The U.S. real estate market continues to reach unprecedented levels of demand, with bidding wars occurring throughout the country and many homes going under contract after just hours on the market. If you're considering a change, it's important to do your research first to ensure that you're ready to jump on your dream home once you find it. Below, we'll discuss seven key things to consider when beginning the home-buying process.
1. Location and Neighborhood
Given enough time, skill, and budget, you can remodel or change just about anything in your home. However, you can't change your neighborhood or location—and noisy neighbors, a crime-ridden neighborhood, or a too-long commute can quickly sour your homeownership experience. What's worse, having a home in a less-than-desirable neighborhood can make it harder to sell if you do decide you made the wrong choice.
Because houses are entering and leaving the market so quickly, it can be tough to fully scope out a location before you're expected to put in an offer. However, there are a few steps you can take to prepare yourself and become more familiar with neighborhoods that spark your interest. Consider the following:
- Traffic: Drive through the neighborhood at various times of day to scope out traffic. Is it too busy for your lifestyle? Is it safe?
- Commute: Find out how long your commute will be to work, school, and other places you frequent. Drive after work, and before, so you know what to expect.
- Neighborhood vibe: Does the overall feel of the neighborhood mesh with you and your family? Do people hang out on their porches and socialize, or is it more of a commuter neighborhood?
The more you can learn about a location before a property goes on the market, the more prepared you'll be to select a neighborhood that works for your needs.
2. School District
Even if you don't have school-aged children yourself, the school district your home is located in can make a major difference when it comes to the marketability of your home—and your property taxes.
Homes in better school districts tend to sell more quickly and for higher prices, as buyers with children may not want to pay a premium for a home if they're thinking of having to pay private school tuition. Sometimes, though not always, these homes also have higher property tax rates.
The decision of whether to buy a home (and when to buy it) can depend on how long you're planning to stay in the area. Because purchasing a home can require a down payment, closing costs, and other expenses, it may take a few years after purchase to break even over renting, even in the same neighborhood.
This means that if you're planning to move over the next few years or expect to need a larger home soon, it may not be the right time to buy. On the other hand, if you're planning to stay in the area for the foreseeable future and the homes you're browsing will meet these future needs, buying can make more sense.
4. Move-in Readiness
You may prefer a home that's move-in ready and requires minimal DIY—maybe repainting a room or two or doing some gardening. However, in many cases, having a turnkey home can mean paying more.
If you're handy and don't mind putting a little sweat equity into your home, you could snap up a relative deal by looking for a home that's a little rough around the edges. Consider factors such as the amount of free time you have, the tools you have available, and your general skill when deciding whether it's realistic to expect to perform multiple DIY projects.
5. Age and Condition
Even if you're planning to make some improvements after you purchase your house, it's important to go into the transaction with your eyes wide open. Major issues—such as foundation cracks, an aging or leaking roof, sagging gutters, or an HVAC system ready to give out—can mean spending thousands of dollars in repair costs shortly after you buy. This doesn't necessarily make these issues a deal-breaker; however, you may need to lower your offer price accordingly.
Knowing how much you'd like to spend on a home will impact the properties you search for and tour. Your available down payment can also dictate your price and your maximum offer.
With many homes going for more than list price, it's worth figuring out your maximum offer amount sooner rather than later. You may be able to structure any offer with an escalation clause, allowing you to slowly go up to your top number if your offer is lower than another.
7. Property Taxes
Property taxes can depend on several factors, including your home size, location, and the availability of certain deductions. When evaluating your home purchase budget, you'll need to remember the effect of property taxes—if your home is assessed at $200,000 at a 3 percent tax rate, you could pay up to $500 per month in taxes.
Along with property taxes, find out whether the home you're interested in has a Homeowners Association (HOA). HOAs can come with dues and restrictions that may impact the monthly payment for your home.
What Does This All Mean? Buying a House, or Remodeling?
In some cases, after evaluating these factors (among others), you may decide it makes more sense to remodel your existing home instead of moving to a new one. And with the competition in today's real estate market, it may be a wise idea to stay put while you save up money or do a deeper dive into real estate research.
Still torn between remodeling and moving? Click below!