So, you decided that you are ready to jump into the life of a homeowner. You have done the research on the pros and cons, checked your finances, saved your deposit, and gotten preapproved.
But while you’re excited somehow you are simultaneously scared shitless.
It’s not that you don’t know what you want your home to look like, or don’t want to buy. After all, you watch HGTV all day and you have enough Houzz and Pinterest pics to decorate 50 houses.
But you’re paralyzed to put in an offer.
Flipping between ‘yes this is the perfect house’ and ‘hmm, something must be wrong with it if it’s still on the market’.
You keep doing this until the houses you love are scooped up.
Now your sad that the house is gone, but in your heart of hearts, you are almost relieved since you get to delay the big decision for another day.
I get it, I’ve been there and no, you’re not crazy.
But you’re worried.
How do you pick a house that won’t turn into a money pit? How do you escape being house poor? How can you avoid ending up upside down, turning your homeowner dreams into a nightmare?
Well, you can start by buying a home between 20 to 40 years old with a proven track record of appreciating significantly in a good school district.
Sounds like a mouthful?
Here’s the skinny on what to look for in a Home
An older-ish home
Staying in the 20-50 age range (the younger the better) for a home will probably be cheaper than new construction but will also help you avoid some of the major costs of improvements, like converting knob and tube wiring, swapping out galvanized plumbing, removing lead paint, or abating asbestos.
And you also avoid getting a house with ghoulish occupant – I am legitimately scared of centuries-old houses for fear of an Amityville honor buy – don’t judge me.
But if you’re cool with it, and love the beautiful old world craftsmanship of a 100+ home that just doesn’t exist anymore, then do it!
Just set aside little extra reserves in case you find an easter egg that requires fixing.
Good Bones/Solidly Constructed
Old doesn’t always equal good, so look for well-constructed houses with good “known value-added features” such as brick or stone exterior/fireplaces, hardwood floors etc.
They have built-in value and a somewhat predictable forecast for needed maintenance.
No house will be perfect, but you want one that comes with ‘free’ equity already.
‘Up and coming’, not ‘Been and Gone’ Neighborhood
Houses in established areas i.e. neighboring houses show a good track record of maintaining or increasing value over the years, with good schools, and developments in and around the area are good factors.
Those are easy to spot and you’ll spend a lot of money for the houses, and the taxes too.
You will want to target houses in up and coming neighborhoods – usually bordering the established ones – so the prices will be affordable. Not neighborhoods that are already on the decline.
So look for schools in the 7-9 great school range (good but not the best) are a good starting point, where developments are taking place – like large companies coming into town, or redevelopments with shops and restaurants.
You can find out about new developments in your neighborhood by checking your local city municipal site and the city newsletter.
Neighborhoods that are vibrant, where lawns or streets are clean indicate that residents care about their environment and will want to keep the neighborhood in good condition.
‘Border cities’ i.e. cities that are right next to an established sought after neighborhood, are great places to look as well since they will likely share the same amenities like parks, restaurants and grocery stores with lower prices and likely lower taxes.
Things to do: Troll the neighborhood at different times of the day, especially when residents will be home and at night. Every street looks great at 10 am, but can be a different story at 6 pm.
The average house size for 2016 was 2600 sqft, which is still a very comfortable size.
These houses cost less, generally have easier resale, and are less costly to customize with high-end finishes since the home is smaller.
If you need more space for your family size then buy as needed, but otherwise, forget the 4000 sqft McMansions and go for a smaller or average-size home.
Also, bear in mind that a well-configured smaller home can feel much bigger than a larger home with wasted space. Large houses with frequently empty guest bedrooms increase your energy bills and suck your time in cleaning and maintaining.
The same goes for your lawn size.
If you don’t envision spending your weekends mowing an acre of lawn or don’t like furry woodland creatures then don’t buy into the romantic HGTV scenes with sprawling front yards, manicured flower beds or homes that back out to forests. Buy what you need.
Built in equity
Get a fixer up if you are feeling handy – But be honest with yourself. If you don’t have floor laying, tiling, or other carpentry skills, then don’t fool yourself into thinking you will add sweat equity. You are better off factoring in the cost of hiring a professional. And if you only want to paint and change the carpet, then let your realtor know your needs. It takes time to get comfortable in a home during renovations and it takes money to fix a home before you move in, so be realistic with your expectations.
Buy with selling in mind (No weird layouts etc.)
If you are checking out a house and it’s super cheap because it doesn’t stack up to the neighbors, then you might have the same problem when you go to sell.
For example: if a home has 2 bedrooms, no garage or basement, when every other house in the neighborhood has 4 bedrooms, a 2 car garage, and a finished basement then you can’t expect it to sell in the same price range as the neighbors.
The reason your potential house is so cheap because it doesn’t stack up to the neighbors, so expect the same sentiment when you go to sell.
If you know you don’t plan to retire in your home then go in with your eyes open, and know that future buyers might want some features your house doesn’t have.
You can get a standard inspection but the truth is, some inspectors receive a few hours of training and they are certified.
Just like that.
So they might not be experts at recognizing subtle foundation issues or assessing the effectiveness of the major systems.
You might want to bring in a contractor – it doesn’t cost too much, less than $100 likely – who can examine your roof, your foundation, and major systems to make sure there isn’t some unseen problem that can cost you thousands.
Trust me, you want to do it. Ask me how I know.
Negotiate like a pro
Finding what to buy is the first part. The next part is negotiating the right price.
Buying a home at the wrong price can turn even a great house into a money pit.
This is where the help of an experienced realtor will be handy when you are a first time home buyer. They can pull comparable home sales in the last 6 months to a year to help determine the value of your home and you’ll adjust your price based on the condition of your house compared to the comps.
The numbers matter so don’t feel uncomfortable offering less than asking.
The sellers asking price is just that, an ‘asking price’ and you can offer whatever you are comfortable with. Everyone is looking to get the best deal, including the seller, so be sure to negotiate and don’t do it against yourself.
Never be a desperate buyer.
No matter how excited you are to own your own home, never be so excited that you are a motivated (ahem … desperate), buyer.
Don’t fall for the house and ignore the flaws. Don’t be lulled by the bidding war. If the house is over your budget then move on. Most real estate entrepreneurs/investors will tell you, ‘you make money when you buy.’
that means the best way to ensure a good deal, is to get the terms right the first time.
If you have any tips you used to snag a great home deal then let us know in the comments.