As a real estate agent for the past five years, I’ve heard many of my clients tell me how badly they want to find a real deal. Take, for instance, my client Linda, who recently left me an urgent message about a house in Auburn, WA, for sale for only $125,000.
Given that homes in this Seattle suburb were going for three times that much, this had to be the bargain of the century, right?
Alas, no. Allow me to explain.
Why ‘cheap’ houses often end up being anything but
A few hours later, I met Linda and her husband at the house. The yard was overgrown, so someone had hacked a path through the blackberry bushes and brush to the entrance. I unlocked the door, and it creaked open. Brave real estate agent that I am, I let my clients go in first.
It’s normally good etiquette when touring a home to take your shoes off at the front door. That wasn’t an option here. The floors were years past their due date for being replaced, and covered with crumbles from the disintegrating walls and ceiling. The house had obviously not been lived in for some time, and the electricity was turned off. From what we could see in the dark, the floor plan was cramped and outdated.
I’d seen bigger kitchens in an RV.
Yet my clients were not deterred by this shell of a house, or the so-so neighborhood. They were still excited by the $125,000 price tag.
I warned them that the house could end up selling for more than that. As we walked around outside, more people came to look at the house, so we knew we had competition.
As it turned out, the house sold for $315,000—over twice the list price, and in my opinion, far too much.
And even then, Linda and her husband were still determined to find a bargain, so I showed them several more houses and lots, all in the bottom price range of the current market. Problem is, homes in this bottom price range typically had three things wrong with them: They were so rundown they weren’t habitable, they weren’t in a great neighborhood, yet they inspired competition, so that typically, they ended up selling for twice the listing price.
In the end, I never found Linda and her husband that bargain house they were hoping for.
The downsides of distressed properties
Linda is hardly alone in her desire for a deal. My husband and I have done our own share of deal hunting—and, once, even bought a 100-year-old house in Peru, IN, for $36,000.
Granted, this was back in 1985, but the house was in sorry shape. One corner of the house had to be jacked up because it was sinking. The electrical systems were so old, my husband—a construction professional—said we were lucky the wiring hadn’t burned the place down.
Yet we were young and energetic, so we rolled up our sleeves and made changes—even many that weren’t strictly necessary, such as moving the garage to create a backyard. We also hated the dark, small kitchen, so we enlarged it onto the once-decrepit sun porch.
All told, we spent three years and about $20,000 fixing up the house. When we sold it for $55,000, we didn’t even make a profit!
And that’s hardly the only bargain basement fixer-upper we’ve entertained tackling, either. We’ve seen houses that have been ravaged by fire, or where the wiring has been ripped out of walls, or where people have started remodeling but have given up halfway through. We once even bought a house with serious roof and water damage that apparently had been used as a marijuana grow house. It was a steal at $175,000, but it took us three years and over $120,000 to fix up and sell, not counting our considerable labor.
What to know before you buy a house at a bargain price
It is tempting when you see distressed properties at low, low prices, but my husband swears he will never buy a fixer-upper ever again. And I have to say I agree.
The biggest problem with a house at a rock-bottom price is that all you are about to invest in time and money could probably be better spent elsewhere. If you spend months or years (and tens of thousands of dollars) working on a dumpy 1952 house in an iffy neighborhood, what do you have when you’re done? Probably an over-improved but still slightly dumpy 1952 house in an iffy neighborhood. If, instead, you’d spent that time and money on a higher-quality home in a well cared for neighborhood, you’d have far more potential upside for your investment.
Another factor to consider is how you intend to make a profit on your real estate investment. Is it by improving and reselling the house? Or is most of your profit actually going to be from a general market uptrend?
For example, although we eventually made a profit fixing up and selling our former marijuana grow house, we probably cleared more of a net profit because the real estate market improved during the three years we owned it, rather than because of the improvements we made. It would have been a whole lot easier simply to buy a house in good condition and hold it for the same period of time, then just kick back and watch as the market went up.
All this doesn’t mean you shouldn’t shop for a good deal. It’s just that when you see one, estimate how much it will cost you to fix any deficiencies (and just assume that it always costs more than you think). Don’t forget the substantial costs of purchasing, financing, and selling property. If the numbers work out and you think you can make a profit, you might be looking at a good investment.
But if, on the other hand, the numbers don’t add up, perhaps that low, low price still isn’t low enough.
Living in a community managed by a homeowners association (HOA) means that you’re obligated to follow certain rules and regulations. Depending upon your HOA, these rules can be very particular—so particular that you may not even know you’re doing something wrong! And if you disobey your community’s covenants, conditions, and restrictions (CC&Rs), you could get fined.
“Fines are a tool to gain compliance, and it is not uncommon for them to be reduced or waived once compliance is achieved,” says Dawn Bauman, senior vice president, government and public affairs, for the Community Associations Institute in Falls Church, VA. She says some rule violations could yield one-time fines of anywhere from $25 to $100, or daily fines of around $10 per day.
The best way to avoid fines is to stay in the loop with your community. Familiarize yourself with the CC&Rs, read community documents, attend community board meetings, pay attention to community updates, and ask questions when you think you might be in violation.
Curious which requirements tend to trip up homeowners the most? Here are some of the most common HOA rule violations.
1. House design changes
Making any changes to the appearance or structure of your home—such as adding a new mailbox or paint job—requires getting permission from your HOA.
David Berman, an attorney forBarry Miller Law, a business and real estate law firm in Orlando, FL, says the most common violations he hears about involve compliance with architectural design standards and covenants. This includes changes made to the exterior of a home without the association’s approval. Why? A good portion of the rules in most HOA CC&Rs have to do with the appearance of your home.
2. Smoking near neighbors
Other common violations are those that inconvenience other residents at the association, says David Swedelson, a community association attorney and a founding partner of SwedelsonGottlieb in Los Angeles.
“This would include smoking that creates a nuisance, whether it be cigarettes, cigars, or marijuana,” Swedelson says.
Owners may have authorization to use marijuana for medical purposes, but that does not necessarily include the right to smoke in their unit if the smoke affects their neighbors.
HOAs may impose limits on pets in the community, including the number of pets you own; the specific breeds allowed; where pets can be walked; and whether or not they must be kept on a leash.
“We are seeing a lot of owners claim that their dog is a service animal, so they can get around a weight restriction or other rules in the CC&Rs,” says Swedelson.
If you’re a pet owner interested in buying in an HOA community, be sure to ask about the rules on pets. And if you already live in an HOA community and are considering adopting, make sure you’re familiar with the rules on pets before bringing a new four-legged friend home with you.
4. Illegal rentals
Thinking of renting out your home on Airbnb? Many HOAs require written permission to allow rental of your home, since renters may not be aware of the association rules. Given the popularity of short-term rentals, Swedelson says his firm is increasingly seeing violations surrounding this issue.
Making a little cash on the side is great, but be sure you’re in compliance with your community’s rules before renting out your place.
5. Landscaping, decorations, and other exterior upkeep
Overgrown weeds and lawns are a big no-no in an HOA community. Thinking about adding tall sunflowers to your garden? How about chopping down that huge tree on your front lawn? These are also situations in which you’d need to check with the HOA. Some boards even limit the types of trees and plants that are acceptable and where they can be located on your property.
Most HOAs also prohibit clutter outside your home. This includes outside storage. An HOA may take issue with things like bicycles or kayaks being stored outside in plain sight.
And during the holidays, HOA rules may limit how long before and after a holiday you can decorate the home’s exterior, including the size and type of decoration.
6. Motor vehicles
Many HOAs have rules on the number and types of vehicles (and boats, RVs, etc.) that can be parked in your driveway or on the street.
Having guests over for a dinner party? You may have to clear guest car parking with the HOA first. The same goes for out-of-town guests who are bringing a car; your HOA may require you to tell them how many days your guests plan on staying.
Most HOAs are strict about putting trash cans out too early or not bringing them in on time. Be careful about bulky items you throw out, such as furniture items or boxes that haven’t been broken down—your board might have a problem with them being left on the curb.
Being a first-time home buyer is exciting. After you finish signing a gazillion documents and the keys are finally placed in your hands, there’s an undeniable sense of accomplishment and pride. However, not long thereafter, buyer’s remorse can set in. New buyers might wonder if they made the right decision or if there were warning signs that they missed—or outright ignored.
Everyone hopes that life after closing on a house will be smooth sailing, but some unsuspecting buyers end up in turbulent waters. The following anecdotes outline missteps that first-time home buyers can make and, most importantly, how to identify those red flags before you’re locked into the sale.
No room to grow
Many of the first-time homeowners Chicago-based real estate agent Jonathan Self speaks to say that they underestimated how much space they would need.
“The family expanded faster than they had planned, and they now need to move without owning the house for enough time to reap any benefit of price appreciation,” he says. “Life happens, but you want to make sure you’ve had four to five years minimum in the home at the normal rate of appreciation—and that’s just to break even.”
To avoid having to move because of a lack of space, buyers should ask themselves the following questions: Is the size of your family going to change? Is there a chance an older family member will need to move in with you? Do you have space for a dog, if you want one?
“Finding the right home isn’t just the sexy, fun stuff like finish selections,” Self says. That’s why you need to consider how much space you and your family will really need down the road so you can stay put.
First-time homeowners would do well to understand the pros and cons of a homeowners association before moving into an area that has one. That’s why Self goes as far as going through the HOA’s meeting minutes with his clients who are considering living in one of these communities.
“Neighbors are always an X factor, and as agents, we do what we can to investigate. But your best bet at spotting any internal HOA drama is to check out those meeting minutes and budget line items,” he says.
A lack of HOA meeting minutes or transparency with the budget is also a big red flag.
Becky Beach, a business owner and blogger at MomBeach.com in Austin, TX, says her HOA dues are $500, but a lack of communication means she and the other homeowners do not know what the money is going toward.
Living in a community with an HOA suits many buyers, but you want to know what you’re in for before signing on the dotted line.
Rushed to buy a home
Aleka Shunk, founder of the blog Bite Sized Kitchen, warns first-time home buyers against a hasty home purchase like the one she made.
While searching for a home in New Jersey, one of her friends sent a flyer from neighbors looking to sell their home. The Shunks loved the home and the area, and the highly motivated sellers wanted to move within six weeks. One of the sellers was an agent, and preferred that the Shunks didn’t use an agent on their behalf—and also said the home would be sold as is.
“I found a local inspector who said there were a few small problems, but overall the house was in good shape,” Shunk says. “I also hired a lawyer to handle the legalities.”
However, a few months after moving, the problems started.
“I woke up to no water in the bathroom faucet, and then a neighbor informed me that the water was gushing down the driveway,” Shunk says. Water was flowing from the ceiling in both the garage and living room. After a week of frigid temperatures, two pipes burst—to the tune of $40,000 in water damage. The cause of all of these problems? There was little to no insulation throughout the house.
“We were just so excited and could not wait to get into our own home,” Shunk says. “However, because we rushed, we did not have time to ask many questions.”
It took three months to fix all of the damage, and the family is saving up enough money to properly insulate the house. The lesson: Don’t rush into buying a home, and always get a second opinion.
DIY real estate transaction
Many buyers—first-time or not—underestimate the value of having a real estate agent represent them. You may be capable of combing through online listings, but navigating the negotiations, paperwork, and legal stipulations that arise during a real estate deal requires experience.
“This is a big transaction, therefore, it is very helpful to have another qualified person speak and deal on your behalf,” says Mark Cianciulli, a real estate broker and founder of The Crem Group in Long Beach, CA.
For example, he says, even a home being sold as is can be negotiated—especially one like the Shunks’ that came with major problems.
“Because we did not use an agent, we did not know the right questions to ask,” Shunk says. “What does ‘as is’ even mean?”
While she did use a lawyer and got a home inspection, Shunk says she trusted the seller to ensure that everything was taken care of.
Owning a home means you can build equity, take advantage of tax deductions, and partake in a little something called the American dream. For the past couple of years, the U.S. homeownership rate has hovered around 64%. But there’s also a considerably large pool of renters in the country who have plenty of reasons for not buying. And some of those explanations are totally legit: Financial, economic, or personal limitations can prove that now is not the right time to buy. But we know an excuse when we hear one.
We get it—investing in real estate is a huge commitment. It’s scary and exciting all at the same time. But what if buying actually is in the realm of possibility?
Think of all of the reasons you’ve ever given for not getting into the real estate game. Now allow us to poke holes in those theories.
We asked real estate agents to weigh in on the most common reasons people give for not buying a home—along with their counterarguments to these statements. If you do your research and everything checks out, purchasing property could be totally feasible.
‘I don’t have enough for a down payment’
According to Jonathan Self, a Realtor® at Center Coast Realty in Chicago, most people who say they don’t have enough for a down payment have no idea how much money they would even need.
“Most people who tell me this have not spoken with a lender—it’s rare for people to go to a lender before their agent,” he says.
So, the first step is to find a reputable lender. This can help you set your goals and put you on the path to homeownership.
Yes, there’s certainly a chance you won’t have enough for a down payment. Yet, on the other hand, you might not need as much money as you think you do. Or, your financial snapshot will qualify for loans that don’t require a large down payment. But you’ll never know unless you reach out to a lender.
‘I need to save more money’
For some, it makes sense to wait and save for a down payment, future mortgage payments, or home repairs. But as home prices edge higher, so do rent costs. That’s why buying might be a better decision than renting.
“The rent you’re paying could be converted to investment in equity,” says John Manning, managing broker at Re/Max on Market in Seattle.
Talk to a lender to see if you qualify for a mortgage. Most agents are willing to match potential buyers with mortgage professionals.
“There are mortgage products for almost every financial scenario,” Manning says.
‘I’m locked into my lease’
This is a common excuse, especially among first-time home buyers, according to Heather Sims at Ebby Halliday Realtors in Dallas. “My response is always, ‘Let’s find out what the penalty is for breaking that lease.’”
She says there’s often no penalty at all if your property management company is able to find a tenant to rent out the unit.
“Other times, it’ll be one month’s rent. In the grand scheme of things, that’s not very much given how much money you’re saving (and investing) by buying a home with a reasonable mortgage rate,” Sims says.
In some situations, the sellers will need to lease back the home as they search for a new home. In these instances, Sims says, it’s easy for buyers to recoup the cost of breaking their lease.
‘I might move away’
Many of us haven’t found our forever town or city yet. That’s fine. The possibility of relocation is a valid reason for holding out on purchasing a home—unless you’ve been saying that for years. The truth is, not investing in property could mean you’re leaving money on the table.
In some areas, mortgage payments are comparable with paying monthly rent. If that’s the case in your neighborhood, it might be wise to buy.
“Even if you have to get out of town before your four to five years of equity has built up to help you break even, you could rent [out] the home and continue to get equity from the tenants,” says Self.
‘I’m waiting the market out’
It’s a seller’s market. Or is it a buyer’s market? Buyers often use this confusion as an excuse to wait out buying a house because they believe they’ll be able to get a better deal in the near future. Markets are cyclical, and it is usually prudent to purchase when there are more sellers than buyers.
“However, there is a good chance your money isn’t doing much for you in your savings account,” Self says. “No one has a crystal ball, but I know people who have been waiting for years so they can jump in at the right time.”
Manning agrees: “Many people will never manage to outsave market appreciation and can lose purchasing power if interest rates trend upward.”
‘I’m looking for the perfect house’
Everyone is looking for the perfect home, but if you’ve been searching for years, and you’ve viewed hundreds of homes to no avail, you may need to tweak your expectations. It’s one thing to prefer a move-in ready home over a fixer-upper, or three bathrooms over two, but sheer perfection is hard to find.
“From my experience, buyers who are looking for a perfect house will never find it, because a perfect house doesn’t exist, regardless of the price,” says Russell Volk, a Realtor at Re/Max Elite in Huntingdon Valley, PA.
If a house has eight of the 10 features on your wish list, it’s seriously worth considering.
What is a home warranty? In a nutshell, it’s a policy a homeowner pays for that covers the cost of repairing many home appliances if they break down.
After all, lots of things you buy come with a warranty in case they break down, from cars to smartphones. But what about homes? It turns out you can get a home warranty plan, too.
“Home warranties provide financial protection from a service provider for homeowners who might be faced with unexpected problems with their appliances,” explains Shawna Bell of Landmark Home Warranty.
Many people buy a one-year home warranty plan right when they close on a home, since such protections can provide some much-needed peace of mind that you won’t get hit with unexpected, out-of-pocket expenses soon after moving in. Imagine what a bummer it would be, after all, to wake up one morning to a broken boiler, knocking appliances, a leaking water heater, dripping plumbing, or malfunctioning fridge in your new home.
A home warranty plan can lessen those homeowner and appliance worries, which for many is worth every penny. A couple of warranty plans to consider: Choice Home Warranty and TotalProtect.
What does a home warranty, like one from Choice Home Warranty, cover?
Don’t mistake a warranty for homeowners insurance, which covers your home’s structure and belongings in the event of a fire, storm, flood, or other accident. Home warranty companies, in comparison, will cover repairs and replacements on home systems, including electrical systems, plumbing, water heater, washer, and kitchen appliances due to normal wear and tear—no calamities required.
Home warranty companies, including Choice Home Warranty and Home Service Club, generally set up a service contract to cover the following items (you can read a sample contract to find out):
Basic home systems such as plumbing and electrical
Heating and cooling systems, including the water heater
Appliances such as the washer and dryer
Kitchen appliances such as the oven, range, built-in microwave, and garbage disposal
How much do home warranty companies charge?
While homeowners are often required to get homeowners insurance along with their mortgage, home warranties are a fully optional purchase. Basic coverage starts at about $300 and goes up to $600 for more comprehensive plans, says Bell.
A homeowner can include add-ons to a service contract if needed (e.g., coverage for a swimming pool, various appliances, or an external well).
Although many home warranty companies offer plans to homeowners at any point, the best deals can often be snagged if purchased when you become a first-time home owner. You’re eligible for these plans whether you’re buying a condo or single-family home. And some warranty plans are the “build-your-own” type, which means you can customize a basic plan to cover particular systems (like plumbing) and appliances, or you might include optional add-ons like a tuneup for your HVAC.
“The home warranty offered at the time of the real estate transaction typically offers the most comprehensive coverage and price points, so that’s why it’s the ideal time to lock it in,” Bell says.
At the end of the first year, you usually have the option to renew your home warranty or bail with your service provider.
Benefits of home warranties for home buyers and sellers
A home warranty benefits homeowners by providing reassurance that they can move in without worrying about shelling out even more for add-on or surprise repairs.
A home warranty can also benefit home sellers (if they don’t have it already), since it can cover these elements during the listing period; some home warranty companies even offer free seller’s coverage during this time with the hopes that the buyer will decide to continue the coverage. Often, home sellers will offer to pay for the first year of a buyer’s home warranty to entice buyers to bite.
But not everyone thinks home warranty companies are worth the cost. Typically a warranty isn’t necessary with new homes, since most of the appliances are already covered under manufacturers’ warranties. But in general, the older your home, the greater the odds that something’s bound to break, and the wiser it is to get a home warranty. Best of all? Not all home warranty companies differentiate between newer and older homes in terms of cost, making a warranty an especially cost-effective option if you are purchasing an older home.
Be sure to read the fine print on the contracts from a warranty company such as Home Service Club and Select Home Warranty. And remember, this type of warranty doesn’t usually cover pre-existing conditions and you may have to pay a deductible if something breaks.
What if something breaks under a home warranty
Home repairs are a big headache, so you’re probably wondering if that broken appliance, leaky plumbing, ductwork, or HVAC is a covered item under your home warranty. To find out whether you may have to pay a deductible, call your provider or customer service to connect with a qualified contractor in your area.
One thing to remember is that a home warranty does not mean you’re off scot-free for a certain “covered item.” Typically you’ll have to pay for a service call, service fee, or part of the bill up to your home warranty deductible first.
While not everyone will think a home warranty is worth it, it is a good idea for people who lean toward being better safe than sorry when buying a home. Consider the appliances you own and how reliable your plumbing is. Speak with your real estate agent for advice, and then check out the home warranty companies in your area (try Select Home Warranty and TotalProtect). This way, you can read a few sample contracts and decide for yourself.
How much is homeowners insurance? It’s a question with answers that are going to vary for each homeowner, depending on the size, age, and condition of the home, as well as the deductible and liability coverage. But know this: No matter how safe and secure you feel in your home, it’s a fact of life that bad things can happen at any time—floods, fires, sinkholes, theft. And that’s why buying home insurance is a must. But how much does homeowners insurance cost? The average annual premium runs about $952, but a bunch of unique factors can go into calculating a specific quote, and that information could help you get a lower home insurance rate in some cases. Got it? Let’s look at the things that make a difference in how much you’ll wind up shelling out for home insurance:
How much is homeowners insurance affected by the condition of your home?
Homeowners insurance cost and how a home’s condition affects the rate, liability, and deductible are issues homeowners commonly wonder about.
The condition of a home includes everything from a house’s roof to its pipes, heating system, electrical wiring, and even age.
For instance, the lead and galvanized pipes found in older homes “result in higher premiums as they are more prone to cracks or leaks than the copper and plastic piping used in newer homes,” says Paul Boudreau, insurance broker at Rowat Insurance.
Price to rebuild per square foot
Since homeowners insurance often offers liability for rebuilding whatever part of your home succumbed to fire, flooding, or other disaster, most home insurance policies factor in the price per square foot to rebuild in your area based on current construction rates.
While the national average is $95.51 per square foot, the overall cost of homeowners insurance policies can differ drastically from insurer to insurer.
It’s important for your insurance company to do a reconstruction cost estimate to ensure “the proper rating for building materials,” says Jason Pesch, owner of a local insurance agency in Scottsdale, AZ.
While most policies include a deductible to pay replacement cost (the cost to rebuild a home), some insurers pay only the depreciated current value for the whole house.
Probability of insurance claims in your area
“If your home is located in an area prone to tornadoes or forest fires, you’re going to have a higher premium due to a greater risk of damage,” says insurance expert Michael Senderovich.
In other words, the more known risk there is to your home, the stiffer the homeowners insurance premium.
Since every standard homeowners insurance policy excludes coverage for natural disasters like earthquake and flood, be sure to check with your agent to see if you need the extra liability coverage. Note that the cost of those add-ons such as flood insurance could easily exceed the price of your homeowners insurance policy.
Your credit score, age, and other personal info
You—yes, you, the homeowner—also factor into how much homeowners insurance will cost.
According to Erin Wenzel, account manager at Michigan’s Provision Insurance Group, everything from your credit score, marital status, age, level of education attained, and frequency of claims submitted on prior homeowners insurance policies will increase or decrease your rate and deductible. (Hint: A higher credit score and few or no claims usually result in a lower rate for home insurance.)
Whether your home has recreational (and risky) amenities
A home with a swimming pool, trampoline, or certain other “fun” features signals a high-risk situation to a home insurance company—and your price quote, liability coverage, and deductible will reflect that. Same goes for homes with pets or farm animals that could be dangerous (e.g., large dogs or horses). In these cases, policyholders may need to add extra liability.
Increasing home prices
Inflation or the increased value of your home in an upmarket may cause your homeowners insurance premiums to increase each year. Be sure to check with your insurance company about how the market could affect your home insurance.
Safety features in your home
You may be able to snag a homeowners insurance discount if your home has a nifty feature that an insurer may find attractive (e.g., storm shutters, security systems, or carbon monoxide detectors). If your home doesn’t have such features, consider upgrading them for a possible discount and to cut your homeowners insurance expense.
“Installing a security system for $30 per month may reduce your premiums by at least that amount—and provide additional safety for your family at the same time,” says Wes Taft, co-founder of moveCHECK.
How to lower the cost of homeowners insurance
However painfully obvious this advice may seem, you should shop around for homeowners insurance. Many homeowners go with the first homeowners insurance policy quote they get in order to cross one more thing off their list during a move or the home-purchasing process. And it’s a big, costly mistake because you may pay more. But the cheapest home insurance option isn’t always the best, either.
“An informed insurance agent that can shop your home with multiple insurance carriers is your best bet at finding a great rate for your home,” says Wenzel.
Ask the agent to explain why the homeowners insurance premiums are different and what the trade-offs are in liability coverage and deductibles. And this isn’t just something you should do when you first buy a home. Every year, you should review your homeowners insurance, including your liability coverage, premium, and deductible.
“Make an effort to get a new quote each year, and shop around if you’re not happy with your current rate,” Taft says.
Homeowners insurance companies hungry for new business offer competitive rates on premiums.
Many homes across the United States are part of an HOA, or homeowners association. So what does that mean?
In a nutshell, an HOA helps ensure that your community looks its best and functions smoothly. If you’re buying a condo, townhouse, or free-standing home in a neighborhood with shared common areas and amenities (such as swimming pools, parking garages, and security gates), odds are high these areas are maintained by a homeowners association.
The number of Americans living in homes with HOAs is on the rise, growing from a mere 1% in 1970 to 25% today, according to the Foundation for Community Association Research.
Is buying a home with an HOA right for you? We’ll help you decide by laying out the pros, cons, and costs of an HOA.
What is a homeowners association?
Let’s say, for instance, that the pump in the community swimming pool stops working. Someone has to take care of it before the water turns green and toxic, right? Rather than expect any one homeowner in the neighborhood to volunteer his time and money to fix the problem, homeowners associations are responsible for getting the job done.
You can think of the purpose of an HOA as similar to real estate property taxes that a homeowner pays for city and state services—except that in this case, these fees go to pay for amenities and maintenance in your own community or condo building.
How much are HOA fees?
To cover these property maintenance expenses and repairs, homeowners associations collect fees or dues (monthly or yearly) from all community members. For a typical single-family home, HOA fees will cost homeowners around $200 to $300 per month.
HOA fees can be lower or much higher depending on the size of your house or condominium and the services provided. The larger the homeowner area, the higher the HOA fee—which makes sense, because the family of four homeowners in a three-bedroom condominium is probably going to be using the common facilities more than a single resident living in a studio condo.
Many HOAs pay property managers to oversee maintenance and deal with other real estate–related property issues. HOA fees might also include insurance payments to cover common areas.
HOA fees are usually divided into two parts: One portion goes toward monthly expenses, and the remaining money goes into a reserve fund. This reserve fund serves as a safety net, to be tapped for emergency expenses that arise when natural disasters or vandals strike—or just the unavoidable wear and tear. They’re also used to cover long-term repairs and replacements such as roofs, plumbing, and exterior paint.
What is an assessment?
Be aware that when your community is hit with extreme maintenance expenses—like a flood in the underground parking lot due to a broken water heater or a pipe bursting—homeowner insurance will cover some of it, but whatever’s left will have to be paid by your HOA.
Typically in these cases, the HOA will tap the reserve fund, which may become depleted as a result. Or the association may not have enough in reserve to cover necessary expenses. In either case, your HOA board may require you and your fellow homeowners in the community to pay a special assessment bill above and beyond your monthly HOA fee.
For example, if the elevator in your condo building goes out and it’s going to cost $15,000 to replace it—but the HOA reserve account holds only $12,000—you and the rest of the residents are going to have to pony up at least an additional $3,000 in dues, divided among you, to make up the difference. And yes, you as a resident still have to contribute your share of dues, even if your property is on the first floor.
Luckily, though, these assessments are typically temporary until the reserve is back up to a comfortable level.
HOA rules: What to expect
All HOAs have boards made up of homeowners in the complex who are typically elected by all homeowners. These board members will set up regular meetings where owners can gather and discuss major decisions and issues with their community. For major expenditures, all members of the HOA usually vote, not just members of the board.
In addition to management of the common areas, homeowners associations are also responsible for seeing that its community members follow certain rules and restrictions. These rules will be spelled out in the covenants, conditions, and restrictions, or CC&Rs.
What are CC&Rs? Common restrictive covenants
Simply put, CC&Rs are just the rules you’ll have to follow if you live in that community. Unlike zoning regulations, which are government-imposed requirements on how land can be used, restrictive covenants are established by HOAs to maintain the attractiveness and value of the property.
Restrictive covenants differ from community to community, but there are some you can expect to see:
Permissible colors for exterior house paint
Minimum property and landscaping standards
Types of fencing allowed
Types of window treatments allowed
Limitations on the type of security lights you can attach to the house
Controls on installing sporting equipment such as a basketball hoop in the driveway
Restrictions that limit vehicle storage or recreational vehicle parking
Curbs on property uses that generate noise or smells (e.g., raising livestock)
Rules on commercial or business uses of land reserved for residences
When to review your CC&Rs
After your offer to buy a home is accepted, you are legally entitled to receive and review the community’s CC&Rs over a certain number of days (typically between three and 10). Warning: Some CC&Rs can be hundreds of pages, but given these are the laws you’ll have to abide by, this is required reading that you skip at your own peril.
If you spot anything in the restrictive covenants you absolutely can’t live with, you can bring it up with the HOA board or just back out of your contract completely (and keep your deposit). It may seem extreme, but if this is the place you hope to call home, living with rules that seriously cramp your style may just not be worth the trouble.
Can you change restrictive covenants?
Restrictive covenants, however, aren’t set in stone. They can be contested and changed with a majority vote of the shareholders, aka neighbors in your development. This can work for or against you depending on where you stand.
Bruce Ailion, a real estate agent and attorney for Re/Max Town and Country in Atlanta, says he has seen neighborhoods tighten regulations by issuing fines for cars parked in the streets, bicycles left outside the garage, nonstandard mailboxes, and other potentially petty problems.
“Yes, restrictive covenants keep the appearance of the property up and can prevent eyesores such as wrecked cars, unkempt lawns, and oddball home colors,” Ailion says. But he admits there are times when CC&Rs can be so restrictive that they start infringing on the rights of their residents.
But even in that case, there are things you can do. In January 2016, for instance, when an HOA in Keizer, OR, wouldn’t allow a family to park their RV in their driveway—a necessity for their disabled child—the family fought back with a lawsuit, arguing that the Fair Housing Act requires HOAs to make “reasonable accommodations” for people with disabilities.
The bottom line: Restrictive covenants are meant to protect residents, but they can be changed if they’re out of line.
What happens if you violate HOA rules or can’t pay your HOA fees?
First off, rest assured that most lending institutions take the HOA fee into consideration when they write up your mortgage. In other words, they evaluate your monthly income compared with your monthly expenses, and they won’t make a loan on the desired property unless they feel you can safely cover everything: your mortgage payment, taxes, and HOA fees.
But life happens. If you lose your job or are unable to pay your HOA fees, you might be able to work something out with the HOA board. Be sure to talk to the board before you miss even one payment.
If you break your HOA’s rules, the consequences could be severe, and potentially, HOA management could evict you from your property. Fall too far behind on paying HOA fees, and the penalty could be the same as if you fail to make your mortgage payments.
Home shoppers weigh a laundry list of factors before purchasing a home. Location, price, size, and style are all taken into consideration. But for some, a home in a community with a homeowners association could either sweeten the pot or be a major deal breaker.
“I have had clients who specifically want this type of situation, and others who refuse to buy in a community that has one,” says Bill Golden, an independent real estate agent with Re/Max Metro Atlanta Cityside.
Want to know what makes buyers swing one way or the other? The following insights will illustrate the best and worst qualities of HOAs and help you decide if living in this type of community is right for you.
Pro: HOAs maintain common areas
Your community’s HOA will be responsible for handling all maintenance of common areas and repairs for the amenities outside your home. It’s perhaps the biggest perk of living in an HOA community.
“Based on maintenance fees collected, an organized HOA maintains a comfortable balance in their fund to offset maintenance costs or unexpected issues that need to be fixed,” says Drew Scott of HGTV’s “Property Brothers” and co-founder of Scott Brothers Global.
An HOA’s level of involvement varies and might depend on the type and size of the community.
“The HOA will take care of the common areas like the pool, clubhouse, walking paths, or other amenities that provide value to the residents,” says Mark Ferguson, a Greeley, CO–based real estate agent and investor.
Sure, homeowners already taking on a mortgage may hate coughing up more money for HOA dues. But they actually let you off the hook for a ton of home maintenance work. So before you start kvetching, consider all that HOA fees can do for you.
“Your neighbors can’t paint their house bright purple or put an unsightly addition on the front of their house,” Golden says. The CC&Rs make sure “the community retains the look and feel of the way it was built.”
Other common no-nos are parking vehicles on the lawn or keeping inoperable vehicles in the driveway.
“You won’t have to worry about that one neighbor that has decided to let his front yard grow into a wild jungle,” says Golden.
Pro: HOAs help homes retain their value
“Ultimately, the HOA helps the homes within the neighborhood retain their value,” explains Patrick Garrett, real estate broker at H&H Realty in Trussville, AL. “When there are rules and guidelines governing how homeowners should keep their property’s appearance, it helps keep the neighborhood looking desirable for the consumers perusing the neighborhood in search of a new home.”
Pro: HOAs mediate problems on your behalf
An HOA can also reduce conflicts and unpleasant exchanges. If your neighbors haven’t cut their lawn in several weeks, or decide to turn their driveway into an auto repair shop, you don’t have to confront them, because the HOA will. When anyone is engaged in activity that violates the CC&Rs, the HOA sends a friendly notice and follows up with a stern warning.
“A reasonable HOA is like heaven,” says Ailion. Several years ago, he represented a builder of family homes that were sold to investors; with no restrictive covenants in place, the community looked terrible two years later. By contrast, a nearby community that had instituted an HOA to oversee lawn care and home exteriors was thriving.
“Those properties looked like new, and year after year, the gap in price between the two communities has grown,” he says.
But HOAs come with some distinct downsides, too:
Con: Those pesky HOA fees
If you move into an area with an HOA, membership is mandatory, and so are the monthly or annual fees. Plus, “the fees can change, based on decisions that you don’t have total control over,” Golden says. “Fees can also be a detriment to resale, if potential buyers don’t want that extra cost in addition to their house payment.”
Con: There’s a lot of red tape
Building that new second-floor addition will be especially difficult in an HOA community.
Any exterior modification—even a minor one like a play area for your kids—has to be approved by the HOA.
You must submit plans describing the height, colors, location, shape, and materials to the HOA board for approval.
“This can really slow down the process or limit the type of work you can do,” Scott says.
Ferguson says the approval process can be downright unreasonable.
“It once took my HOA nine months to approve a basketball hoop that had already been approved by them for the previous owners,” he says.
Con: HOAs can be overbearing
Remember those CC&Rs? While they come in handy for preventing rowdy college students from moving in, they also might be off-putting for homeowners who like their autonomy.
“Many folks believe that buying your own home should give you the freedom to make the changes you want to make and express your own individuality,” Golden explains. “They don’t want decisions about their own home made by a committee.”
HOA-mandated restrictions can be set on swimming pools (e.g., in-ground swimming pools can be built in the back of the house, but above-ground pools are prohibited), pets (e.g., they are allowed, but they can’t be bred or kept for commercial reasons; livestock or poultry are not allowed without permission), and rentals (e.g., you might be prohibited from renting out rooms or the entire home).
In extreme situations, some HOAs can evict the tenant and hold the homeowner responsible for any eviction costs or any damage caused by the tenant.
Just keep in mind that an HOA’s goal is not to meddle; it’s merely to maintain a neighborhood aesthetic. However, if you don’t like being told what to do with your home, living under the bylaws and rules of an association may not be for you. Make sure to read your CC&Rs carefully and weigh the pros and cons of any particular HOA before you buy.
Michele Lerner, Cathie Ericson, and Lisa Johnson Mandell contributed to this article.
Getting ready to move into your new home? Before you settle in, there are some important home improvement projects you’ll want to tackle.
We totally get that home improvement is probably the last thing on your mind while you’re unpacking boxes, but trust us. You’ll regret not tackling these tasks while your home is a blank slate. Some of these projects are just easier to do before your furnishings are all set up, whereas other things are essential for your safety.
Curious about what you could be missing? Take a look at these eight essential home improvements to do after moving in—or even just before—to start your new life right.
1. Change the locks
Here’s a basic safety check: Those old locks at your new house need to be replaced or rekeyed, says Sarah Fishburne, director of trend and design at The Home Depot.
It’s not that you shouldn’t trust the sellers—it’s that you shouldn’t trust all of the people who’ve had contact with those keys over the years, any of whom could have copied the keys for some unsavory purpose.
Unfortunately, more than half (52%) of baby boomers and about a third of Gen Xers (33%) and millennials (31%) who moved in the past year have not changed their locks, a recent Home Depot survey found. Don’t join them.
2. Change alarm batteries
Making sure your fire and carbon monoxide detectors have fresh batteries may not seem like a pressing issue when you’re in the middle of a stressful move, but it’s the kind of thing that gets ignored and then forgotten. It’s better to deal with it now, when the home is empty and you can replace the old batteries without having to move furniture to make way for a ladder.
3. Caulk cracks and gaps
Using caulk to seal cracks around bathtubs, windows, doors, and other crevices around the house will help you stop leaks, drafts, and other nuisances that could inflate your utility bills.
“Caulk serves multiple purposes: It lowers heating and air-conditioning bills by reducing airflow into and out of the home; it prevents moisture that can cause wood rot, mold, mildew, and water damage; and it keeps insects and other pests out,” says J.B. Sassano, president of Mr. Handyman.
Pro tip: Mark Clement of MyFixItUpLife recommends using a latex-based elastomeric caulk, specifically DAP Dynaflex 230.
“It’s versatile: You could use it for molding, repair for paint jobs, both interior and exterior,” Clement says. “It’s the best jack-of-all-trades caulk.”
4. Spackle holes
Cracks, scratches, and holes in walls can form over time from regular wear and tear, or simply from nails that were used to hang artwork. A bit of spackling and spot painting will make rooms look fresh again, says Fishburne.
Nearly 3 in 5 (59%) new homeowners patch and paint their walls themselves, a Home Depot survey found. If you have only a few holes and scratches, you can fill them with spackling compound, which is sold in small qualities. For a greater number of gashes and holes, use joint compound, which is sold in quarts or 5-gallon buckets.
When you’re done spackling, you’ll want to repaint those areas. If you don’t have any of the original paint lying around (ask the seller if there’s left any), peel a dollar-size piece from the wall and bring that to your local paint store, which can match the color.
5. Build extra storage
If your new home is short on storage space, installing some storage units around the house can make your new home a lot less cluttered after you move in.
Specifically, entryway storage is crucial, especially in the winter, when puffer jackets, snow boots, and scarves demand extra space. So, consider mounting a shelving unit near your front door or in your mudroom (or both).
The only tool you’ll need is a power drill. If you don’t have one, you can rent one from a hardware store—or, better yet, borrow a drill from one of your new neighbors.
6. Childproof your new home
If you have young kids, take a day to childproof your new house. After all, accidental injuries are the leading cause of death in children aged 14 and younger, and more than a third of these incidents happen at home.
Installing safety gates at the top and bottom of all stairs is a must for small children. Choose a gate model that needs to be mounted with nails or screws to the wall or banister, rather than one that stays in place with tension, which kids can potentially push out of place, says Sharalyn Crossfield, a child safety expert and owner of Gate Maven Childproofing Services.
Blind cords are another problem—every day, at least two kids head to the ER for blinds-related injuries, often involving little ones getting entangled in (or strangled by) these strings.
To keep window blind cords and strings out of a child’s reach, place them on high, wall-mounted hooks.
Going up against deeply embedded dirt? You’ll want to rent a powerful, industrial-style carpet-cleaning machine such as a Rug Doctor, which sprays hot water with a detergent over the carpet and extracts it with a high-powered vacuum. These have more washing and sucking power than most consumer carpet cleaners, but they’re expensive to buy—about $400 to $700—so it’s more economical to rent one from a hardware store for about $25 to $30 per day.
Transporting the equipment and operating the machine can be cumbersome, but it does a better job cleaning your carpet than a regular vacuum cleaner and is less expensive than hiring a professional carpet cleaning service, which costs on average between $121 and $233, according to HomeAdvisor.
8. Clean hardwood floors—without ruining the finish
This is another task you’ll want to tackle before moving in so that you don’t have to move heavy furniture around to get the job done. Using the right cleaning solution is crucial. Most wood floor installers or manufacturers recommend cleaners that contain isopropyl alcohol, which dries quickly, and are available at home supply stores.
To make your own solution, add a capful of white vinegar to a gallon of water, which will help dissolve grease and grime on the floor without stripping the finish.
To remove shoe scuff marks, rub marks with a tennis ball. Whatever you do, do not clean wood floors with a steam mop, says Brett Miller, vice president of education and certification for the National Wood Flooring Association, in St. Louis.
“Steam is horrible for wood floors,” he says. “It opens the pores in woods and damages the finish, causing irreversible damage to any wood floor.”
How much does it cost to build a house? According to data from the National Association of Home Builders, the median price of constructing a single-family home is $289,415, or $103 per square foot.
Just keep in mind that the cost to build a home can vary widely based on where you live. So if you’re wondering “can I afford to build a house?” and want a more targeted estimate, go to realtor.com®/local to find out the price per square foot in your area.
Only why does building a home cost so much? Let’s break down the costs.
The main costs to build a house
There are a few main costs involved in the construction of a home, says Andy Stauffer, owner and president of Stauffer and Sons Construction. Sure, each time you build a home, costs are a little different, but here are the biggies:
The shell of the house, which includes walls, windows, doors, and roofing, can account for a third of the home’s total cost, or $95,474.
Interior finishes such as cabinets, flooring, and countertops can eat up another third of the budget, averaging $85,642. Use this calculator to plug in your ZIP code, exact square footage, and level of finish to come up with a general budget for various projects.
Mechanical—think plumbing and heating—runs around 13%, or $37,843.
Kitchens and bathrooms are the most expensive rooms to build, especially when the average cost for finishes like cabinets and countertops alone is $16,056. So if you’re looking to save money, ask yourself whether you really need that third full bathroom, or will two plus a half-bath do?
Architect and engineer drawings will run about $4,583.
Additional costs to build a house (not included)
Now you know the basic cost to build a home, but the expenses don’t end there. Here are a few extra costs you’ll need to be aware of that aren’t factored into the above price:
The cost of a plot of land to build on averages $3,020 per acre. That said, the average home is built on only 0.2 acres, so unless you want a lot of space in a highly desired neighborhood, that alone won’t break the bank.
Excavation and foundation work are by far the most variable cost when building a home, according to Morgan Franklin of Kentucky’s LexHomeHub. In other words, you never know what you’re going to find until you start digging—be it bad soil or massive boulders. If excavation and foundation work goes relatively smoothly, the average cost for both is $33,447.
You’ll need a building permit, of course—it averages $908 nationally.
Other costs you’ll incur before you hammer even one nail include land inspections ($4,191) and an impact fee, levied by the government to cover the costs a new home will incur on public services like electricity and waste removal ($1,742).
Advantages of building a house
That’s a fair question—particularly since you can buy an existing single-family house for a median price of $223,000, or $66,415 less than building one. You will also save yourself the headaches that inevitably come with construction.
Building a house does have its advantages. Everything from pipes to the heating and cooling systems will be new. That means no costly repairs in the near future—and so a newly built home could end up costing less in the long run. Plus, of course, you get to design your home to your exact specifications. If you have very clear ideas of how you want your home to look, this blank slate could be worth every penny. (That said, designing your dream home from scratch has its challenges, too, so make sure to not make these mistakes.)
Is it cheaper to buy or build a house?
Does it cost less per square foot to buy or build your own house? It’s smart to weigh the pros and cons of new versus old construction—and the price you pay for construction costs versus an existing home is only the beginning. Here we lay out everything a home buyer needs to know about buying an existing home compared with building one from scratch or having it built by a general contractor.
There are actually two things to consider: the upfront costs of buying verses building, and the ongoing maintenance costs.
The upfront costs
If you buy an existing home: According to the latest figures, the median cost of buying an existing single-family house is $223,000. For the average 1,500-square-foot home built before the 1960s, that comes to about $148 per square foot. That said, the exact price can vary widely based on where you live. (Go to realtor.com/local to see the price per square foot in your area.)
If you build a new home: Building a house will set you back an average of $289,415. That’s $66,415 more than the cost of an existing home!
Still, you’ll get a lot more for your money. For one, new construction is usually more spacious, with a median size of 2,467 square feet—so the cost to build per square foot, $103, is actually lower than that of existing homes.
Another advantage of having a builder construct a custom home is you pay for only what you want, whereas an existing home may have interior and exterior features (e.g., a finished basement or a basketball court) you’ll pay a premium for, even if you don’t want them. But if an older house happens to be your dream home the way it is, that may be the more bargain-friendly route.
If you buy an existing home: Older homes have more wear and tear, which means certain things may need more maintenance—or, if they’re on their last legs, replacement, points out Michael Schaffer, a broker associate at Colorado’s LIV Sotheby’s International Realty.
Naturally, the cost of this upkeep isn’t cheap, so make sure you know the age of the main items. For example, the average furnace is expected to last 20 years and will cost $4,000 to replace. The typical HVAC system lasts 15 years and costs $5,000 and more to replace. Another biggie is the roof: The average shingled roof holds up for about 25 years. If you need to replace roofing, you’re looking at a bill of at least $5,000. Plumbing and septic systems can go for some time without a problem, but when something goes wrong, it’s an emergency.
With an existing home, unless you step into a high-end home with everything you want, you may want to start changing things, even if they are still functional. Home improvement shows make it seem simple to change countertops and flooring, or even overhaul floor plans. When you’re paying for material and labor costs for plumbing and drywall work, you may start to think your total cost might have been less paying a builder for a custom home in the first place.
If you build a new home: Considerably less upkeep is one of the primary reasons to build your own single-family home, because everything from major appliances to the HVAC system is new and under warranty. In fact, sometimes the entire home is protected for up to 10 years because a builder generally offers a construction warranty “for any problems that arise,” says Schaffer. Your interior and exterior maintenance outlay for a decade is potentially zero dollars. That can make up for some home construction costs per square foot that you paid by opting for a custom home.
If you buy an existing home: A major perk of older homes is mature landscaping with large trees and established plantings. That may not seem like a big deal until you consider that the U.S. Forest Service estimates that strategically placed mature trees can add tens of thousands of dollars to a property’s value and save up to 56% on annual air-conditioning costs.
If you build a new home: Builders often do little or no landscaping to new construction. It may take thousands of dollars—and many years—to get the yard you want. For instance, one 6- to 7-foot-tall red maple will cost about $120 (if you plant it yourself), which will then grow 2 to 3 feet a year. According to HomeAdvisor, the average cost of adding complete landscaping is $3,219.
If you buy an existing home: The latest U.S. Census found the median age of American houses to be 36 years. Older construction means dated windows and appliances—dollars flying out the window on wasted energy expense.
If you build your own home: Recent construction almost always beats older homes in energy efficiency, says Kyle Alfriend of the Alfriend Real Estate Group Re/Max, in Ohio. Homes built after 2000 consume on average 21% less energy for heating than older homes, mainly because of their increased efficiency of heating equipment and building materials. This translates into reduced energy expense every month, even with the higher square footage in many newer homes.
If you buy an existing home: The nice thing about old homes is that there’s context to your purchase: You can research the home’s previous sale prices, as well as prices of similar homes in the area (known as comparables, or comps) to get a feel for whether prices are rising or falling in your area. If the prices for your home and others in the area have been steadily rising, odds are decent that the trend will continue, which bodes well for you if you decide to sell later on.
If you build a new home: New house construction, particularly in up-and-coming neighborhoods, can be more of a gamble. Without a proven track record of lots of comps, there just aren’t enough data points to really know what could happen down the line. This is also true for all of the latest amenities you might ask the builder to install in your home (think self-cleaning toilets).
“Some trends die quickly, dating the home, and can negate any appreciation,” says Alfriend. So when in doubt, try to steer clear of anything that screams it’s a passing fad.
That said, if you pay reasonable home costs when you build a home, and your local community is thriving, you should be able to get a good sales price for your home down the line.
If you’re hoping to buy a house, the very first dollar figure you’ll want to know is the home’s price, of course. But a close second is its cost for each square foot—and the average cost for each square foot for a home in that neighborhood (or the median cost for a square foot of home space, which is actually a better representative of the middle ground of the market than the average). Here’s what you should know about these numbers, and how to use them to your advantage as you shop for a home.
How to calculate the square foot costs for a home
Typically, a home’s cost for a square foot is prominently featured on the listing—both online as well as in those property information sheets you get at an open house. But a home’s price by the square foot doesn’t tell you much on its own. This number is best understood in comparison with similar homes in the surrounding market.
So your next step should be to type in the city, neighborhood, or ZIP code of interest into a site like realtor.com/local. This will give you the median cost a square foot for homes in that area of your city (as well as median asking price, closing price, and number of homes for sale in the local market—all useful info during a house hunt).
What’s the median or average price for each square foot in a home?
It’s important to know the difference between the median price and the average, or mean, price. The average price is simply the arithmetic mean, calculated as the total of all home sales, divided by the number of sales. An average sales price can be skewed by a few higher or lower home values.
The median, however, is the value separating the higher half of a data sample from the lower half. If all of the real estate property prices were lined up by value, the home sale in the middle would represent the median home value.
According to the latest estimates, the median price for each square foot for a home in the United States is $123. But that can vary widely based on where you live and other factors.
For instance, on the low end, you’ll pay $24 a square foot in Detroit. On the expensive end, in San Francisco, $810. So why such a wide range?
Well, it’s no secret that certain neighborhoods are considered more desirable than others, and fetch a better price as a result.
“The hotter the neighborhood, the higher the price per square foot,” says Anthony Stellini, a Realtor®with RSR, a division of the real estate firm Nourmand & Associates. But odds are you knew that already. What you may not know is how this info can help you get a better deal on a house. More on that next!
How cost per square foot can help you negotiate
When you run your comparison of a home’s cost per square foot with the neighborhood median, you can use that information to help you determine whether a place is a bargain or overpriced.
Let’s say you see a home you love priced at $150 per square foot, but then you find that the median price for a square foot for the neighborhood is $135. This suggests the cost of the home you’re looking at could be too expensive—which spells an opportunity for you to negotiate for a lower purchase price. Just point out to the sellers that homes of similar size in the area cost far less. Or, conversely, if the median price a square foot is $135 but this home is only $120, you may have a bargain in your crosshairs that you should snap right up!
Of course, as a buyer you know there’s more to consider than the cost for each square foot of housing.
A single-family home on 5 acres of real estate will generally be worth more than one with the same square footage, but on a small-size lot. A new home generally costs more. And a large house may cost more overall because of higher labor costs and total construction costs, but the market will only pay so much. A house may actually sell for less than you might expect, based on its size, if it is overbuilt for the area.