What to Look for in a House - Part 1 of 2
As a home buyer, you probably already know some of the things to look for in a house. It needs to be big enough to accommodate your family. It needs to be located in the right part of town. And it needs to be priced within your budget.
But these are just the basic criteria to look for when buying a house. In order to choose the right home, you need to delve much deeper. And that's where this article comes in. This two-part series explains 13 of the most important things you should look for in a house, before making an offer.
1. The Price of the House
Most home buyers realize they need to buy a house that falls within their budget. But they might not realize that their budget comes from two different sources.
There are actually two numbers you need to keep in mind when shopping for a home. The first one is your own personal budget, and the second one is the pre-approval amount given to you by the mortgage lender.
Of course, if you have enough money to pay cash for the house, you can scratch the part about the mortgage lender. But the average home buyer will have to consider both of these spending limits. So let's look at each one in more detail.
- Before you apply for a mortgage loan, you should already have a monthly spending limit in mind. This comes from your own personal budget -- it's not something that is imposed by a mortgage lender. You need to find out how much you are comfortable spending each month, because the lender might actually approve you for more than that amount. Learn more here
- Before you start house hunting, you should get pre-approved by a mortgage lender. This is where they review your financial situation and give you a maximum loan amount. This amount might be higher or lower than your personal budget. Learn more here
You should use the lower of these two numbers as your maximum spending limit.
Price is one of the three most important things you should look for in a house. Suitability and resale value round out the top three. The house should suit your lifestyle and your family. It should also have a certain potential for resale value, in the event that you sell the home down the road. But from a house-hunting perspective, it all starts with the price.
You need to make sure the price falls within your budget. But you also need to validate the seller's asking price against current market conditions. The last thing you want to do is buy a home that is significantly overpriced. How do you perform this kind of validation? You examine recent sales in the neighborhood. And that happens to be the next item to look for in a house…
2. Average Sale Prices in the Area
If you already know where you plan to buy a house, you should start researching the recent sales in the area. The goal here is to find out what homes have been selling for, so you can validate the seller's asking price.
It's common for homeowners to overprice their homes when they first bring them onto the market. On the other hand, some homeowners price their homes competitively because they want to sell fast. In order to tell the difference between the scenarios, you have to look at recent sales.
You will probably hear your real estate agent use the phrase comparable sales, or comps. This is industry jargon for similar homes that have sold recently in the same area. If you can pull up sales data for similar houses that have sold recently, you will have a pretty good idea what your chosen house is worth. This is the best way to determine the current market value of the property. So it's something else you should look for when buying a house.
3. Resale Potential of the Home
Maybe this will be your "forever home," and you don't plan to move ever again. Or maybe this is a starter home you'll outgrow in three to five years. Either way, you need to be concerned with the potential for resale value.
You want to look for a house that's going to appreciate in value over the years. You obviously don't have a crystal ball to predict the future of home prices. But there are certain indicators you can use to measure the potential resale value of a home:
- Is the house located in a desirable area?
- Is it an up-and-coming area, or is it a neighborhood in decline?
- What are the local schools like? Is it the kind of school district where parents want to place their kids? Or is it the kind of district that parents run from?
- What is the overall condition of the home? If you listed it for sale five years from now, would it still be a desirable home? Or does it need a lot of work to reach that level?
- What's the condition of the kitchen and bathrooms? These are important areas in terms of resale value.
- Is the house located a convenient distance from shopping and other amenities?
These are all things you should look for in a house, because they influence the future resale value of the home. Remember, you're not just buying the home itself. You are buying into the surrounding area and everything that entails. This has an impact on your future property value, so you need to consider it before making any decisions.
4. The Overall Condition of the Home
You should choose a house that matches your capacity for maintenance and renovation. If you love to do home-improvement projects, and you have the time and money to support that passion, you might choose a fixer-upper. But if you don't have the time or resources for these projects, you need to buy a house that is move-in ready. This also ties into resale value (item #3 above).
During the house-hunting process, you will have several opportunities to evaluate the condition of the property. Your first opportunity is when you visit the home for the first time. I don't expect you to be a professional home inspector. But you should certainly keep an eye out for any signs of disrepair.
You'll have another opportunity to reevaluate the home if you decide to come back for a second visit. It's common for home buyers to visit a property more than once, before making an offer to buy it. It's hard to make such a big decision based on a single visit. Use this opportunity to focus on the condition of the property, and the potential cost of renovations.
Your third opportunity to evaluate the property is the home inspection. This happens after you make an offer to buy a house. The home inspector knows exactly what to look for in a house, in terms of structural integrity and functionality. This process can be a real eye-opener for you.
5. The Size and Layout of the House
If you haven't done so already, you should make a list of features you need in a house. One of the obvious factors is the size of the home. You can use your current living conditions as a guide here. Is your current house or apartment too small for you? Is it just right? Or does it have a bunch of extra space you don't need? What's the square footage of the place? Use this as a guide when determining your requirements for the new house.
The size is an obvious thing to look for in a house. But the layout is equally important. Don't just walk through the property and focus on the size. Think about the way you live your life, and how this house would enhance or detract from that.
Do you entertain a lot? Does this house have an open floor plan that would cater to dinner parties? Do you need a dining room right off the kitchen? Do you prefer to have a master bedroom upstairs or down? Or maybe you want a one-story home instead of two? When you're visiting the house for the first time, try to imagine yourself living there. The layout is not something you can change (at least not easily), so you need to consider it carefully.
6. Bedrooms and Bathrooms
This is an offshoot of item #5 above. You need to choose a home that has the right number of bedrooms and bathrooms for your family. This much is obvious. But the size and location will also play a role in your decision.
Are the rooms large enough for the furniture you have right now? If you're not sure, come back with a tape measure. I've seen this many times when selling homes in the past. It's common for buyers to bring measurements and tape measures along when visiting a house. The last thing you want to do is buy a home only to find out you have to sell some of your furniture.
The location of the bedrooms and baths is equally important. Do the bedrooms back up to a noisy street? Is the master bedroom upstairs when you prefer it to be down? These are all things you need to look for in a house, in order to make the best choice.
7. Kitchens and Bathrooms
We talked about resale value earlier in this lesson. It's item #3 above. Kitchens and bathrooms contribute a lot toward the future resale value of a home. You've probably heard this before. These are also the two areas where you'll get the most return on investment, if you do a remodeling project.
If you buy a house that has a nice kitchen with modern appliances, you've got some good resale value right from the start. The same goes for the bathrooms. The master bathroom is especially important. It's just something to consider when you're evaluating homes.
If you buy a house with an outdated kitchen, you're going to hurt your resale value. This might not be an issue if you have the resources to renovate the kitchen down the road. But if you lack those resources, you want to look for a house that has decent bathrooms and kitchen already.
Note: This concludes the first part of this lesson. Use the link above to continue reading part 2. In the second part, you'll learn about maintenance considerations, neighborhoods, schools, and other factors that should influence your decision.