, return less than 60 cents on the dollar, or worse. "Anything beyond what you will get back through appreciation is a true expense," Fritschen says.

The difference is a question of land value versus structure value. "Land appreciates the most, the house not as much," Fritschen says. So staying on your existing property and improving the home itself could mean a substantial tax savings compared with moving to a new home where the taxable value could increase.

A decision to remodel or move comes down partly to emotions and partly to finances. "One of the first things you should ask yourself is if you really like the location your house is in right now," Fritschen says. Consider your neighborhood, the schools and whether your home is average or below cost for neighborhood.

"If you like all of those aspects, then it is likely you can remodel and keep the things you like and improve on the things you might not like so much, size, amenities, things like that," Fritschen says.

But even if you are in love with an area and you would certainly get your money back, columnist Glink says, it might not make sense for some people to commit to a potentially life-changing remodel. "You really need to be honest with yourself," she says. "Do you want to go through the mess and headache of a remodel? You have to realize, things will go wrong. It will cost more than you thought. It will be a nightmare. And then when it is done, it will be beautiful."