Buying a new home can be a lot of fun, especially if it is your first one. There are an amazing array of first time home buyer programs out there just waiting for eager applicants. Whether it is your first home, a second home, or a vacation cottage, there are some important considerations to address before signing on the dotted line. Financing is an issue, of course, unless you are going to pay cash. Here are some after purchase items to explore.
Can you afford to keep your home after the initial purchase?
This is probably one of the most overlooked considerations, especially in the case of young people.Often, in the excitement of the moment, things like property taxes, maintenance and upkeep costs, assessments, insurances and other possible hidden requirements get overlooked in the planning stages.
New home buyers would be well advised to closely examine the property tax history for the property under consideration. Has the property tax stayed the same for a number of years? How often does the tax assessor value the property? In our locale, it takes about four years for the tax assessor to make the rounds of our county and return to our property, so our property tax increases roughly every four years. Have there been any recent improvements to the potential purchase that have not been figured in the current tax assessment e.g. a new garage, a new storage shed or carport, new sidewalk or landscaping? Maybe the local property tax rate has been on a steady state of increase for the last few years.
Watch the local news about the schools in the area where you are thinking of buying. As populations increase, many school districts are applying pressure for bigger and better schools and more, higher paid teachers and staff. This all translates into bond and levy increases that will show up as increased property taxes. The same applies for emergency services. If you are thinking of buying in an area of economic growth, police, fire and medical aid demands are going to skyrocket and guess where they are going to come for the increased funding?
The new home owner should take the time to seriously consider whether current income is sufficient, or may possibly increase enough in the foreseeable future, to account for possible jumps in property tax rates.
Property maintenance is another potential tiger trap that can easily put a new home owner in a state of shock. Is there enough money set aside to replace a leaking or failed water heater? In many areas of the United States, ever-tightening water heater regulations may force you to spend hundreds of dollars to replace a hot water tank you expected to last for years.
If the new home utilizes a private septic system, as opposed to a municipal sanitary sewage disposal system, you may well be required to have your septic system pumped every two years, another several hundred dollar expense. If the septic system is advanced in age, you may need to have a new system installed. Most county and state governments have private sewage disposal system requirements that may send the price of a new septic system into the stratosphere-multiple thousands of dollars.
Be sure to check out the municipality’s regulations regarding garbage pick up, sewer disposal and water fees. If the city or town you are thinking of buying a house in, is growing, expect booming utility fees year after year.
These same considerations must be applied to other utilities as well. What are the current electricity rates? Have they stayed the same year in and year out? Check the local and regional newspapers. What do they have to say about electrical distribution in the area of purchase? With current discussions about drought in the West and the battle over public utilities and power supplies, will you be able to afford increasing electric bills?
While you are looking up these things, look up-up to the roof. What kind of roof is it? Asphalt shingles (otherwise known as composition roofing), cedar shingles, cedar shakes, metal, Spanish tile, torch down, rolled roofing? In fire zones, like some places in Southern California, cedar shake or shingle roofs may require additional insurance or even removal and replacement.
Years ago, a broken window was a minor repair. A single pane of glass was not much money. Today, with the variety of low e windows, and other high tech windows being sold and installed, a new window can be very expensive and the labor to replace it sky high, unless you do it yourself. These types of windows don’t necessarily need to be broken to fail. If the internal seal fails, the window will no longer perform as an energy saver. The glass panes may well fog up or become discolored, ruining that view you paid so much to enjoy.
Foundation work, mold and mildew damage, sick house syndrome, other plumbing failures, constant updating to meet current code standards-if you intend to sell any time in the future-gutters and their downspouts, the list is almost endless.
If your new prized possession is in a gated community, you will almost certainly be required to pay assessments for sewer, water, road maintenance, security, and membership. Check out these provisions very carefully. Some of these associations have uncomfortably costly provisions in their agreements that are not easily discerned at first glance. For instance, you may have to pay a road maintenance assessment, but does the agreement cover your driveway? If you have a great deal of snow fall one winter, does the association require you to pay extra for snow removal?
Some communities, not necessarily gated communities, have regulations that require you to maintain your premises to a certain standard, i.e., your lawn must be mown weekly, no cars parked on the street, you must have paid garbage pick up (as opposed to taking your garbage to the waste reduction facility yourself), etc. These all may incur costs to you.
Check out any insurance requirements from as many sources as you can think of; they have a way of jumping out at you in the most inopportune times. Is your house located in a flood zone? Don’t take the real estate agent’s word for it. Some don’t even bother to check. It may surprise you to learn what constitutes a flood zone and you may be required to maintain flood insurance even though you don’t live anywhere close to water. Same goes for earthquake insurance, fire insurance, and a host of other even more obscure insurance requirements, for example, if you are going to operate a home based business or cottage industry (yes, they are different) from your new premises you may be required to show proof of insurance.
Check out your potentially new neighbors. Do they welcome you with open arms or do they greet you with suspicion? Do they want to know right off if you plan on putting up a fence? Do they have dogs or other pets? Do they insist on using your driveway or other parts of the property?
Two legal terms related to real estate that you would be well advised to learn about, if you are contemplating the purchase of a house are “prescriptive rights” and “adverse possession”. They may or may not apply in the area where you are considering a real estate purchase, but you should find out for they can have shocking and expensive consequences.
All of this may sound very depressing to a new home buyer. It is no reason to avoid purchasing a new home; real estate is still one of the best investments a person can make. One should simply do one’s homework. Investigate, take your time, get references, save, save, save, study the real estate market and the real estate industry in your area to better understand how it works. Talk to homeowners; ask them how they account for the items mentioned above. Everyone has their own method of coping with all these unexpected expenses. It can be done and it can add an element of enjoyment and excitement to life. The key is careful preparation.