Don't buy a house with these problems
Robert J. Bruss
Recently I received a letter from a reader who asked if having a tall water tower about 1,000 feet from his house would hurt his home's market value. By coincidence, a few days later I saw an appraiser friend at the local post office so I confronted him with that question.
"It sure won't help a home's market value," was his reply. Then, being an experienced appraiser, he reminded me the water tower is ed "functional obsolescence." That means it is a material fact that is virtually impossible to eliminate but has a significant impact on market value.
Functional obsolescence factors, whether within the property or outside, should always be considered when buying a home. Sometimes they "kill the sale." But in other situations, the buyer doesn't care or even likes the problem, which other buyers loathe.
For example, years ago I owned a rental house where the backyard adjoined a school playground. Although the house was in excellent condition, when prospective tenants spotted the playground hidden behind bushes, they suddenly lost interest. I quickly learned to advertise that house as "Close to elementary school." Then I had no trouble renting to families with children.
Looking back, I now realize that house adjoining the noisy school playground was a "bad house." It had an incurable defect that most prospective buyers and tenants disliked, thus affecting its desirability and market value.
EVEN NEW HOUSES HAVE DEFECTS.
Fortunately, most on-site problems with new houses are correctable, such as paint scratches or doors that don't close right. Buyers of new houses should (a) understand the terms of the builder's warranty; (b) hire a professional inspector to thoroughly check the house before the sale closes; and (c) inspect the house with the builder (called checking a "punch list") so both parties are aware of problems needing correction under the builder's warranty. Realizing the importance of having satisfied customers, the best builders promptly take care of any defects reported by the buyers.
THE DUTY OF HOME SELLERS TO DISCLOSE DEFECTS.
Most states now have either statutes or precedent court decisions that require home sellers and their real estate agents to disclose, in writing, known defects with the residence. However, some sellers and realty agents have "selective memory," meaning they forget to reveal some defects, hoping the buyers won't discover them.
When a home buyer can prove the seller and/or realty agent knew or should have known about a home defect, the buyer's legal recourse is to either (a) seek rescission of the sale or (b) sue for monetary damages. However, the buyer's difficulty is proving the defect was known before the sale closed.
PROFESSIONAL HOME INSPECTORS AREN'T PERFECT.
In addition to obtaining a written home-defect disclosure report, even when a home is being purchased "as is" (meaning the seller won't pay for any repairs), smart buyers insist their purchase offer include a contingency clause for their approval of a professional home inspector's report.
When hiring a professional home inspector, be sure to inquire as to the inspector's experience. Personally, I prefer members of the American Society of Home Inspectors (ASHI) because of their high membership standards. Local ASHI members can be found at www.ashi.com or 1-800-743-2744.
Home buyers should always accompany their professional inspectors. In addition, the realty agents and the seller are welcome to attend, just in case an unexpected serious defect is discovered and needs to be discussed.
When a serious undisclosed defect is found by the inspector and the buyer still wants to buy the house, a smart buyer will use the inspector's report to (a) get the seller to pay for repairs; (b) reopen negotiations with the home seller to get a repair credit, or (c) go ahead with the purchase anyway, knowing of the defect, even if the seller won't offer any compensation.
DON'T BE FOOLED BY HOME-WARRANTY POLICIES.
Home sellers and their realty agents often buy, as a sales inducement, a one-year home-warranty policy. These policies pay for repairs to built-in appliances, plumbing, wiring, furnace, and the hot water heater. Often excluded, unless an extra premium is paid, from warranty coverage are the air conditioning, plumbing outside the home's perimeter, roof, foundation and structure.
Home buyers should be aware warranty companies charge about $50 per service call, even if the defective component isn't covered by the policy. A favorite ploy of many home-warranty companies, especially when the problem is very expensive to repair or replace, is to say the defect was a "pre-existing condition," which is not covered by the policy. The best place to resolve such conflicts is in the local Small Claims Court where the home buyer usually is favored by the judge.
THE "TOP 10" STEPS TO AVOID BUYING A "BAD HOUSE."
Although most professional home inspectors have these key factors on their checklists, savvy home buyers also should be on the lookout for these potential serious problems:
MOLD AND MOISTURE. Even the best homes, at one time or another, have mold or mildew. The cause is trapped moisture, usually due to poor ventilation. In excessive amounts, such as after a flood or water pipe break, it can ruin a home because mold can be extremely difficult or impossible to remove.
RADON. According to the Environmental Protection Agency, this naturally occurring, radioactive gas is created in soil and rock beneath 1 in 15 U.S. homes. Radon allegedly causes cancer in residents whose homes contain radon underneath.
ASBESTOS. Asbestos was routinely installed in millions of U.S. homes for fireproofing, insulation, roof shingles, and floor tile. In good condition, there is nothing harmful about asbestos. However, when it deteriorates and the particles become airborne, asbestos can cause fatal lung disease.
LEAD-BASED PAINT. Before 1978, lead-based paint was used in most homes. It can cause brain damage to young children who ingest it, usually from flaking paint chips. But it is not dangerous if the paint is in good condition.
Federal law requires sellers of homes built before 1978 to provide home buyers and tenants with (a) a federal booklet about lead-based paint dangers, and (b) a disclosure form if the seller or landlord had lead-based paint tests performed. If desired, home buyers have 10 days to have a lead-based paint inspection at the buyer's expense.
FORMALDEHYDE. Many manufactured homes contain this material which causes eye, nose, and throat irritation, as well as coughing, rashes, headaches and dizziness in some people.
CARBON MONOXIDE. Malfunctioning furnaces, wood stoves, kerosene heaters and lamps, fireplaces, water heaters, and gas stoves can produce invisible but deadly carbon monoxide in homes. The easy solution is to install a carbon monoxide detector, usually costing $25 to $40.
DEFECTIVE WELL WATER. If the home being purchased depends on well water, be sure to include a purchase-offer contingency clause for a test of the well-water quality. Also, have the well's pump tested to be certain it is in good working condition.
SEPTIC OR SEWER SYSTEM. A home that is not connected to a public sewer system probably has a septic system, which drains waste water into the soil. Be sure the septic system is located a substantial distance from any well. If the seller reports the home is connected to the public sewer, be sure to verify this and that the sewer pipe is not broken.
HIGH-VOLTAGE POWER LINES. Government tests have been inconclusive if adjacent high-voltage power lines cause cancer and other diseases. But they certainly don't benefit health. The presence of nearby high-voltage power lines won't enhance a home's market value and can be considered a serious negative factor at resale time.
OTHER NEGATIVE INFLUENCES. There are many possible negative influences, sometimes beyond the home's lot boundary, that can affect desirability. Examples include a high crime rate, heavy street traffic, poor location, poor-quality public schools, lack of public transportation, nearby noisy railroad tracks, poor floor plan, inadequate or dangerous wiring, galvanized pipes, an old furnace, leaky gutters, flood zone, high fire-hazard area, earthquake fault zone, seismic hazard zone, easements and encroachments and high property taxes.
SUMMARY: No house is perfect. To avoid buying a "bad house," smart home buyers ask lots of questions and insist on a professional home-inspection contingency clause.
Tuesday, August 21, 2007
Wednesday, August 8, 2007
Buyer's Market in Full Swing!
The Rochester market, as well as most of the nation, is in the middle of a buyer's market. This market is great if you are thinking of buying your first home as there are many great deals out there right now. Talk with your Realtor about what you are looking for in your new home and begin looking....you never know what you will find, it might just be your dream home at a price you can afford.
Below is an article to help first time homebuyers begin the process of purchasing that new home! And as always, talk with your Realtor, as they are the expert on the process! :)
First Time Home buyer Tips
If you're a first-time home buyer, you've probably discovered that you have a lot to learn - and unfortunately, it's all too easy to get burned. But don't be discouraged. By doing some research, you can avoid common first-time buyer mistakes.
Try to Refrain from Large Purchases
If possible, don't make any big purchases or take out loans that you can't pay off in full within six months. When you're calculating how much you can afford to spend on a home, your total monthly debt should not exceed 36% of your gross monthly income. If you owe any more than that, you could find it hard to get a loan. If you must have that new car, wait until closing is completed before you buy so that your purchase doesn't affect your mortgage eligibility.
Investigate "Hidden" Costs
Closing costs are normally 3-5% of the property's value. In addition, owning a home has associated costs - insurance, property taxes, and maintenance all add up. Plan to spend 1% of your property's value on annual repairs. Remember that moving into your first home probably means spending extra money on furnishings, too. Take all of these things into account when you're calculating how much you can afford to borrow, and how much you'll need to cover up-front costs.
Study the Market
When you've decided on the area you want to move to, do some research and get a Current Market Analysis (CMA). A CMA will calculate the market value for the type of home you're interested in on the basis of recent sale prices of similar properties and will help you determine if properties you're interested in are priced competitively.
In addition you need to decide if it's the right time for you to buy. If you have only a small amount of cash for a down-payment, if interest rates are high, or if property prices are predicted to drop in the near future, consider holding off for six months or a year, until the market is more favorable.
Shop Around for a Loan
In a hot market, sellers often only consider bids from buyers who have mortgage pre-approval. Don't use this as a reason to rush into getting a mortgage. Take the time to find a good deal, and carefully consider your options when it comes to interest rates and other terms. Take into account how long you intend to live in the property. If you plan to move out after a few years, an adjustable rate mortgage may work better for you.
Your lender is required to give you a Good Faith Estimate within three days of your loan application. This documents your closing costs and expenses related to inspections, taxes, title insurance and other essentials. Get a copy of the Good Faith Estimate before making a commitment so that you're aware of these costs up front.
Hire Independent Inspectors
When you find a property you like, the next step is hiring inspectors. This is usually optional, but it's still an important part of the process. Before you make this purchase, you need know all about the property - whether it's structurally sound, if the plumbing and wiring are in good condition, and if it has sustained any major pest damage. Your agent may provide you with a list of contacts or may offer to help handle it. However, it may be more prudent to hire independent inspectors. Using an agent's "buddies" sounds attractive because it's one less thing for you to do, but on the other hand the agent wants this deal to close so they can collect their commission, and they may not have your best interests in mind.
Don't Let Your Emotions Take Over
Buying a house can be stressful. Try to keep a cool head and be realistic. If small repairs are needed on a property that you really like, don't be discouraged if the seller refuses to take care of them. Instead, negotiate a lower sales price. Similarly, set a limit on what type of repairs you're willing to tackle yourself and then stick with that limit. If you don't want to cope with major structural repairs then avoid properties that need them, no matter how much you like it or how flexible the seller is willing to be on price.
Just as importantly, don't let anyone talk you into something you can't afford. Once you've made the decision on how much you want to borrow, don't change your mind, or you may end up in financial difficulty later on.
Below is an article to help first time homebuyers begin the process of purchasing that new home! And as always, talk with your Realtor, as they are the expert on the process! :)
First Time Home buyer Tips
If you're a first-time home buyer, you've probably discovered that you have a lot to learn - and unfortunately, it's all too easy to get burned. But don't be discouraged. By doing some research, you can avoid common first-time buyer mistakes.
Try to Refrain from Large Purchases
If possible, don't make any big purchases or take out loans that you can't pay off in full within six months. When you're calculating how much you can afford to spend on a home, your total monthly debt should not exceed 36% of your gross monthly income. If you owe any more than that, you could find it hard to get a loan. If you must have that new car, wait until closing is completed before you buy so that your purchase doesn't affect your mortgage eligibility.
Investigate "Hidden" Costs
Closing costs are normally 3-5% of the property's value. In addition, owning a home has associated costs - insurance, property taxes, and maintenance all add up. Plan to spend 1% of your property's value on annual repairs. Remember that moving into your first home probably means spending extra money on furnishings, too. Take all of these things into account when you're calculating how much you can afford to borrow, and how much you'll need to cover up-front costs.
Study the Market
When you've decided on the area you want to move to, do some research and get a Current Market Analysis (CMA). A CMA will calculate the market value for the type of home you're interested in on the basis of recent sale prices of similar properties and will help you determine if properties you're interested in are priced competitively.
In addition you need to decide if it's the right time for you to buy. If you have only a small amount of cash for a down-payment, if interest rates are high, or if property prices are predicted to drop in the near future, consider holding off for six months or a year, until the market is more favorable.
Shop Around for a Loan
In a hot market, sellers often only consider bids from buyers who have mortgage pre-approval. Don't use this as a reason to rush into getting a mortgage. Take the time to find a good deal, and carefully consider your options when it comes to interest rates and other terms. Take into account how long you intend to live in the property. If you plan to move out after a few years, an adjustable rate mortgage may work better for you.
Your lender is required to give you a Good Faith Estimate within three days of your loan application. This documents your closing costs and expenses related to inspections, taxes, title insurance and other essentials. Get a copy of the Good Faith Estimate before making a commitment so that you're aware of these costs up front.
Hire Independent Inspectors
When you find a property you like, the next step is hiring inspectors. This is usually optional, but it's still an important part of the process. Before you make this purchase, you need know all about the property - whether it's structurally sound, if the plumbing and wiring are in good condition, and if it has sustained any major pest damage. Your agent may provide you with a list of contacts or may offer to help handle it. However, it may be more prudent to hire independent inspectors. Using an agent's "buddies" sounds attractive because it's one less thing for you to do, but on the other hand the agent wants this deal to close so they can collect their commission, and they may not have your best interests in mind.
Don't Let Your Emotions Take Over
Buying a house can be stressful. Try to keep a cool head and be realistic. If small repairs are needed on a property that you really like, don't be discouraged if the seller refuses to take care of them. Instead, negotiate a lower sales price. Similarly, set a limit on what type of repairs you're willing to tackle yourself and then stick with that limit. If you don't want to cope with major structural repairs then avoid properties that need them, no matter how much you like it or how flexible the seller is willing to be on price.
Just as importantly, don't let anyone talk you into something you can't afford. Once you've made the decision on how much you want to borrow, don't change your mind, or you may end up in financial difficulty later on.
Subscribe to:
Posts (Atom)
