Buzz
In today's unpredictable housing market, it's essential to keep an eye on hidden costs that can surprise you after your initial purchase. From unseen repairs to ongoing maintenance, these can quickly escalate into major financial burdens. As Meghan Walbert of Mytour, a proud owner of a century-old house, says, 'tear up my basement and take my money, thank you!'
If you're on the hunt for your next home, here are the financial pitfalls to be aware of—and how you can steer clear of them.
Always factor in potential maintenance and repair costs when considering a new property.
When you think about the cost of buying a home, the initial expenses usually come to mind. However, it's also crucial to consider the 'hidden' ongoing expenses like maintenance and repairs.
A common guideline is to allocate 1% to 4% of your home's purchase price annually for maintenance and repair costs. Naturally, the older the home, the higher these costs will be. According to Money.com, that percentage translates to anywhere from $4,500 to $18,000 on a median-priced home.
Think of this as an 'emergency fund' specifically for your home. This means setting aside cash for unforeseen expenses that arise while maintaining your property, such as cleaning the HVAC system or repairing roof leaks.
Some of the biggest trouble spots for your wallet are the basement and foundation. Not only should you ensure a thorough inspection before purchasing, but it's also worth looking into the property's renovation history. On that note...
Review the renovation history
In most situations, the seller is required to disclose any significant renovations done on the property. However, it's wise to conduct your own investigation as well. You wouldn’t want to find out that certain improvements were made with errors and no warranty, leaving you responsible for fixing any expensive damages.
One action you can take is to request a CLUE Report for the home, which will detail all insurance claims filed for it in recent years. You can also ask the listing agent for the contractor's name and license number to verify them through your state’s licensing board. This will help ensure that you’re not unknowingly accepting the risk of dealing with unreliable contractors and ongoing repairs.
Investigate HOA regulations in your area
HOAs, or homeowners associations, are private entities that have the power to set rules for everything from the mulch in your front yard to the placement of your trash cans. They also come with their fair share of hidden fees. According to Morning Brew, if your property falls under an HOA, which affects about 40 million housing units, you can expect to pay between $200 and $300 monthly. Be sure to review the HOA’s Covenants, Conditions & Restrictions (CC&Rs) to understand what fees may apply and their history of fee increases. And make sure you know whether or not an HOA is involved before you even see the house.
The bottom line is that while buying a new home is always a financial rollercoaster, it’s crucial to do your homework beyond just the intimidating upfront costs. You don’t want to commit to a house before you’re truly financially prepared. Here’s what else you need to know before purchasing your first home.
