Reduce Your Risk When Buying a Home, Condo or Townhouse

Although it isn’t possible to have absolutely no risk when purchasing real estate, there are steps you can and should take to ensure that you reduce any possible risk to the lowest levels possible.

Location

It is always best to purchase a home or condo that is not at a substantially higher price or at a significantly higher quality level than those in the same area or complex. There does need to be some judgment here because this is not a completely black or white rule – but buying a million dollar home surrounded by $200,000 homes in a neighborhood that is starting to decline would not be a good idea.

You should look for a home or condo that does suit your needs but if you are buying the best one on the block and it is way above the ones around it in price or finishes you will most likely have difficulty in the future maintaining its value and/or selling.

Condition

It is very important that you are aware of the condition of the property you are buying, as much as can be determined without tearing open walls and such. A properly done home inspection and termite inspection are a must and will give you a lot of information about the condition of the property and possible upcoming costs for repairs or replacements.

Even with good thorough inspections you have to be prepared financially for issues that will arise in the future that may not be of concern at the time you buy. It is smart to put aside money for possible repairs that may be needed so that you can fix things that need to be addressed quickly. Letting repair issues go because you can’t afford to fix them can result in adverse effects in the property condition that may lower its value.

If you do have inspections and the results indicate that there may be a major repair or replacement coming up in the next few years, and decide to proceed with the purchase, you will definitely need to be prepared when this comes up to be handled. Something like a new roof or A/C system can be costly but if you have planned ahead you will be ready and when you do take care of this it will actually increase the value of your property.

Flood Zones, Taxes, Insurance, Etc.

You should definitely know if the property you are buying is in a flood zone and if it will require flood insurance. If you are financing your purchase this will increase your monthly payment and you will have to be prepared if your flood insurance premium increases in future years. If you do not want to deal with this particular risk you should make sure that any property you consider is not in a flood zone. There is no guarantee that the flood maps will always stay the same that they are now but at least for now you would be in a less risky position if that is something you want to avoid.

When you have your inspections you should also ask if there is anything that will help you to qualify for a lower homeowner’s insurance rate or if there is anything that you could do to the property that would help you to qualify for any discounts on your insurance. In some cases, the costs for making changes would not be worth the discount but in other cases the discounts would more than pay back the changes you would make. It’s worth asking and why not do it since you already have the inspector there doing the inspection.

Property taxes are also an ongoing expense and you should get assistance in finding out what they will likely be for you. Many buyers assume that the taxes they see that the current owner is paying will be the same for them and sometimes buy based on what looks like a lower tax rate. However, there are factors that you may not understand which can result in the taxes being quite a bit higher after your purchase than you thought they would be so you do need to have accurate information on the likely annual property tax amount for any property you are considering purchasing. If you base your budget on an incorrect tax amount you are at risk of buying something that will not be affordable for you in the future.

Condo and Homeowner Associations

Be certain to review any available documentation regarding the rules and regulations of the complex or community in which you want to make a purchase and also, especially for condo communities, carefully review the financial condition of the association. You want to make sure that there are adequate reserves for future maintenance and repair issues that will be coming up so that you won’t get any surprise, large assessments in the next few years. Sometimes a condo community has lower fees than others and it may look like a better deal – but if that community is not putting aside enough reserve funds to cover things like roof replacement, exterior painting, resurfacing of their parking lot, etc. then it is very likely that there will either be a large assessment coming your way in the next few years or you will see the overall condition of the complex or community deteriorate which will drag the value of your property down with all the others in your community.

Not Having Professional Advice

Trying to make a purchase on your own, using an inexperience agent, relying on an agent or loan officer/mortgage broker who you choose because they seem nice, using someone for financing because they initially quote you a slightly better rate – anytime you use the wrong professional or no professional for a certain aspect of the purchase process you are increasing your risk.

I find that a lot of buyers I work with don’t fully understand all of the complexities involved with a purchase and either from past experience or from no experience also don’t realize there are different levels of quality of service provided by real estate agents, mortgage brokers/loan officers, title companies, inspection companies, etc. Over the years I have seen buyers put in uncomfortable situations or making costly mistakes because they either did not use professionals who really knew what they were doing or did not use professionals to represent them because they thought they knew enough.

Since a home or condo purchase will probably be the largest single purchase you will make in your lifetime, you should make sure that you have the best representation in every aspect of the transaction.

Conclusion

What is most important for buyers so that they can keep their risks to a minimum is having quality representation from professionals, getting as much accurate information as possible for the decision-making process and to know what potential costs they may have in the future, and to do adequate research with their professionals’ assistance and on their own.

Buying a home, condo or townhouse can be a wonderful experience and provide a place where you and your family can experience years of enjoyment. To have the best experience possible requires making the correct decisions and understanding what you are doing and what you are buying. Hopefully the information above will help you in your future purchases and I am here to assist you with those when you want my help.