Motivations for Moving
Before starting your home search, take stock of what you’re looking for and what is driving your need for a new space. Evaluate your current living situation for things you like and things you don’t like. From there, build out a list of “need-to-haves” and “nice-to-haves.”
It’s important to consider your present needs as well as those in the future. What you need now may not necessarily be what you need five years from now, so keep plans like building a family or starting a business in mind. Those things may be less of a factor if you’re simply looking for a starter home rather than a place to put down serious roots.
There are other questions to ask yourself to help narrow down your options. Are you looking for a fixer-upper or something that is move-in-ready? What are you looking for in terms of outdoor space or architectural style?
Whether it’s your first home, a step toward downsizing or purely an investment decision, choosing a home is highly personal. Aside from matching the house’s features to your motivations, there are a few more key considerations that should play into every home-buying decision.
Location, Location, Location
Your home’s location can help determine its future value. It will also figure into your lifestyle, whether you like the energy of a city or the serenity of the country. Some factors to research include:
- proximity to schools, shopping, entertainment and medical services that you’ll use frequently
- neighborhood safety, which can help determine your home’s value when you decide to sell
- a school district that offers high-quality education; also a big factor for resale value
- proximity to work and the length of your commute, which can affect your pocketbook, quality of life and how much time you’re able to spend with family and friends
Research neighborhoods online or on foot. Talk to friends and loved ones about where they live, and talk to locals in areas you’re interested in. Real estate websites may provide statistics on crime and demographics (e.g., level of residents’ education, income, age) that can paint a picture of your potential neighbors.
Types of Homes
Single-Family Homes. You not only decide what to do with it but also maintain it from top to bottom. You can choose from a variety of sizes, from tiny one-bedroom cottages to sprawling estates, depending on your needs and budget. Unlike an attached home, a single-family home usually has no shared walls.
Some homes can be in planned unit developments with common areas that may require homeowners association (HOA) fees. Additionally, some developments may have bylaws that restrict what can or can’t be done with the property. Check with your real estate agent to find out any potential bylaws and fees.
The bottom line: Single-family homes may offer more privacy than other options and a lot more space if you need it, including a yard to call your own.
Condos/Townhomes. These are two similar styles of housing that are part of a larger complex. While the typical characteristics of each differ depending on location, the difference is generally in what you buy. The owner of a condo owns the individual unit, while the buyer of a townhome owns the individual unit, as well as the roof above it and the ground below it. The land may include a yard and a separate garage that the owner maintains.
Residents of both condos and townhomes are members of a HOA and typically pay a monthly fee for maintenance of the common property. Depending on where you live, a co-op may be another option that is similar to condos and townhomes. A co-op exists when homeowners in an area or building share the cost of home maintenance, and members (or homebuyers) may be screened by the co-op members before being granted access. Not all lenders are able to lend on co-ops; check with yours ahead of time to determine if they do.
The bottom line: Condos and townhomes are great options for those who prefer the peace of mind that basic common area maintenance is usually covered and don’t mind sharing walls with neighbors. They also provide the benefits of homeownership without as much yard work.
Duplexes. A house separated into two living units, one on top of the other or side-by-side, is called a duplex. You can purchase one unit or both if available. Many people who purchase both units opt to live in one unit while renting the other as an income property. If you’re able to purchase both and rent one out, you can offset your mortgage payments. For example, if your mortgage is $2,000 and you collect $1,200 in rent from your tenant, you only need to pay $800 per month toward your mortgage. You could, however, pay more and pay off the home loan faster. The downsides of a duplex could include shared walls or ceilings, maintenance responsibility and no guarantee of finding renters if you own both units.
The bottom line: A duplex can require more maintenance effort (keeping two homes rather than one), but can pay off in added income if you rent one half and live in the other.
Short Sales and Foreclosures
If you’re looking for a deal, another option may be to look at short sale or foreclosure properties. Short sale and foreclosure properties can apply to any type of residential property, including condos, townhomes and single-family homes. Both options can come with pitfalls, however, so you should proceed with caution.
Short Sales. Homeowners unable to continue paying the mortgage may ask their lender to agree to a short sale. This means that the lender agrees to sell the property at a price lower than the amount the homeowner owes on the mortgage. Although a short sale may mean the sale price is lower than market value, it’s not without frustration. You may need to submit extra paper work, the process may take longer than a typical sale and you often purchase the property as-is, meaning all repairs are on you.
Foreclosures. Homeowners who fail to pay their mortgage forfeit ownership of the home, and it goes to a foreclosure auction. If it’s not purchased at auction, ownership returns to the lender. Sometimes the price may be right, but you also get the home as-is. Purchasing foreclosures can be a lengthy process full of red tape. Some lenders don’t offer loans for foreclosed properties. Some foreclosures may have liens against them (old debt associated with the home’s title) that you may end up paying for. So do your homework before choosing this route.
If you’re considering a foreclosure or short sale home purchase, you’ll need to do your homework. Here are some important aspects to consider:
- Finding an Experienced Realtor: Using a realtor who has experience in foreclosures and short sales can help ensure that you get a good deal on a smart investment.
- Considering the Costs: It’s important to understand the cost of any repairs that may be necessary or if there are several foreclosed homes in the area that may keep property values low.
- Paying With Cash: When buying a bank-owned property, your lower offer may have a better chance of being accepted if you pay with cash.
- Timing Your Offer: To avoid any delays in processing, be sure to pay attention to any deadlines listed in your approval letter.
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