When you dive into home buying, there are plenty of things you should know. One big part of the process that you should learn about, both before purchasing your home and after, is home improvement.
Many of us know little to nothing about renovations in the beginning stages of homebuying, but if you buy a home without looking into the updates that have been made, you can get into some major financial trouble. Improperly inspected homes lead to catastrophic physical damage, which can end up costing you a lot of money out of pocket or digging you into a deep hole of debt.
On the other hand, when you familiarize yourself with the complicated relationship between home improvement and home buying, you’ll be best prepared to purchase a home that doesn’t throw you any curve balls or severely damage your financial status.
Read on to find out some of the details you need to know about home improvement as an aspiring homeowner.
1. Does your desired home need renovations?
Even if you think you’ve found the house of your dreams, step back and consider what updates or improvements you’d need to make so that the home is both safe and comfortable. Before you pull the trigger on an offer, it’s imperative to consider your budget and find out whether or not you can afford to make the anticipated changes.
Whether you’re thinking about personalizations like DIY projects or renovations like kitchen remodels, figure out the potential costs and ask yourself some of these questions:
Are the costs of the updates feasible? Get quotes from contractors, see if DIY is practical, and weigh the costs against one another.
Will I be able to afford these now or can they be delayed? Evaluate the amount you’ve saved for your home and determine whether the updates can be done now or if they can wait until later on.
How can I fund these home improvement projects? Save up some cash, try financing via credit cards, or look into alternatives like a home equity loan that utilizes your current mortgage to provide cash upfront that you can use for home improvements.
Asking yourself these questions about home improvement is critical in order to best avoid any financial struggles later on.
2. Have renovations been considered in the price of the home?
If you’re interested in a home that needs a little TLC, you’re not alone. In fact, out of the available US homes in 2018, 65% exceeded 25 years of age. So, chances are the home buy will require improvements. Therefore, you need to consider these renovations when negotiating the price of the home.
Before making an offer, weigh in all the improvements that need to be made. These can be used to lower the actual price you pay for the home. Combine the knowledge of a trusted inspector with an experienced real estate agent to determine which characteristics of the home align to cut down the purchasing price.
Experts say that the best way to negotiate is to know what the other party wants most out of the transaction. Once you understand their perspective and their goals, the negotiation will become more efficient and productive. It’s also important to note that the negotiation should be based not solely on asking price, but also based on all costs associated with the transaction including closing costs and other fees.
Keep in mind, just because you’re getting the house for a lower price than asking does not mean that it’s worth the back and forth. Some of the unavoidable renovations could be so time consuming and expensive that arguing for the reductions in price might not be worthwhile, especially when reviewing future closing costs, mortgages, and any other maintenance fees.
3. Are the existing renovations up to code?
If it’s your first time buying a home, you likely haven’t spent much time thinking about the rules of home improvement. But, if you’re looking to buy a home that’s been worked on, it’s critical to know that the renovations are up to code.
Not only should you be aware of the updates that have been made, but the seller should have documentation that summarizes the work that was done, by whom, and proof of permits. Work done with a proper permit shows that the home has met a certain standard of safety required by the local area’s legal requirements. Improper or outdated permits, on the other hand, could make your desired home unsafe for living.
So, what’s the worst that could happen? You might be thinking verifying permits and maintenance is a headache you’re willing to sacrifice, but that is a big no-no. Electrical wiring that hasn’t been installed correctly puts the home at risk for fatal damage. Overlooked asbestos or mold detections put occupants at risk for certain cancers. Even something as simple as improper fence heights can lead to complete removal of a newly-installed fence.
That said, making sure your renovations are up to code is vital to your well-being and should be examined before making an offer on a new home. Ask for documentation and use a reputable home inspector to ensure your future home is safe for you and your family.
4. Are the new renovations worth it?
Once you’ve evaluated all previous improvements made on the home and you decide the home is appropriate for your family, you should consider the ones you want to make in the future. It’s important to anticipate which projects you plan to take on, and most importantly, if they are worth the time and money that goes into them.
Any expensive renovations or projects should add resale value to your home. But, as we’ve stated before, just because there is a change you’d like to make, does not mean that it will increase the selling price of your home or that it will be appealing to future buyers.
Contrary to popular belief, efforts like drastic customization, eliminating rooms, or over-the-top renovations are major projects that won’t generate any value to your home in the long run. On the other hand, kitchen remodels, bathroom additions, or boosting curb appeal will add significant value to your home and make your home stand out to potential house hunters.
Before taking on a hefty home improvement project, make sure that it’s going to be profitable and that it’s done by a renowned contractor. And, obviously, don’t forget your permits!
The more you learn about the home improvement projects you plan to undergo, the easier the home buying or selling process will be down the road. Take your time and do some research to make sure you’re making the best financial decisions before and after buying a home.