Living in a culture that places more and more emphasis on instant gratification, it’s no wonder why so many overzealous home buyers fall in love with a perceived dream home they know little to nothing about. Sure, first impressions certainly matter, but when it comes to home ownership–and the myriad financial implications that come with it–you can’t be too careful to expose and consider every current or potential issue that could turn your dream home into a nightmare.
To break this down even further, it’s necessary to consider three potential home ownership problem areas–price, condition, and neighborhood. These areas are all interconnected, and it’s likely that one will influence another. Here are some questions to consider and ask of your Realtor before making the final decision to buy.
Price—What It Is and What It Will Be
The typical strategy most buyers employ when researching home prices is to look at the average home price of the neighborhood. While this is a good starting place, asking price is not the only metric you should consider. It’s important to ask questions like “what did the seller pay?” Not that this has anything to do with negotiating, but it helps in revealing if home prices in the area are going up or down. It’s also necessary to ask for what other homes in the neighborhood have sold, as this is what your lender’s appraiser will use to compute a home’s value. Finally, it’s important to ask how long your potential dream home has been on the market. A home that’s been on the market longer than 60 days is prime for negotiation!
Condition—The Good, the Bad, and the Un-Insulated Attic
Homes that are a little rough around the edges can be great bargains. However, while the sticker price may be a steal of a deal, it should come as an obvious fact that repair costs can stack up and sink you into a financial hole without asking the right questions. For instance, what’s the condition of the pipes? Have they ever frozen or been replaced? Has there even been an issue with mold or mildew under the carpets? Has the electrical been inspected in the past 50 years? (If not, it’s highly suggested you hire an electrician to do so.) Is the attic insulated (a huge energy waster for those in colder climates)? These are all incredibly important issues to take into consideration before deciding to purchase. If your gut tells you it’s not worth it, then it probably isn’t.
Neighborhood—Who You’re Going to Live Next To, Their Habits, and Animals
Location is often touted as the most important aspect to consider in purchasing real estate—and for good reason. A great piece of land in a great place is what got your home to where it is in the first place. But places change over time. Talk to the neighbors. Ask them how the neighborhood has shifted in the past five to 10 years. Ask them what nuisance factors exist in the neighborhood. For instance, maybe living next to a highway or within walking distance to popular nightlife spots comes with issues you don’t want to deal with. Maybe your future neighbors also have extremely vocal pets that will keep you up all night. It’s also important to ask your Realtor what development trends have been like in the area over the past decade. The appearance of apartment buildings and industrial utility centers can have a deleterious effect on home values in the surrounding area.
Keep these questions in mind and don’t be afraid of a little seller interrogation. It shows that you’re considerate of both you and the seller’s time and aren’t in the business of wasting either. Happy hunting!
Nice newsletter. Good article. Good information. Thank you. Carol
For conventional financing, borrowers with scores at 740 or anywhere above generally receive the same loan pricing (rate and cost). That being said, the better your credit the higher your chances of receiving loan approval with high debt to income (up to 50%) or high loan to value (up to 95%) which can be a major benefit when applying for a new loan. For Jumbo financing, borrowers with credit scores above 800 are generally rewarded with both better pricing and easier guidelines. There are no situations where better credit is a negative when obtaining new financing so we should all continue to strive to reach and then stay in the 800’s.
What are the advantages of a score over 800
Thank you Mike for this information. As a residential realtor the information that you provide is crucial to a successful transaction for my clients. You are indeed a pleasure to recommend to all of my clients. You are so professional, thorough, conscientious and pleasant to work with. !!
Hi Dane! Wanted to make sure I'm clear on this. Am I right in saying that on whichever remodel is done you still take a loss rather than an increase in value - the ROI will never exceed 100% of cost?