The single largest investment that most people ever make in their lifetime is the purchase of their house. Given this fact, it is highly important that you understand what you are doing before you buy in order to maximize your investment and meet your individual goals. To help you do this I have created this list of things you should consider before buying a house.
1. Clarify Your Goals. Before you begin looking for a house to buy you need to determine what your goals are. Are you looking to maximize your profit, or do you have a large family and need to get the most square footage for your money? Your clear goals will inform every other decision you make in buying your new home. However, if you do not have clear goals it is much more likely that you will make a poor decision down the road.
2. Location. According to the old adage, "The three most important things to know about real estate are location, location, location". Real estate prices vary greatly from one place to another, as does the growth potential. If you are looking to maximize your profit, look for a deal in a popular location. If on the other hand you want the most house for your money, look to buy in a more rural location where housing prices are lower. Blowing Rock and Boone offer ideal real estate communities for second homes, vacation homes and log homes.
3. Purchase Price and the Price Ceiling. The price ceiling is the highest price a home in a particular location will sell for. No matter how nice the house, it will not sell for more than the price ceiling. For investment purposes, the last thing you want to do is to buy a house that is close to its price ceiling, leaving little room for growth. Instead, look for a property that is at the bottom of its area's price range, thus maximizing your profit potential.
4. Minor vs. Major Repairs. The basic issue here is how much room there is between the purchase price and the price ceiling. The greater the difference, the more money you can put into the house and still turn a profit. Many problems with a house, such as bad carpet, poor landscaping, or ugly paint or wall paper can affect the value of a house more than they actually cost to repair. It may be wise to buy a house needing many serious cosmetic repairs that can be fixed relatively inexpensively. Such a house may grow in value instantly after the repairs are completed. What you want to avoid are expensive structural repairs such as faulty or settling foundations, mold or dry rot, insect damage, or other expensive repairs that can quickly sap any potential profit from the property. Sometimes these more serious issues are covered up with cosmetic improvements that make the house attractive and trick the buyer into thinking the building has been properly maintained.
5. Home Inspectors. Having a house professionally inspected can be a valuable tool in finding serious problems before they become yours. Home inspectors are trained in spotting warning signs and know all the areas where they need to look, things which you may not know. While this does provide an extra layer of protection, there are still no guarantees, after all, no one can actually see inside the walls.
6. Fatal Flaws. Sometimes otherwise great houses have problems that make them undesirable and difficult to sell. Some examples might be overly steep driveways, neighboring structures that are unsightly, or a sordid past. If a house has a fatal flaw, do not buy it. Even if you are willing to overlook the problem, chances are when you go to sell it, others won't. You will be forced to drop the price and eliminate any chance for profit.
7. Loans. There are many types of loans available for real estate purchases. Traditional loans require a 20% down payment, while many new types of loans have significantly lower down payment amounts and some do not even require a down payment. Financial advisors generally discourage getting one of these low down payment loans for several reasons. The first is that the more money you borrow, the greater the interest you will pay. Another reason to avoid these loans is that they almost always require Private Mortgage Insurance (PMI), which increases your monthly payment and is an expense that lowers your potential for realizing a financial gain from the property. If you have a loan with PMI, after you have repaid 20% of your loan, try to have the PMI dropped. Two types of loans that you never want to take are balloon mortgages and adjustable rate mortgages. Both of these mortgages are difficult to repay and add a tremendous amount of uncertainty to your financial future. Non-traditional mortgages also have higher closing costs associated with them. By far the cheapest option is the traditional 20% down option. Another factor to consider with your mortgage is its length of term. The most common length of term is 30 years, which means that it will take you 30 years to pay off the loan at the monthly payment amount. It is wise to consider a shorter term. 10 or 15 year mortgages will save you a substantial amount of interest but do not increase the monthly payment by all that much.
8. Real Estate Agents. The question of whether a buyer needs an agent is largely a matter of choice, whereas selling agents provide a lot of resources to help market a property and thus typically increase the selling price beyond their commission; it is not as clear that a buying agent will bring an equal reduction in price. If you do choose to hire a buying agent, make sure that you find one who will aggressively look for the right property and aggressively negotiate the best price. The most important thing to remember is that the agent works for you. Interview several agents, ask for references, determine that they are knowledgeable about the market in which you would like to purchase a house, and have had a lot of recent success.
9. Emotion and buying a house. The enemy of wise purchasing decisions is emotion. In order to buy a house that will build its value you can't make your decision on what makes you feel good at the time. Something as simple as an overgrown front yard or dated carpet in the entryway will drive many buyers away. When you are looking at houses do not allow your initial impressions drive your decisions. Instead, look closer at the house. A house with cosmetic problems but that is in otherwise good condition can be a wise buy, if you can get over your emotional response of "I could never live here". On the other hand, a properly staged house, where everything is very carefully designed to make you feel at home, where you walk in and think "I could live here", is likely to make you feel like buying the house even though it may already be at the price ceiling. If you want to truly make a wise, informed decision, you must take emotion out of the equation.
If you have question about this article or about real estate in either in Blowing Rock, Boone, Valle Crucis, Banner Elk, Seven Devils, Deep Gap or Ashe County, please give one of our professional Realtors a call today.
Ace Realty in Blowing Rock can help you with all your Blowing Rock area real estate needs. We can be reached at (828) 295-6165.