As you may build, house prices are still going down...and what you end up building, the buyer may not want/like the plan etc. So if you are stritcly building to increase value, I would not recommend it. Of course, I do not have all the details and info of your goals and motivation, so I am more generalising in this comment.
I would be happy to evaluate in details if you prefer.
Thanks for the question.
First - the intrinsic cost does not equate value dollar for dollar. The contribution to the entire property by the improvement (addition) and market reaction defines any increase or decrease in value.
Second - the principle of conformity would come into play in determining value. Depending on the type and extent of the improvement, the property may or may not conform to the neighborhood/market area. Again, market reaction and/or buyer preference determines the amount of increase/decrease in value. Also, the type and quality of materials used has a bearing, such as "does the improvement blend in with the existing original structure, and is it done with "equal to, same, or similar materials" and in a workman like manner or "inferior" quality and materials.
Third - there may some zoning restrictions that may need to be addressed and possibly obtain a variance. There may also be private restrictions (CC&Rs) to consider.
While additional room may be appealing to some potential buyers, it may not be as appealing to others. You need to determine if the demand for additional room would attract more or less potential buyers then your existing room. The principle of substitution and its market determination on the number potential buyers who are willing to pay more for one property, over other properties that serve the same function and purpose.
The present size of your property is perfectly placed in the hottest Orange County market in a couple of years, and that will probably remain the case for the next 9 months, with your optimum time to sell most likely being May or June of 2010.
Spend the time between now and April getting it into its best possible showing condition, and then put it on the market in early May - probably at a higher price than now, as the median price in your price range has gone up about 7% in the past 9 months, and is likely to continue to do so.
Obviously, if you have a good reason to sell immediately, then do so, but if you can wait until May of 2010 you'll probably get more money.
Click on my photo for my contact information - I would be pleased to discuss this situation in person. Good luck in your decision.
Again, I can show you what you can still do to get the absolute most money possible out of this home, I know what buyers like to see when they walk into a home. You don't want them thinking "well, I've got change this & replace that" because they'll take double what it costs to actually repair/replace from your proceeds when they're negotiating price.
Check out this website: http://www.RealQuestInvestor.com & type in your Anaheim address & zoom in or out & watch the flags pop up.
If you have any questions just shoot me an email at email@example.com
If you'd like, I could stop by when it's convenient for you to give you an honest female's opinion. I also work with a great general contractor who always comes up with great ideas to give my clients the absolute lowest cost for upgrading items, he's got ways to make things shine without having to replace. On a home in Santa Ana just this week that's the same size as yours, I thought the new buyer would have to replace an entire tub, he says, "oh no, that's not necessary, I can do a glaze over it & on the shower walls too, it'll look brand new & cost so much less".
I like contractors like that. That 9500sqft lot is going to be a BIG bonus for a buyer. Let the new buyer add on. Just make sure the lot looks nice & the curb appeal is inviting.
I'd be happy to come out & give you some pointers for areas that you may want to consider upgrading. I think you can get a good price on these things & ultimately sell for the absolute highest price possible.
Shoot me an email. I do have a buyer who would love a 9500sqft lot, he would add on in the future & probably put in a pool.
I wouldn't do it. 4 bedrooms is good, and 1350 is very common for the area. If you make the house larger, it will sell for less money per spuare foot. You'll make the house more desireable than others, but that isn't necessary right now because of the strong demand throughout Orange County.
Call me when you get a minute today to discuss.