When I became a real estate agent, I discovered something about home buyers: A lot of them cry. Right in front of you. After a few times I began to understand. This is a high-pressure, extremely emotional decision. No house will ever fully live up to your dreams, and whatever compromises you make (and you'll have to make some) you'll be stuck with for years.
I've never met anyone who was totally rational about evaluating a home, but the way to get closest, I've found, is to break the process into discrete parts. Just as diamond buyers focus on four competing criteria (carats, clarity, color and cut), home buyers need to consider a home's four Cs: cost, condition, capacity and convenience.
The worksheets on the following pages have helped my clients weigh those factors and make the inevitable tradeoffs with fewer tears; they should work for you too.
A home's true cost
I see a lot of buyers make a basic mistake: When deciding if a particular house fits their budget, they look only at listed price and their probable mortgage payments.
But to make an honest comparison of the houses on your list, you must consider all the costs you'll be facing. In addition to mortgage payments, there are maintenance costs, property taxes and homeowners association fees, utilities and insurance.
Your total outlay should be no more than a third of your gross income (ideally, less).
Define 'acceptable' condition
Unless you're buying brand new, expect your home to need some upgrades. Just be sure the issues aren't structural (such as those under "red light" below, which your home inspector can help you identify). Fixing these could run as much as $30,000, says New Jersey builder Jay Cipriani.
Better to go with a home needing cosmetic work ("green light") or at least a less extensive overhaul ("yellow light"). The investment you make in resolving these will improve your quality of life while living there and increase the resale value.
Consider capacity
To squeeze into a budget, you might have to get a smaller - wait, I'm a real estate agent: cozier - house than you'd like. So forget about square footage, often a misleading number. More important is how that space is allocated. These questions will help you evaluate whether the space in a house fits you.
Does it have enough closet space? Rather than look at the number of closets, measure the length of them (for instance, six feet in the hall, two in the kids' rooms and so on). Compare the total with that of your current home. Also, take along a hanger to make sure the closets really are deep enough for clothes.
Are there enough bedrooms? One of the most awkward moments for a real estate agent is when the husband counts the bedrooms and says "We'll all fit," then the wife gets a gleam in her eye. Ideally, you'll know your family's expansion plans before shopping. Since that's not always possible, consider whether there's room for surprise long-term guests, be they kids or in-laws. If you can't afford extra bedrooms, is there an area that could be converted, like an attic or a basement?
Does the kitchen suit my needs? Think about whether there's space for you, your family and your guests - as well as your cooking gear. (I've seen kitchens with cabinets too shallow for a microwave.) Don't forget about the fridge, which can be costly to replace: A family of four needs at least 22 cubic feet.
Is there a spot to work from home? Is there room for a desk, a computer and files? Even if you don't need an office, your next buyer might: A work space can add an average of $12,000 to resale value, according to a study done by Remodeling magazine.
Weigh the price of convenience
Cities offer great job and cultural opportunities, but they generally come with high real estate costs. To get more house for your money, you might look along the edge of a hot neighborhood or in a smaller town nearby.
But will you miss the pace? Will you end up with a longer, pricier commute than you'd prefer? Will family and friends ever visit?
To determine whether moving farther out is worth the sacrifice, look at a house in the area you like and a similar one 15 to 30 minutes away. Then consider the factors in the worksheet below.
Alison Rogers is the author of "Diary of a Real Estate Rookie."
I've never met anyone who was totally rational about evaluating a home, but the way to get closest, I've found, is to break the process into discrete parts. Just as diamond buyers focus on four competing criteria (carats, clarity, color and cut), home buyers need to consider a home's four Cs: cost, condition, capacity and convenience.
The worksheets on the following pages have helped my clients weigh those factors and make the inevitable tradeoffs with fewer tears; they should work for you too.
I see a lot of buyers make a basic mistake: When deciding if a particular house fits their budget, they look only at listed price and their probable mortgage payments.
But to make an honest comparison of the houses on your list, you must consider all the costs you'll be facing. In addition to mortgage payments, there are maintenance costs, property taxes and homeowners association fees, utilities and insurance.
Your total outlay should be no more than a third of your gross income (ideally, less).
Define 'acceptable' condition
Unless you're buying brand new, expect your home to need some upgrades. Just be sure the issues aren't structural (such as those under "red light" below, which your home inspector can help you identify). Fixing these could run as much as $30,000, says New Jersey builder Jay Cipriani.
Better to go with a home needing cosmetic work ("green light") or at least a less extensive overhaul ("yellow light"). The investment you make in resolving these will improve your quality of life while living there and increase the resale value.
| RED LIGHT These problems can be incredible costly. Run away. | YELLOW LIGHT These issues may be fixable. Consult a pro to determine. | GREEN LIGHT Fixing these problems will return at least some of your investment. |
| Major cracks in the foundation To fix major foundation cracks, the house often needs to be propped up. | Leaking or sagging roof Ask the roofer if you can plop on a new one (cheaper) or if you must strip the old (more costly). | Too few bathrooms A half bath could run $15,000 but it can increase the home’s value by 12%. |
| Sagging stairs One loose tread is okay, but if the entire staircase bows, you may have foundation problems. It’s a big job - see above. | A 20-year old boiler… A more modern system (which you will likely have to install within a few years), will cost thousands. | Outdated kitchen Revamping a kitchen can return 75% to 100% of your investment on resale. |
| Leaks or water damage A long-term leak can rot your carpet and your walls, cause mold and require extensive repairs. | Mature trees within 15 feet Roots can grow into pipes causing leaks or sewage backups. | Too-small rooms Adding an archway or moving a non-load bearing wall can open the layout at a cost of around $7,000. |
| Termites Mud tubes and hollow wood are signs of a serious infestation, particularly worrisome if the house has a wood frame. | High radon levels To mitigate this lung cancer risk, you must install a ventilation system. | Cracked, drafty or warped windows New, energy-efficient windows cost as little as $200 each and can make a big difference in appearance and heating bills. |
To squeeze into a budget, you might have to get a smaller - wait, I'm a real estate agent: cozier - house than you'd like. So forget about square footage, often a misleading number. More important is how that space is allocated. These questions will help you evaluate whether the space in a house fits you.
Does it have enough closet space? Rather than look at the number of closets, measure the length of them (for instance, six feet in the hall, two in the kids' rooms and so on). Compare the total with that of your current home. Also, take along a hanger to make sure the closets really are deep enough for clothes.
Are there enough bedrooms? One of the most awkward moments for a real estate agent is when the husband counts the bedrooms and says "We'll all fit," then the wife gets a gleam in her eye. Ideally, you'll know your family's expansion plans before shopping. Since that's not always possible, consider whether there's room for surprise long-term guests, be they kids or in-laws. If you can't afford extra bedrooms, is there an area that could be converted, like an attic or a basement?
Does the kitchen suit my needs? Think about whether there's space for you, your family and your guests - as well as your cooking gear. (I've seen kitchens with cabinets too shallow for a microwave.) Don't forget about the fridge, which can be costly to replace: A family of four needs at least 22 cubic feet.
Is there a spot to work from home? Is there room for a desk, a computer and files? Even if you don't need an office, your next buyer might: A work space can add an average of $12,000 to resale value, according to a study done by Remodeling magazine.
Weigh the price of convenience
Cities offer great job and cultural opportunities, but they generally come with high real estate costs. To get more house for your money, you might look along the edge of a hot neighborhood or in a smaller town nearby.
But will you miss the pace? Will you end up with a longer, pricier commute than you'd prefer? Will family and friends ever visit?
To determine whether moving farther out is worth the sacrifice, look at a house in the area you like and a similar one 15 to 30 minutes away. Then consider the factors in the worksheet below.
YOUR DOLLARS WILL GO FARTHER IF YOU DO TOO Use a list like the one below to determine whether moving farther out is worth the sacrifice. | ||
| Closer House | Farther House | |
| Listing price | ||
| Length of commute | ||
| Gas price | ||
| Cost of commute | ||
| Cost of child care | ||
| Nearest hospital | ||
| Nearest supermarket | ||
| Nearest pharmacy | ||
| Nearest airport | ||
| Good schools? | ||
Copyrighted, CNNMoney. All Rights Reserved.
No comments:
Post a Comment