At what point does it make financial sense to rebuild, as opposed to remodel?

I think we answered this question wrong, and are now stuck with a house that will never be what we want it to be, no matter how much we fix it up.

We started with a 1970’s split-level on a narrow, sloping lot. Ugly. But terrific views: because we’re on a hill overlooking another (unbuildable) hill, we see no neighbors, and very likely never will. We bought this house 12 years ago because we fell in love with the lot and could afford the ridiculously low $105,000 price. The neighborhood is not the best, however (the poorer neighbor of an extremely wealthy college town 4 minutes away, where we work), and the zoning is transitional — a red flag of uncertainty about the future. The house itself was tacky, old, outdated, and oriented in a way that blocked some of the nicest views.

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The Housing and Economic Recovery Act of 2008 authorizes a $7,500 tax credit for qualified first-time home buyers purchasing homes on or after April 9, 2008 and before January 1, 2009. The following questions and answers provide basic information about the tax credit. If you have more specific questions, we strongly encourage you to consult a qualified tax advisor or legal professional about your unique situation.

First time home buyers purchasing any kind of home—new or resale—are eligible for the tax credit. To qualify for the tax credit, a home purchase must occur on or after April 9, 2008 and before January 1, 2009. For the purposes of the tax credit, the purchase date is the date when closing occurs.

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