Updated on September 20, 2016
7 Homes A First-Time Buyer Should Avoid
From hidden damage to crummy neighbours, beware these 10 signs that your dream home may turn into a nightmare before you sign the contract as a Buyer.
Too good to be true?
You’ve scraped together a down payment, with just enough money left over to pay closing costs. What you’re unlikely to have, as a first-time home buyer, is a big pot of cash to pay for repairs or a clear understanding of how much certain home flaws can cost you down the road.
Novices should be particularly cautious about “bargain” homes, they may come with problems that are expensive to repair or impossible to fix.
Avoid the killer deal, as the chances are good there is some issue that made the other owner walk. Buying a dog of a house will always be less desirable than the cream puff with a good location.
1. Foundation problems
The old-school method of detecting foundation problems still works: Drop a marble on the floor and see how far (and how fast) it rolls. Sloping or sagging floors can indicate serious foundation problems that can cost a fortune to fix.
Cracks in the foundation can be no big deal or a very big deal.
Minor vertical cracks may just need a sealant to prevent water from getting in, while bigger, horizontal cracks indicate ‘something a little more severe. Structural problems can cost tens of thousands of dollars to repair.
If an inspection reveals any kind of foundation issue, you need to call in specialized help to assess how bad the problem is.
Don’t trust your home inspector, get a structural engineer to be safe.
2. Bad Neighbours
Sometimes the problem isn’t the house; it’s the neighbourhood. You won’t be shelling out for repairs, since the issues typically can’t be fixed. The real cost is the reduction of your home’s value and how difficult your home may be to sell in the future.
Neighbours who are slobs or hoarders can knock up to 10 per cent off adjacent home values. Getting them to clean up their acts can be difficult, even if your area has zoning and public-health officials who are on the ball.
Some neighbourhood features can be ‘eye of the beholder’ issues that may cost you or not. Some people will object to being near a cemetery, for example, while others will like the peace and quiet. Some will object to the sounds of shrieking children from nearby schoolyards or playgrounds, while families with young kids may appreciate the proximity of such features.
Other neighbourhood problems, such as a bad school district or a lot of traffic (more on that later), are likely to cost you to some extent.
Remember, you can always modernize or change the structure but you can’t change the school district or the view of a busy highway.
3. Special Assessments
Any project, repair or unexpected cost such as a big hike in insurance premiums can trigger special assessments on members of a condo or homeowners association. Residents of unfinished developments, older condo complexes and projects gutted by foreclosure can be particularly vulnerable to such assessments. For example, builders may have gone bankrupt before finishing a development, which means remaining residents may be assessed to pay for amenities the builder failed to provide. A high foreclosure rate may mean higher assessments on remaining residents to pay for needed maintenance and repairs.
Sellers typically would have to reveal any special assessments that are pending but those that are merely rumoured or not yet settled by the association board may not have to be disclosed. Talk to current or former residents of the development to see what might be on the horizon.
4. Busy Streets
Traffic noise ranges from a virtual nonissue in urban neighbourhoods, where it’s expected, to a potential deal killer in otherwise quiet suburban areas. Even if you’re willing to overlook a busy street, other buyers may not be and that could affect your ability to sell.
5. Water Damage and Mould
Most of the serious problems that home inspectors see have to do, in some way or another, with water: water seeping into basements, pooling in crawl spaces, leaking in from siding or trickling down from roofs. Left alone, water causes rot and mould. All too often, homeowners don’t discover the problems or if they do, they ignore them. Either way, unsuspecting buyers can inherit expensive repairs.
Some of the worst damage is caused by black mould, which is suspected of causing health problems and which can spread fairly quickly throughout a house.
It can cost a couple hundred thousand dollars to remediate a bad case of black mould, you might have to tear out all the cabinets and treat every surface in your home.
Any sign of water damage or mould should be traced to its source, so that potential homebuyers can get a realistic idea of how extensive repairs will be. Mould should also be tested to determine what type, and how virulent, it may be.
6. Hard-to-Insure Homes
Homes in flood plains or adjacent to wildfire zones can be difficult and expensive to insure. The same goes for homes that are simply in out of the way places. Unless you’re looking at an all-cash deal, going without coverage usually isn’t an option, since mortgage lenders require homeowners insurance. Even then, failing to buy homeowners insurance is foolhardy.
But even the best policies don’t cover every eventuality. There is no coverage available for overland floods, but flooding due to plumbing and sewage problems can and probably should be purchased. The rules on property damage can vary sharply among insurance carriers so be sure to read your policy carefully.
At a minimum, potential buyers should ask to see recent insurance bills to see what they’re likely to be charged. However, if you plan on making changes after you buy, be sure to factor in higher costs from the outset. Canadian insurers, caught offside by generally higher claims, have been working hard to reassess existing policies to bring them in line with current costs.
Buyers also should keep in mind that if a disaster hits, their premiums will certainly shoot up even higher. While storm damage is generally not as severe a problem in canada, canadian insurers are usually equally quick to bring costs in line with actual claims experience.
7. Hard-to-Finance Homes
A unique home may stir your soul, but you may have a tough time persuading a lender to give you a mortgage. Even if you succeed, the next buyer may not, which could make it tough to sell the house someday.
Unusual houses geodesic domes or homes built from straw bales or old car tires, for example can be hard to value, since there usually aren’t other comparable properties nearby. Without ‘comps,’ it can be tough to find a lender willing to make a loan, even in boom times. When lenders are shying away from risk, it can make financing virtually impossible.
This isn’t a complete list of things that can go wrong with a home purchase. Construction defects, aging systems, broken sewer lines and a laundry list of other problems can cost you big time. That’s why it’s so important to have a thorough, professional home inspection before you buy, and to make your purchase contingent on that inspection. You should know what you’re getting into before it’s too late to back out.