How to Buy a Home at a Fair Price

By
Home Inspector with Bay Area Home Inspection, LLC WI 739-106

When buying a home, how do you know it's listed at a fair price? I've got a bit of experience (bought 6 homes over the years) as a home buyer and in my view it generally boils down to 3 things.

The first is location. Is it on a desirable lot? does that lot have value added things such as old growth oak trees or a green house and tended garden, or a view of the lake? Is it on a block in town surrounded by other homes that have been well  cared for? Is it close to conveniences or your potential employer? This all boils down to curb appeal and intended use!

Of course the square footage, style and amenities are important, but, even if you have a market analysis done showing how this home is priced verses others that appear (on the surface) to be similar and have sold recently, there's still one important consideration such an approach may fall short on when making any meaningful comparison.

That brings us to my second point: This is where the rubber meets the road folks. What is the condition of this home? I don't mean "does it look cute". I'm talking here about taking time, going through all the components of the home: electrical, plumbing, HVAC, insulation, roof, siding, structural, interiors, doors, windows, flooring, appliances that are included...now how does it all stack up? The truth is, it's kind of hard to say with any certainty.

That is, it's hard to make a true dollar for dollar comparison to those other homes that have recently sold, as you're not going to get the chance to go through them the same way as your home inspector will with this one. That said, you still will get some valuable insight. The first is to rule out structural defects making sure you're not investing in a lemon. The second is determining if there are costly defects or needed upgrades that would typically have been addressed, but were not. One example is a new electrical panel, but finding it only has a 60 amp disconnect.

Upon further investigation, the service drop from the mast head was never upgraded and the home is only rated for 60 amps, which is under sized for today's standards and is a poorly thought out upgrade. Though under $1,500 to correct, issues like this add up fast. A better example might be a recently replaced roof that has a manufacturer's defect in the shingles. knowing this would allow you to work with the seller to have it addressed under warranty while they still own the home.

Finally, there's always the potential for unforseens. Was the lot divided properly? Are there encumbrances? Assessments? Is it a former Meth lab?

In my view, due diligence is a virtue. I have read the language in some of the the title insurance policies and found it to be so narrowly tailored that few situations would be covered.

Hope this helps and good house hunting!

Comments (2)

Gabe Sanders
Real Estate of Florida specializing in Martin County Residential Homes, Condos and Land Sales - Stuart, FL
Stuart Florida Real Estate

Solid advice for the age old question in real estate.  Thanks, Walt. 

May 22, 2017 05:33 AM
Walt Fish
Bay Area Home Inspection, LLC - Marquette, MI
Upper Michigan's Most Experienced Home Inspector

Thanks Gabe. Property condition is one of those things that really needs to be considered carefully when comparing prices...i.e. apples to apples.

May 23, 2017 05:34 AM