Alex --
Purchasing and owning a home can be planned just like you would a
business. You just need a larger "contingency" fund for an older
house!
RECURRING EXPENSES
-------------------
Your major annual recurring expenses for the home will be in the
following categories (excluding the mortgage itself):
1. property taxes
2. heating, cooling
3. insurance
4. electricity
5. water, sewer
6. garbage collection (if not a municipal service)
7. yard maintenance
8. homeowners association
In many states, the property listing will have estimates for each of
the categories. You'll want to discuss those with the agent or your
professional service people to determine whether or not they are
realistic.
The most-variable item on the list will be heating/cooling expenses.
Continual operation of central air conditioning will run an electric
bill into the hundreds of dollars in the summer; but you may not find
it necessary until Cleveland weather hits 90 degrees in 90% humidity.
One of the most-difficult things to judge in an older home is the
quality of the insulation. Even if insulation has been upgraded,
there may be coldspots left. We had reinsulated and added new
double-pane windows to a minor addition to our home in Chicago, yet it
remained cold. Only then did we realize that while the walls and
ceiling were well insulated, we'd done nothing about the floor. When
it was completed the room improved dramatically.
Insurance is one area in which you'll see large differences between
newer and older homes, with many insurers offering 10% discounts on
homes less than 5-10 years old. Compounded with discounts for smoke
alarms or security systems, you may see differences of 25% or more.
Finally, you'll want to plan yard maintenance carefully. Lawn
service, leaf removal, gutter cleaning, window washing, deck cleaning,
driveway sealing, snow removal (higher east of the Cuyahoga) all can
be done by the homeowner or contracted out.
PLANNING MAJOR REPAIRS, UPGRADES
---------------------------------
Not having owned a home, you're probably worried about the major
repair items, such as the roof, plumbing or appliances. To help plan
for that, have a house inspection done by a professional. We live in
a home that was new when purchased but we'd changed regions and felt
it wise to pay $250 just to have someone with whom to discuss routine
issues of water, mold/mildew, yard maintenance (this is Seattle). It
paid dividends in a dozen small details that we'd have overlooked,
even as experienced homeowners and remodellers.
A good home inspection should tell you:
* life of HVAC system; assessment of its efficiency
* life expectancy of the appliances
* economic life of roof, gutters
* assess the quality of the plumbing; determine if there have been
leaks in the past
* quality/integrity of windows
* determination of quality of paint on windows, exterior
* structural integrity of house and its framing
* insulation quality
This do-it-yourself guide describes the process, but again a
professional who does home inspections every day will provide a wealth
of information on the materials in a house that even experienced
remodelers won't know:
ANZ Banking Group
"Pre-purchase house inspection"
The licensed professional engineers also discuss the top 10 nasty
surprises that you can face:
InspectAmerica Engineering
"Top 10 Home Defects"
http://www.inspectamerica.com/Get_Advice/Top_Ten_List/top_ten_list.html
http://www.anz.com/australia/channels/Promotion/HomeEssentials005/houseinspect.asp
InspectAmerica's home page also has a good list of issues for home
buyers or builders:
http://www.inspectamerica.com/index.html
Of course, you'll have your own input to this as certain carpeting or
wallpapering will certainly be candidate for replacement!
This way you can plan a budget of perhaps 20% of your mortgage for
improvements and repairs on an older home. Experience has shown us
that initial costs of a new home can be very high in these
"improvement" areas: landscaping, window coverings and decorating.
However, after about a year a new home tends to have lower costs for
maintenance items during the next 5-10 years.
The home inspection will give you a chance to outline what major
expenditures you want to tackle in the future. If the roof has an
economic life of 30 years and 20 have already past, you may wish to
plan for its replacement in the next 5 years. Leaks in the roof could
increase the cost of replacement beyond the value of delaying its
replacement for another year.
SOME OTHER CONSIDERATIONS
--------------------------
1. Is there a homeowners association? What are its responsibilities?
Are there any major improvements being planned that might require an
assessment?
Often a homeowners association has responsibility for common areas,
such as streets, which you might have assumed to be municipal
property. Check before buying.
2. Does the community plan any major changes for which there might be
a special tax assessment?
3. Resale value is tough to assess. An "up-and-coming" area may
rebound the year after you decide to move; local employment changes
can cool a hot market quickly. We've found a couple things in our
experience which you'll probably hear as part of the conventional
wisdom:
* a new neighborhood appreciates very little in its first 5 years.
When it does, houses tend to move together in a narrow range.
* you'll see the best potential for appreciation when yours is the
least-expensive house in the neighborhood.
Good luck with the decision. U.S. Census data predicts that you won't
be in the first house 7 years, as Americans move on average every 5
years!
Google search strategy:
"house inspections"
Best regards,
Omnivorous-GA |
