[onewhippedpuppy]

The big things I see that need to happen:

1. Figure out what it costs to move, go do some house shopping. Find examples of what you want, where you want.

2. Figure out what it costs to remodel. Most city zoning offices aren't all that helpful, and will quickly revert to asking for plans and engineering approvals. They won't typically tell you yes/no or cost, because they don't want to say something that can be held against them later. I think your best bet is to consult with an architect that is familiar with local codes. They can tell you what will/won't fly in your area, as well as what is possible with the remodel. Take what you learn from them and get rough builder estimates from someone like Jeff. Then add 30% for good measure. By the time you get done with this step, you may find that your dream remodel isn't even possible.

3. Compare. If the net difference is anywhere close, I would recommend moving. The sort of remodel that you are suggesting will be very disruptive, very likely putting you in an apartment for a year. Expect that everything will be more expensive and take longer than estimated. It will be a huge time suck constantly needing to approve change orders and deviations with the builders, tracking progress, trying to keep them heading the right direction, etc.

4. Financing. Make sure you talk to the bank early. Construction loans are typically a 2nd mortgage on your property, at least around here. The rates aren't as good as a 1st mortgage. Again, compare what it would cost to buy a more expensive home vs 1st + 2nd construction loan.

I don't know your neighborhood or housing market, but I would personally lean pretty heavily towards moving.