Think Critically: 5 Costs to Keep in Mind After Finding the "Perfect Home"
Buying a home is both exciting and often emotional. Keep a level head and make sure to look for flaws even if you have found “the perfect home”.
- Inspection - Get a high-quality inspection from a company unaffiliated with your real estate agent. The inspection is the greatest investment you can make as a homeowner. It should cost anywhere from $500 to $1,000 and you should receive a detailed (30 to 100 pages) report outlining key issues or repairs that need to be made to the home.
- Pricing - Understand that real estate agents are paid to sell homes (they typically take home around 2.5% to 3% of the sale price). As such, their financial incentives are built around completing a transaction. Consequently, their advice on price can be conflicted. Instead, ask the average price per square foot for homes sold in the area and the price per square foot on the home being evaluated. Price per square foot is the most common way to compare properties. This information is readily accessible online, as well. Sold listings will show the sale price and square footage.
- Mechanicals – These are the costliest items to replace in a home and typically have a replacement time frame of 10 to 20 years. This includes the HVAC system, water softener, roof, water pump, and other expensive items. Older mechanicals represent required future capital investments that are a drain on reserves and limit the budget for other projects.
- Cost of ownership – Consider materials and construction. Certain materials like tile roofs, shingle siding, or detailed masonry and stone work can have higher average maintenance costs.
- Know when to say no! – Foundation issues, mold, or persistent water incursion can be difficult, impossible, or incredibly costly to address. It can be tempting to overlook such things, particularly if a house ticks all the other boxes. Often the costs to address these issues can quickly balloon and can resurface (i.e., the $100,000 invested in reinforcing the foundation may not be a permanent fix). Moreover, a future buyer will not give credit for these large investments keeping a home free of mold is not a feature like an updated kitchen or bathroom.
Buying a home is one of the most exciting, nerve-wracking purchases one can experience. If you are patient and are willing to invest the time necessary to be an educated buyer, you will have an asset that will bring you enjoyment and potential for growth for years to come.
This is not a recommendation and is not intended to be taken as a recommendation. This material was prepared for general distribution and is not directed to a specific individual.
LPWM LLC does not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisers.