Home Searches and One ‘Devilishly Hard’ Line Item

Once a local home search gets underway, even prospective buyers who hadn’t hardened up the prices they were aiming for begin to hone in on a target range. Even a cursory excursion into the area listings forces the issue. Anyone who is at all serious about finding a new home sees the correlation between the listed asking prices and ‘how much house’ is available in that range. In most cases, lower prices denote features that are, for one reason or another, not very popular. Higher prices can mean the opposite: top-of-the-line quality… (or an overly optimistic seller).

So once a home search has narrowed the field to the local offerings that meet at least the minimum physical requirements, the lower number of the price range is established. If a realistic family budget shows more to spare, more expensive possibilities can be explored. But first, it’s also a good idea to make at least one revision to those budgetary assumptions, because there’s one area where the actual costs of home ownership can cause a surprise. The particular line item we’re thinking about is the one that, according to the experts, is ‘devilishly hard to predict.’

The maintenance cost.

Devilishly hard or not, the best ballpark figure that can be agreed upon is 1% of a home’s value, every year. When you are contemplating a pristine local property, that may seem to be a wildly pessimistic figure, but it is simply the case that every home requires maintenance. Appliances fail, paint blisters or fades, shingles fly off or break down; things (as the book title says) fall apart. The 1% figure is accepted by most lenders—and they should know.

Any area home search sooner or later narrows the field to prospective properties within a lower and upper price range. That upper number should be flexible.

Assuming a home has an investment that will grow in value over time (TheStreet’s Jeff Brown pegs it at 4% per annum), “because of inflation, your maintenance costs will also continue going up, so they will always remain equal to 1% of the home’s value.” In the post quoted, Brown’s intent is to promote the investment returns on a Wall Street portfolio. It’s only fair to point out that even Wall Street denizens seem to rest easier when they own their own house (houses, in fact).

The point here is that as a home search expands to higher-priced offerings, it’s a good idea to be willing to recalculate that 1% figure. Although the natural tendency is to start out by penciling in a dollar amount to cover maintenance—and thereafter to mentally stick to it—the prudent procedure is to revise that line item to reflect the actual value of the home you settle on. It might mean your area home search excludes some homes you really like, but the result will be a family budget that’s less likely to be met with unpleasant surprises later on.

I work to help my clients’ home searches turn up exciting properties that fit all their requirements—and within budgets that fit their long term requirements. This fall sellers are offering a number of great values across the price spectrum, so I hope you’ll decide to give me a call!

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