Home Buyers Need to Understand the Cost of Home Ownership

Great post, Ginny!   My next door neighbor was trying to equate the yearly costs to a percentage of the cost of the home - he said he had heard 1 %, but was changing it to 2% paid out per year......

it's not just maintence. it's also annual tax, and insurance increases. i kid my buyers at the closing that I'm the only part of your payment which will not change.

I enjoyed your post, Ginny! Very informative for ALL home buyers!  Education is key to helping them make a wise decision/investment for long term happiness and enjoyment!

Another "cookie jar" cost that home buyers should consider is appliance replacement. Forty years ago you could count on a stove, refrigerator, or clothes washer to just keep on working. Not so any more - they're built to break down in just a few years. 

Many marginal buyers would be better off renting.  If they do not have 6 months in reserves, there is a good chance they will end up with a bunch of deferred maintenance or worse behind on payments. 

When buyers are willing, I will spend two plus hours explaining everything from the pitfalls of home ownership to the financing end of it.  I have been told many times, "The last realtor didn't tell us any of this."  This was not only surprising to me, but a real eye opener.   

Great topic Ginny.  Great reminder to all.

This is one of the things we went over in detail in the home buyer class I taught over the weekend.  Even if the house is in great shape & has no major issues on inspection, there are always surprises and ongoing maintenance costs when you own a house.  

Ha! Had to respond to and reblog this post. What grabbed me was your comment  

"Start at the septic and check the town records...is it a cesspool or a current septic system?"

Beleive it or not we were working on a deal whence the RE Professional spent almost $1000 trying to test the dried up septic system and leach fields until she discovered that the home had been hooked up to the sewer system years earlier. It actually cost her a deal. It's beyond me how she could have ever let that one slip by.

Great post Ginny.   Last year I brought up the topic of reserves to a buyer - he hadn't given it a thought.   I "lost" the sale, but when he's ready, I've got a client.

Great advice!  So many buyers want 'move in ready' but don't understand there will always be maintenance issues!!

Good advice, Ginny!  I came here after reading the reblog on J.L. Arendsen's blog.

He mentioned $1,000 to test an old dried up septic system on a house that is now hooked to a sewer system.  It has to rank up there with the crazy things that have happened in a real estate transaction!

Excellent post and one that should be saved as a reminder to every agent especially about a 6 month emergency reserve fund. Dare I say, only a very few agents will have this conversation with their buyer for fear of losing a transaction.

However, professionals are fearless because they have discovered the discretionary cash flow of their clients to ensure they are capable of not only buying a home but also maintaining their cash flow and lifestyle. 

Good Post and thought for the day.  Many times I have seen this happen.

I try to inform my buyers so they are aware of hidden flaws.  Having money set aside for emergencies are a must.

Where were you when I was buying our present home? My 1900 Victorian cost only $88,000 in 1999 for 4800 sq.ft above grade and in pretty good structural condition. Easily another $150,000 - $200,000 later it still isn't done and a few of the early on repairs and upgrades are coming due again. We love the old girl but you really have to and perhaps we would have done differently had we been fully aware.

Hi, I love your post really hit home, glad I came across it in the archieves. Thanks for sharing. 

Great post, and it's great to see so much support for it.   

They're young. They can do it. They'll figure it out.

(But, yes, we don't want them to get in over their heads.)

A lot of very good advice here, every property will have its own set of probable costs associated with it.