Things to Look for When Purchasing a Home

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Home Page > Finance > Real Estate > Things to Look for When Purchasing a Home

Things to Look for When Purchasing a Home

Posted: Mar 05, 2007 |

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There are many things to watch for when buying a new home. Often, home buyers find themselves overwhelmed by the process of buying a home and overlook many of the telltale signs that a home might not be all they think it is. It will always be good practice to go over the negative aspects of any given home, in detail, before making an offer. Many of the following things should be found during a proper home inspection, however it is a good idea as the buyer to familiarize yourself with certain things and to discuss them with your Realtor and the inspector.

1. Damp Basements

A damp feeling in a basement can suggest water seepage, either from improperly graded soil, or a bad foundation. This can lead to many problems further down the road when considering renovations or remodeling. This can also lead to problems with mold and the deterioration of the standing foundations. Moisture can also weaken the foundations leading to expensive repairs in the future. This is also a health concern as the presence of mold has been linked to several respiratory conditions and ailments.

2. Cracks in the Foundation

Always inspect the interior and exterior of the foundation for cracks and stress marks. Visible cracks can mean several things; excessive settling of the house, the fact that the house may have been built on an improperly graded site, or in an area that is prone to earth movement. Cracks can also allow small insects access to the interior of the home. Ants and termites can cause no end of costly problems in a home. There are many different types of foundation imperfection and the causes of these are quite varied. If there is any evidence of an imperfection in the foundation, have the entire foundation checked by a professional.

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3. Odor

The presence of unappealing odors can mean many things in a home, the most common of these is mold. Biological problems like mold can be difficult to repair as it usually means an extensive amount of work to correct them. Ripping out walls is the most common “fix” for mold as it can be trying to find the source. Visible mold can be killed with bleach, but usually the problem runs far deeper than the surface. A professional inspector should identify any mold problems upon the necessary inspection and relate these to the realtor or home buyer.

4. Poorly Ventilated or Damp Attic

This is another factor that can cause large amounts of mold and dry-rot to develop in a home. Check the interior of the roof if it is accessible. Is it wet? If so, there is a problem. This means there is insufficient ventilation and/or a leak in the roof itself. The interior of a roof should be bone-dry, year-round. This could also be a result of fans from the kitchen or bathroom that vent into the attic and the attic is not properly set up to accommodate the moisture that this generates.

5. Discoloration

The discoloration of portions of the walls or ceiling is a good indicator of leaks and seepage. This could indicate a problem with leaking roofs or plumbing pipes. This can be an extremely expensive problem to fix as it usually involves cutting into the walls and/or ceilings. Leaks such as this can also cause a fire hazard as they may interfere with the existing wiring. Be mindful of fresh paint as this is a common way to cover up spots that show water damage.

6. Electrical Work

One of the largest causes of electrical fires in homes is D.I.Y. Electrical work. Check the connections on fixtures and anything that appears to be added post-construction. Electrical work should never be done by an unqualified individual. For instance, check the main electrical panel, does it look unorganized and sloppy? This is one indication that the home’s electrical work may have been done by a non-certified individual. Haphazard wiring can lead to costly repairs and is a definite danger to the homes and residents.

7. The Property Itself

The Property itself can contain many oft-overlooked problems. In particular the landscaping of the property can affect the home itself and particularly the foundations. Is the property sloped away from the house? The high point of the property should always be the house itself. This assists in drainage and presents water problems. If the land slopes downward towards the home, chances are there will be issues with water and seepage.

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Simon Conway -
About the Author:

Simon Conway is a professional real estate agent and investor specializing in Orlando real estate , and Orlando vacation homes & resort communities. Simon has won several accolades including agent of the year in his firm, and has been a member of the multi-million dollar club for many years, he is also a speaker and lecturer on real estate investing.

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Foreclosures in the country have pushed past over one million homes. Couple that with folks just trying to sell their home for whatever reason and there is a glut of homes in many markets. While this level is high it is within many historical swings of the past. The point of this discussion is to point out the incredible buyers market that exists in many areas of the country.

Arbitrage in the financial markets takes advantage of price differentials between more than one market. Money is made taking advantage of the differences. In real estate, with the benefit of trained Certified Property Managers and the like, there exists the potential to invest in areas, which are depressed and hold good value in the future. Like examining the financials of a company so the same type of play can be marshaled with investment situations across the country. In crafting offers, returns in the 25% plus range over say a two-year period must be factored in even consider the ramp up into these venues outside of one’s backyard. Finding deals in the backyard would be best, however, lacking that one must look elsewhere. In an example of buying a rental condo in a resort area that has abundant inventory and has plenty of foreclosures forcing prices down some investment play may be possible. If a rental condo is listed at $300,000.00 and has and existing mortgage of $280,000.00 with a pending foreclosure pressing the owner this might be a deal worth looking at. Owners with ARM mortgages with accelerating payments and/or other pressures have come to bear on owners who find themselves in a fix. Many of these condo rental properties with onsite rental offices make for a decent cash flow. In some water front properties the gross rents will approach $30,000 plus per year. In trying to negotiate with a lender with a foreclosure action in hand it is best to have ones own financing or cash to bring to the table. That lender will not cut the price (mortgage) if they are being asked to hold the mortgage. In this example, a proposed “Short Sale” would be probed as a possible action. In this case, the owner receives nothing. The owner may save a foreclosure nick on their credit but that’s it. The lender on the other hand will be offered an offer in the $240,000 range IF the return is figured. The lender takes a $40,000 plus hit on the deal with additional costs for legal fees, past payments, late charges, etc. in addition to the “short” settlement. This is a big hit for the lender. However, Real Estate Owner (REO) properties have to be liquidated. If the lender foreclosed and sat on the condo for another six months and took another hit at sale time, the proposed $40,000 plus hit starts to look pretty good.

An investor needs to determine the condition of market place in a year or two. The economy still has strength, employment is strong, so then it is a question of what will be happening in the market down the road. If that analysis comes up positive then one would continue on the track. An outside force on these waterfront investor condo properties will come to into play as when possibly the dollar falls against the Euro or Pound. Those buyers coming into the market with stronger currencies will see these situations as strong buying opportunities and prices may spike back up. A Realtor needs to market to these buyers immediately. In addition, with stronger currencies abroad vacations in these waterfront condos can almost look cheap with a good deal of safety. A few years down the road, the rentals could be pumping and the demand could be up for these specific properties which can be rented when not being used by the owners. Naturally, there is no guarantee that this will play out exactly that way, but it is an educated analysis basis on the facts currently in hand. When depreciation, interest deductions and other factors are put into the equation, perhaps a $40,000 “short” is not enough. Perhaps it will take a little more. In any case, an investor’s numbers should be shared with the lender to shore up the case for the “short sale” and give a little cover to the work out specialist who is signing off on the deal. The lender will have several BPOs (Broker Price Opinions) of the value as several AVMs (Automated Value Models) to further peg the value. However, if things have not been moving with say six months exposure to the market place, then the lender may be compelled to pull the plug.

Much like when the accelerated depreciation plug was pulled in the 1986 Tax Code, properties must stand on their own. Limited Partnerships and REITs were being offered with low (50% LTV) leverage to realize any kind of cash flow. In this case, a highly leveraged mortgage would insure a negative cash flow. Thus the return on investment will be calculated on a low leveraged situation. The 25% plus return then would be possible. Each case needs to be turned inside out before making an offer. If there has been several price reductions over the listing period with offers of paying all the closing costs and such, then this will garner further investigation. To save a lot of time, the question phased as: “To save us both a lot of time, I’m looking to buy at a deep discount from a motivated seller or a lender who will consider a deep “short sale. I’m very liquid in cash and can close quickly. Is there any shot at a deal on this property?” If not move on.

This glut of properties won’t be here forever. It took a few years to absorb the Savings and Loan fiasco and major write-downs that took place, but it was absorbed and money was made by many. The original owner being in an overly leveraged mortgage situation may have cast the initial foreclosure situation. High leverage kills when the underlying financing is an Adjustable Rate Mortgage in a rising interest rate market. Cash flow disappears. The bleeding begins.

It’s no place for the faint of heart. Like arbitrageurs in the financial markets, it takes a strong will, liquid cash and a good feel for the current market and the future market and how it will all play out. The climate for a play is here and now in some targeted areas. Over 1,000,000 foreclosures, a glut of listings on the market, a falling dollar making attractive situational buys to foreign borrowers makes for a play now. “Knock, knock.” “Who’s there?” “Deal” “Deal Who?”

“To Deal Or Not To Deal, That Is The Question”

Dale Rogers
www.BrokenCredit.com
www.sellerhelpsbuyer.com

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