Welcome again to our Buying a House Series.
House Designs and Styles
We are going to start this entry with a basic overview of the designs and styles of houses. The different types are as follows:
Ranch – One level
To understand the difference between the types of houses we should look at things someone would normally consider when they buy a house. If someone does not want to walk up and down stairs it would be a natural assumption a ranch or patio style house would best suit their needs. Someone that does not want to cut grass would be more interested in a condominium or town house. The people with children or an expanding family would probably lean toward a split level, split foyer, 1.5 story, or 2 story. Especially if they need their own space.
Does the House Conform
When we ask if the house conform we are asking a basic question. Does your house look like the Jones’ down the street? We all want to be different in some ways but being different in Real Estate is not always a good idea. This can drastically affect the value of the house you’re buying. If the house is a lot bigger or smaller than the other houses in the neighborhood, it does not conform. When buying a house you never want to buy the biggest house because the value will never be maximized to it’s full potential. If you are going to buy a house that does not conform, buy the smaller house. Think of it with this example, if Donald Trump lived in your neighborhood would his house help or hurt your value? The answer is Donald Trump’s house would help the value of your house because he is always going to have the very best house. Your house on the other hand would hurt Donald Trump’s value because your house would bring his value down. This is why you see similar designs and styles in a neighborhood. The reason for buying a house smaller than any others in the neighborhood is because the only way the value can go is up. The most inexpensive addition anyone can make to a house is adding square footage. No one ever tears down part of their house to make it conform to their neighbors.
Things You Notice But Do Not Realize
Have you ever noticed there are always more condominiums, town houses, and patio homes for sale in a neighborhood than there are in a traditional neighborhood? There are many reasons for this activity but we will cover the most important. When buying a house you should examine competition. Competition is what is for sale in the neighborhood, how many and for how much, compared to the house you’re interested in buying. For these types of homes, they are usually a first or last time home buyer. This means the young married couple or the elderly that down-sized. In these neighborhoods, there is always what I refer to as a fire sale. Someone is expecting a baby and needs more room so they need to sell fast. When a fire sale takes place there is always a drop in the asking price to try to sell it before any of their neighbors. This is a good strategy for them since all of the homes are identical. This is not good for you though. This is also called the principle of substitution. Why pay more for the exact same thing when you can get it on sale down the street? The value in these neighborhoods struggle to appreciate and go up in value because there is so much competition compared to a traditional neighborhood.
How and Why to Bargain Shop When Buying a House
It is unfortunate to have as many deals on the market as there are today. It does not make you less of a person to look for a foreclosure or short sale when you’re buying a house. A house is your greatest savings account. If you look at these types of houses they will most likely need repairs. This is perfect for you as a buyer. The market is slow and Lowe’s is not selling as much. If Lowe’s isn’t selling as much then contractors are not working as much. This benefits anyone buying a house if they will use the discounts available to them in the market. The house down the street is selling for $150,000, but the foreclosure is selling for $65,000. The foreclosure looks horrible and not very appealing in it’s current state. Take the blinders off and imagine it like the house down the street once the repairs are completed. Let’s say the repairs cost $30,000, with the foreclosure. You saved $55,000, instantly by buying the foreclosure. If you buy the house down the street you are going to paint it at the least to match your taste. Now you’re in debt because you paid full price and spent money after the fact. There are mortgage loans to buy and repair from the very beginning so take advantage of them. The most recognized is the FHA 203(k) loan. There is also Homepath sponsored by Fannie Mae. You can look at their website for available houses in your area. You can also visit the HUD Home Store.
When you’re buying a house make sure you don’t buy with short sighted thoughts. Buying a house is an investment you are making today but is one of the most important investments you are making for your future. If you buy a house right today, it will provide the equity for security in the worst Real Estate market. It’s a long term saving account to draw from if it’s ever needed.