We have examined the reasons why so many older homes are on the market. Conversely, we looked at why there are so few new homes available for purchase. If you are looking to buy a home, you may have to consider an older home for the first time. Not only are there so many more available, but they are typically priced at a significant discount compared to a new home. Older homes often have a lot of charm, but they also come with their set of challenges.
Find out now: How much house can I afford?
The market for older homes (for our purposes those built prior to approximately 1990) varies significantly by region. On the east coast, and in older western cities like San Francisco, lay a significant numbers of “pre-war” homes. These homes have distinctive features, like exposed brick and crown molding, that make them especially desirable.
If well-kept, these homes can command similar prices to new homes. “Post-war” homes, are usually considered less desirable for two reasons. One, they tend to be located in suburban areas. Two, many of the features of mid-century construction on “post-war” homes have gone out of style.
Making a straight comparison of price between an older home to a similar new home, may be misleading. The purchase price may represent only one portion of the true cost of ownership. Even a well-maintained older home is likely to need major work down the road. You should ask the seller about the roof’s age and condition, the water heater’s last replacement, etc.
Get a Home Inspection
When buying a home it is always a good idea to get a home inspection. If buying an older home it is absolutely essential. An inspection is very different from an appraisal. An appraisal determines the market value of the home, and it is primarily for the mortgage lender’s benefit.
An inspection is entirely for your benefit. An inspector will look for any defects in the home and estimate the remaining life of elements like the roof. The inspector can also recommend areas that need immediate repairs, if any.
The inspection will help you determine what the true cost of buying an older home may be. Let’s say the purchase price on an older home is $20,000 less than a similar new home. But then the inspector estimates it needs $15,000 of work in the first two years of ownership. The older home ceases to look like such a great deal all of a sudden.
Consider a Renovation
Planning for a full or partial renovation is a good strategy if you are interested in an older home. This would particularly be true if you identify a property in a good location with a general structure that you like. There are mortgage options available for folding the costs of a renovation into the purchase financing.
Keep in mind that a renovation is different from repairs. With a renovation you will likely improve the value of the property by more than the combined cost of the purchase plus repairs. The final project will give you a house with personal customizations and some already existing equity.
Older homes do have their challenges. But with good planning and realistic expectations, they can make for a good investment. Not only that, but they can provide you with a charming and character-filled place to live.
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