Buying a first home is always stressful. Buying now, with property price increases eating into savings and inflation driving up the cost of home repairs, is proving to be particularly costly for some first-time buyers.
New buyers are putting more money into down payments and increased closing costs as prices go up. To compete in the current market, buyers are also waiving inspections and making fast deals, brokers say—decisions that pose big risks and potentially bigger costs.
Waiving an inspection can often mean buyers face needed repairs shortly after moving in, just when budgets are already stretched thin. And the cost of those repairs is higher than usual right now, thanks to labor shortages and inflation pushing up the price of goods. Inflation rose 7% in December, as prices for appliances, household furnishings and household operations all increased.
Ms. Lvova, 44, had budgeted about $15,000. The couple is going in phases, repairing windows in the bedrooms and living room first and paying for the fixes with credit cards.
Ms. Lvova is hardly alone in facing rising costs. The average cost to care for a single-family home rose 9.3% to $4,886 in 2021, compared with the prior year, driven in part by labor and material shortages, according to online-services marketplace Thumbtack Inc.
Cheryl Costa, a financial planner in Framingham, Mass., said she advises clients to budget for maintenance and repairs totaling 1% to 3% of the home’s value every year. For a $500,000 house that is $5,000 to $15,000.
Ms. Costa recommends speaking to prospective neighbors to ask about flooding; bringing a home inspector along for the tour if sellers seem likely to demand waiving an inspection; and asking questions about anything that seems odd in the disclosures on the home’s listing. While touring the house, take a picture of the hot-water heater, she suggested. It usually has a tag on it from the most recent servicer, and a buyer can try to contact that company to get more information about the system, she said.
About a year and a half ago, Max Sturm, 34, and his wife Gabrielle Sturm, 31, thought they had found their dream home, a three-bedroom house with a finished basement in Montclair, N.J.
About three weeks before closing, they learned they would need flood insurance. Neither the real-estate agent nor the seller had disclosed the home was in a flood zone.
Further investigation uncovered that prior owners had filed flood-related claims with the Federal Emergency Management Agency. The couple was eventually able to get the seller to return their $60,000 deposit and terminate the contract.
The Sturms are now renting in East Rutherford, N.J., until the housing market cools down—and they regain their nerve.
“We’re still rocked from that first-time experience,” Mr. Sturm said.
Via: The Wall Street Journal, Veronica Dagher