Buying a house with a 'catch'
With fewer houses on the market than a year earlier, finding your dream home may not be as easy as it once was. But considering a home with a “catch” – a busy street or poor curb appeal, for example – may make sense, especially if the issues can be fixed or improved, experts say.
To be sure, not every house is in an ideal location or in prime condition. Among the top issues that prompt house hunters to walk away from a deal are busy streets and homes that need a lot of TLC, says Judy Dutton, deputy editor of Realtor. com.
Nationwide, inventory dropped almost 7% in October, or a decline of 98,000 listings, compared with a year earlier, according to the latest data from Realtor. com. And the median listing price rose 4.3% to $ 312,000 last month. In some markets, that’s producing a perfect storm of pricey homes and few choices.
“Homebuyers are in a pickle in that home prices are so high that they have to make compromises if they want to find a home they can afford,” Dutton says. “The thing to remember is that there are always upsides to any downsides.”
For instance, a home on a busy street or one that needs some renovation work might offer a bargain compared with an otherwise comparable home, she says. And many of those catches can be fixed. Case in point, Dutton says, is her decision to buy a home next to a busy gas station.
“We installed soundproof windows and we don’t hear a thing,” she says. “There is a lot you can do for noise.”
Here are three tips from experts when considering homes with “catches.”
Decide what you won’t compromise on
“With the market what it is, buyers will undoubtedly have to settle,” says Greg Buchanan, president- elect of the Lexington- Bluegrass Association of Realtors in Kentucky. “Buyers have to figure out what their nonnegotiables are.”
For instance, some house hunters may insist on buying a property in a specific school district, an issue that’s top of mind for many families with children.
Take Stephanie Loomis Pappas, 38, a freelance writer in Beachwood, Ohio. She and her husband recently moved about one mile from their previous residence in order to enroll their son in kindergarten in the new home’s school district.
Ironically, she adds, her new home is on the same busy street as the previous one. But she says she and her husband realized there are advantages to the location, such as being able to walk to stores and coffee shops. In her eyes, she was also able to get a better deal on a home on a busy street. She recalls they were considering another house on a quieter street that was listed for the same price – $ 439,000 – but it hadn’t been updated in 50 years.
The home they ended up purchasing “was completely redone in January: a new HVAC system, a new kitchen, new walls,” she says. “It is very clear we were able to get a much nicer home.”
Be realistic about repair costs
Some house hunters have trouble looking beyond aesthetic handicaps like garish paint colors, but many of those issues can be fixed at a reasonable cost. Other maintenance issues, such as a new roof or furnace, might represent a bigger investment and should be calculated in the offer, says Danielle Parent, a Redfin real estate agent.
“When I take a buyer through a home, I say, ‘ It needs windows, it needs a roof and it needs a furnace,’ and then we put that into our offer,” Parent says. “We factor that in and hope for a better price to offset the deferred maintenance cost.”
It’s also a good idea to walk through the house with a contractor to get a rough estimate for fixing problems, says Realtor. com’s Dutton.
“Keep an eye out for homes with cosmetic flaws versus serious fundamental flaws with the foundation or the roof, which will cost a bundle,” Dutton advises. “If it’s ugly wallpaper or a poor paint job, those are easy fixed.”
Think like a seller
At some point, you’ll be on the opposite end of the transaction. That’s why it’s important to think like a seller, Dutton says.
“Even if the busy road doesn’t bother you, keep in mind it could bother other people,” she says.
An undesirable school district is the top drag on a home’s potential selling price, depressing values by about 22%, according to an analysis of home sales in the top 100 metropolitan areas by Realtor. com. Homes next to strip clubs have a roughly 15% lower value, while houses in areas with a high concentration of renters are depressed by about 14%, they found.
House hunters can find out about the quality of local schools through such sites as GreatSchools. org or Redfin and Zillow, which both link to GreatSchools. org data.
Says Buchanan: “Just like when you are buying a car, do a lot of research online” before buying.