July 2019 - Ed Powers Real Estate - Fort Collins, CO

When searching for the next house to call home, the options can be daunting. Location, size, amenities, and price all play major factors in the decision process. Opening the home search to older constructions can increase your options. However, the older a house is, the likelier it could be harboring issues beneath the surface. We’ve compiled the top seven things to keep in mind when considering purchasing an older home.

Foundation and Structural Issues

Issues with the foundation or structure have the potential of costing a lot to fix. Since the foundation and structure are what is keeping the house upright, it is crucial that they are stable and sound. Cracks or unevenness in the foundation can lead to moisture damage, dry rot, corrosion, and shifting of the house. Signs of foundation or structural damage can be found in doors or windows that don’t open and close easily, cracks in the wall or flooring, and uneven floors.

According to Safewise, “Foundation repairs can escalate to over $10,000, depending on the extent of the structural issues- and homeowners insurance won’t cover these costs.” If foundational issues are suspected, be sure to hire a quality inspector or contractor to check out the home. Consider getting a quote for repairs and negotiating the cost into the purchase price of the house.

Electrical and Plumbing Issues

Many older homes have their original plumbing and rewiring, as updating these systems can be costly. However, keeping the original knob-and-tube wiring or the original cast-iron pipes can be a safety hazard. Old electrical systems can cause a fire, and old pipes can cause leaks or weak water pressure.

Beware of older homes whose electrical and plumbing systems have been updated by a do-it-yourself homeowner. Be sure to ask if the work was done by a qualified professional.

If the home has original electrical and plumbing systems or has been updated by an unqualified individual, ask an inspector to evaluate the systems. If they need to be replaced or repaired, consider getting a quote and negotiating the cost into the purchase price of the home.

Hazardous Materials

The older a home is, the more likely the chances are of it containing hazardous materials, such as asbestos and lead. Lead is commonly found in paint applied before 1978 and in plumbing installed before 1985. The lead can leak into the water supply or the surrounding environment, causing a potential health hazard. Asbestos can be found in gas fireplaces, roofing, and insulation that was installed before 1980.

Radon

The breakdown of uranium in the environment can cause a carcinogen known as radon. If radon gas gets trapped in a home, it can be dangerous. Homes built before 1970 were not built with this risk in mind, so they are more susceptible to a gas build-up that could potentially be harmful to its inhabitants.

Outdated Heating and Cooling Systems

Older homes were likely designed for a different type of heating system than what is common today. One hundred years ago, houses were heated with oil. After that, it was common for houses to be heated with coal or wood. Even in a home with a more up-to-date heating system, if it hasn’t been maintained well, it could be inefficient, unsafe, or both.

Houses with cooling systems are likely to be a bit younger than oil-heated homes, however, cooling systems are known to have their own issues. Five common problems with older AC units include wear and tear, improperly working fans, reduced efficiency, refrigerant leaks, and electrical problems.

Dysfunctional Alarms

Smoke alarms and carbon monoxide detectors are important safety devices in any home. When looking at an older home, be sure that both smoke alarms and carbon monoxide detectors are present and in working order. Although not necessarily expensive to replace, asking homeowners to replace unsafe alarms will save the homebuyer the hassle later, and could potentially save someone’s life in the meantime.

Termites and Bugs

Depending on where the home is located, termites and other bugs could be a major issue. The National Pest Management Association claims that termites alone cause around $5 billion in property damage yearly.

The older a home, the longer it has been exposed to the chance of infestations. Termites especially enjoy soft wood, so a home that has had water damage over the years could be especially susceptible.

“All cash, seven-day close.” Those words are a dream for a home seller and a real estate agent, but while they may be thrown around on shows like Million Dollar Listing to entice a buyer to accept a $28 million offer on a $30 million list price, how realistic is it to close so quickly in the real world? Not very, it turns out. Yes, an all-cash offer can greatly speed up closing (and, even then, seven days is rare). But for the 75% or so of buyers who finance their home purchase, “47” is the magic number.

That’s the average time it takes to close on a home, according to mortgage software company Ellie Mae. However, every loan is different, and there are a number of factors that can affect the closing date. The trick to getting through closing as quickly, easily, and painlessly as possible is knowing what to expect, knowing where you can step in to facilitate or speed things up, and being prepared for any surprises that pop up along the way. Here are some common occurences that can delay a closing.

The type of loan

The type of financing you’re using to purchase your home can help determine the amount of time it will take to close. For Federal Housing Authority (FHA) or conventional loans, the average time to close is 47 days; U.S. Department of Veterans Affairs (VA) loans generally take a bit longer. There may still be ways to hurry things along by being diligent and in constant contact with your lender, however, some parts of the closing process are baked into the loan type.

Down payment issues

Did you budget for both the down payment and the closing costs. Maybe you had enough for both but then had to deal with an emergency. There are a number of ways down payment issues can arise, and if you’re faced with need to gather additional funds, it could put your closing date in jeopardy.

Verification delays

Expect your finances and employment history to be scrutinized and all the details verified when buying a home. The process is can be even more intense if you’re self-employed or if your down payment is coming from unconventional means like gift funds. Getting to the closing table in a timely manner will require cooperation from employers, bankers, landlords, and anyone else who needs to verify information. Being at their mercy is no fun, but one thing you can do to keep your closing moving forward is respond quickly to any lender requests that come your way.

Irresponsible credit management

Getting your pre-approval from a lender is not an invitation to go buy a car or apply for a new credit card. Doing so could derail your loan. The ding to your credit score can cause your interest rate to rise; and incurring more debt may raise your debt-to-income ratio (DTI) beyond the acceptable threshold.

Quitting or losing your job

Sometimes an employment change is out of your control, but you definitely don’t want to willingly leave your job while you’re in escrow. Less than two years of steady employment could put your loan at risk, or at least cause a delay while your lender takes the time to figure out how your change in circumstances affects your approval and financing.

Interest rate changes

If you didn’t lock in your interest rate and it rises during escrow, your payment may go up. In most cases, a minimal uptick won’t make that much difference, but if you were already maxing out your budget or approval amount, this could become a problem. You may be able to work with your lender to adjust the rate or it may be necessary to come up with a little more money, which could add some time to your escrow period.

The home doesn’t appraise

A crucial part of the escrow process is the appraisal, which is usually required during any home purchase. The appraisal is used to determine the market value of the home; if it comes in lower than the sales price, there may be some more negotiating to do. If the seller is unwilling to lower the price, you may have to pay cash for the difference between the appraisal amount and the sales price—which could be dangerous if you overpay and end up under water on the home.

The title doesn’t come back clear

As part of the escrow process, a title company will complete a title search on the home to make sure there are no liens on the property and that no one else can claim ownership. Uncovering title issues can push the closing by weeks or even months.

Inspection issues

Unless you’re planning to waive the home inspection—which is not recommended since it can leave you on the hook for expensive repairs to things you can’t see, like electrical and plumbing issues—your purchase offer will contain a contingency for an inspection. This contingency gives the buyer an “out” if the inspection uncovers serious defects; the buyer can also opt to negotiate with the seller, however, that back and forth can push the closing date.

Other contingencies

Your purchase contract will typically have language that spells out other conditions that have to be met in order for the sale to go through; two of the main contingencies are for loan approval and appraisal. Additionally, if you’re selling one home in order to buy a new one, your new loan is likely contingent on the sale of the other property. The seller may have his or her own set of contingencies. If any of them become problematic, it could push the closing.

Termite damage

Your lender will typically order a pest inspection during the escrow process, and the evidence of termites or carpenter ant damage could put a wrinkle in your closing. Repairs may have to be made before the home can close, or, in a worst-case scenario, it could kill the deal altogether.

Insurability

Homeowner’s insurance is required on any home that is being financed, but certain conditions can make it hard to get a policy. A major claim against the home like mold or water damage, or multiple claims filed by a previous owner, may cause insurance companies to flag the home as a risk. It can also be hard to get insurance, or at least take more time, if the home is located in a flood or disaster zone.

Inflated costs on the closing statement

Your lender is required by law to provide you with a loan estimate outlining the different costs related to your mortgage loan. The estimate is just that—an estimate—however it shouldn’t be too far off from the closing statement you’ll receive from the lender at least 24 hours before closing. Certain fees are allowed to change, but not by more than 10%. If you feel like you’re being overcharged, you can ask for a reduction, Or, you can change lenders—but this will definitely add time to your escrow period.

Homeowner’s association feesTop of Form

Delinquent homeowner’s association (HOA) fees and/or fines may show up during a title search if the HOA has put a lien on the home you’re buying, but can also pop up at any time during escrow and put your closing on pause. If you can’t convince the seller to pay the fees, reduce the price of the home accordingly, or provide a closing credit, it may be up to you to pay them. Bottom of Form

Death of the seller

Yes, it happens. And if it happens to the seller while you’re in escrow, you’re looking at probate court, which can take a few months—or even a few years.

Walk-through issues

Even if everything else has gone smoothly throughout the escrow process, there is one more potential hurdle: the walk-through. This is your opportunity to make sure the home looks good, that any requested repairs were made, and that there is no damage to the home that may have been obscured or that is new since the last time you toured it. Any issues uncovered during the walk-through could delay the closing.

Month: July 2019

Thinking of Buying an Older Home? Here Are Some Things to Keep in Mind