While hunting for a house, it’s crucial to remain realistic, organized, and a bit thick-skinned. If you don’t approach the process with a clear sense of your budget and expectations, you can either get carried away and buy a house you can’t afford or, out of frustration, settle for less than you deserve. Knowing what matters most to you ahead of time will help the house-hunting process go as smoothly as possible.
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Prioritize Your Needs
Here’s a list of typical home attributes that you should consider when prioritizing your needs:
- Type: House, apartment, duplex, etc.
- Location and views: Waterfront, city skyline, etc.
- Price: Including property taxes and insurance costs
- Size: Square footage
- Land: Acreage
- Schools: Quality of the school district
- Privacy: Proximity to neighbors
- Appreciation potential: Likelihood it will rise in value
Tell your real estate agent your priorities, indicating which items you consider fixed (a maximum price, for example) and which you consider flexible.
If You’re Buying a Single-Family Home . . .
If you want to live in a freestanding single-family home, consider whether you’d rather buy a new home or a home that’s been previously occupied.
If You’re Buying Attached Housing . . .
In general, apartments, townhouses, condos, co-ops, duplexes, and other attached housing units give more space per dollar than freestanding houses and often provide amenities that don’t come with a house (pool, gym, clubhouse, and so on). Yet buying this type of real estate comes with its own quirks and complications.
When you buy into a condominium or co-op, you’re joining a community, both legally and financially. Membership in that community can limit your freedom to renovate, have pets, and so on. In a co-op, nearly every decision about the building is subject to the decision of the co-op board. In a condo, the purchase contract likely contains rules about what you can and cannot do. So if you’re buying a condo or co-op, make sure to:
- Read all legal documents and contracts carefully
- Hire a good lawyer to review all contracts you sign
- Know your rights once you own
Most home buyers spend at least a few weeks visiting properties before they find a home to buy. The average home buyer sees 15 properties. Here are some tips to keep in mind as you shop:
- Request that the seller or tenants not be present.
- Try not to be influenced by furniture, which will leave when the seller does.
- Note upgrades you’d have to make to the carpet, paint, appliances, and so on.
- Observe and inquire about the neighbors.
- Check the views out every window.
- Try to visualize the house in all seasons and weather.
- Inquire about the infrastructure, including plumbing, electrical, gas, heat, air conditioning, cable TV, internet service, and so on.
- Make sure the floor plan provides enough space for you, your family, your furniture, and storage.
- Consider how the property might fare in a natural disaster, such as a flood or earthquake.
- Take notes and photos to help you keep track of the different houses that you visit.
It’s helpful to attend open houses in neighborhoods that interest you. In an open house, the real estate agent listing the house invites anyone interested to come and look at the house. Open houses are typically held on Sundays. You can find open house listings in your local newspaper or simply by driving around neighborhoods that interest you and looking for “Open House” signs.
Open houses are free opportunities to investigate a neighborhood and its housing options on your own, before you hire a real estate agent. Just be wary of the agents who attend any open houses you visit—they can be a bit pushy.
Home Buying as an Investment
Though one of your goals in buying a house should be to find a home you love, also keep in mind that the home you buy will likely be the biggest investment you ever make. To make a good investment, a house must be priced fairly and have a strong shot at appreciating in value.
Comparable Market Analysis
If you’re interested in a specific house, the best way to get a sense of how much it should sell for is to ask your real estate agent to prepare a comparable market analysis (CMA) for you. A CMA is an analysis of sale prices of homes sold within the last six months that are similar—in terms of neighborhood, size, age, condition, amenities, and so on—to the houses that interest you. If a house that interests you is being sold at a price well above those listed in the CMA, it’s overpriced and is therefore probably not a good investment.
Three Principles of Home Pricing and Appreciation
There are three general principles of home pricing and appreciation (rising value) that can help you spot homes that might be good investments.
1. Conformity: The more “unique” a house is, the fewer potential buyers there will be for that house. The more a house “fits” with the houses around it, the better its appreciation prospects.
2. Progression: Properties of lower value are raised up by proximity to properties of higher value. It’s better to buy the cheapest house on an expensive block than to buy the most expensive house on a cheap block.
3. Proximity: Appreciation of a house can be harmed by proximity to lower-value houses. So the most expensive house on a street is unlikely to appreciate rapidly, even with renovation.