Old House or New House: Which is Right for You?

Old House or New House

The following is an excerpt from Local Real Estate News.

My fiancé and I are searching for our new dream home in a central metropolitan area. Over the past few months, we have been struggling with the decision of whether or not we should purchase an old house or new house. I love the charm of the older homes in the area, but I’m not sure if they hold as much value as a new home would. From your experience, would you say that an older home could be worth as much as a home that was recently built?

Sandy Q.

Dear Sandy,

This is often a question we hear when buyers, like yourself, are interested in centralized properties. So, let’s jump straight into the new house or old house debate.

Pros of Buying an Old House

If you’re looking for beautiful architecture, mature landscaping, lower upfront costs, and a more centralized location, an older house just might be for you. Let’s take a look.

Architecture

Many older homes offer a certain charm and elegance that newer builds lack. Turn-of-the-century homes, Victorians, Colonials, and Tudors are just a few of the architectural styles that today’s home builders hesitate to replicate. It’s far more time and cost-efficient for builders to construct cookie-cutter homes. If the architectural character is near the top of your must-have list then an older home might be right for you.

Mature Landscaping

Land used to be more affordable in ye old olden days so older homes often come with larger yards than new builds. It’s common to find that many years, much effort, and 10’s of thousands of dollars have already been put into the landscaping of an older home by previous owners. A beautiful yard that you didn’t have to do: what more could you want?

Centralized Location

Older homes tend to be bigger, more centrally located, closer to downtown, and in stronger communities making them less likely to undergo zoning changes.

It makes sense when you think about it. Families used to only have one car and before the time of cars, people used their own two feet to get around (or a horse’s four hooves!). Everyone built as close to town as possible to keep close to amenities like the post office or corner store. As the population grew, people had no choice but to build farther away.

Lower Cost

You may pay for the charm and elegance but these old, unique homes cost much less than new builds on average and offer homeownership opportunities to those who can’t afford new builds with the skyrocketing lumber prices.

Cons of Buying an Old House

Buying an older house isn’t all roses though. An older home is more likely to have big-ticket maintenance expenses sooner than a new build, as well as increased utility costs, and an outdated interior style.

Maintenance Costs

With older homes come older materials, so expect to budget for a few maintenance costs. Be sure to have a home inspection done that checks out the big-ticket maintenance expenses like windows, roof, siding, and HVAC so you aren’t surprised with a massive bill a month after you bought the home.

Utility Costs

Speaking of windows, a lot of the materials used during home construction have improved. Double-paned windows and increased insulation allow a home to better retain heat or air depending on the season. If your old build home has single-paned windows expect a higher heating bill come this winter.

Style

In an aged home, you rely largely on the previous resident’s tastes and technological whims, unless you plan to farm thousands into a remodeling. A new build often has an open floor plan while older homes reflect the needs of the time it was built by offering smaller, more separate spaces.

Pros of Buying a New House

Many people consider a new build more valuable because there should be no major expenses in the first few years of ownership and the utilities should be lower thanks to energy-efficient building materials.

Delayed Major Maintenance Costs

New homes mean new water heater, new roof, new windows, new appliances, new everything. Which, hopefully, means that the homeowner can avoid those hefty maintenance expenses for a while those who purchase older homes can usually expect to fork out some serious coin for, say, a new roof.

Energy Efficiency

Homes are better insulated than they’ve ever been and that’s resulted in lower utility bills for heating in the winter and cooling in the summer. Double-paned windows help prevent the escape of air as well leaving new build homeowners sighing in relief.

Larger Living Spaces

In a new house, modern features like media rooms, large closets, and extra-large bathrooms are more attainable. More electric outlets are built into a new home in more convenient locations as society becomes increasingly dependent on electrical energy.

Cons of Buying a New House

Smaller Outdoor Space

As the price of land increases, the outdoor space that comes with a home decreases. If you’re looking for a big backyard for your pup to run around in, a new build may not be for you.

Less Centralized

Newer builds are often much less centralized than older homes. As more homes are built, there is less space to build on in town. There is no choice but to build farther and farther out.

Higher Upfront Costs

A new house means higher upfront costs. You won’t have to replace that new roof for a few years but you will have to pay for that privilege. Major maintenance costs are delayed for now because you’re buying everything new.

The Bottom Line of New House or Old House: Value is in the Eye of the Beholder.

The truth of the matter is that the value is in the eye of the beholder. We recommend making your must-have list and your wants list then matching them to the homes you’re looking at and your budget. An older home that needs a little TLC might be more attainable than a newer home, or a new build might be the move-in ready place you need. Your housing needs are unique and only you can pick the home that is right for you.

If you have any additional questions about the values of your home, we are always happy to have a chat free from obligation. Just give us a call at 614-888-6100.

What You Need to Know About an Appraisal Gap

Appraisal Gap

Let’s start with the one thing everyone knows about real estate at the moment. It is a sellers’ market. Whenever you take a mortgage out to buy property; all mortgage lenders require an appraisal. An appraisal is an unbiased estimate of the fair market value of the property. This is so lenders can ensure that the borrower is requesting an appropriate amount for the purchase.

With the real estate market today, buyers are purchasing homes above the market value. This leads to an Appraisal Gap which means you’ve agreed to pay more than the house is worth according to the appraiser. This seemingly unimportant term results in complications, delays, & sometimes losing out on your dream home.

So, what can you do when you find yourself with an Appraisal Gap?

Pay the Difference in Cash

You’ve put an offer in on the house but your mortgage lender won’t lend you more than the house is worth. Your first option is to pay the difference in cash. This means your down payment will be bigger than expected. You’ll have to cover the difference between the appraised value and the price, or risk having others buy the property you want, when you can’t or won’t go through with the sale.

Walk Away

This option is the least risky, but you’ll find yourself back in the same place as you were before. Needing a house, fast.

Renegotiate

You could ask the seller to cut the price to the appraised value or to split the difference with you. Unfortunately, in this seller’s market, you’re more likely to be told to take a hike than to be invited to the negotiation table.

Request a Review

If you think you’ve found errors in the appraiser’s report, you can request a review of the appraisal. Your agent can help with the research and paperwork but anything that drags out the buying process may lose you the house. After all, this seller most likely has offers from other buyers that can happen immediately and under more favorable terms.

Apply with Another Lender

You could also apply with another lender in the hopes of receiving a more favorable appraisal, but like requesting a review, this takes time, and you might get the exact same answer.

Or, you could eliminate the issue before it starts with Appraisal Gap Coverage.

But wait, you say, I already have an appraisal contingency in my home purchase contract. An appraisal contingency is not the same as appraisal gap coverage. A contingency says that the buyer or seller can call off the deal if the property is appraised for lower than the buyer offered. No problem, you’re covered, right?

Not exactly. In hot real estate markets, like we’re currently in, buyers will waive the appraisal contingency to make themselves more appealing to sellers.

Appraisal gap coverage is different. It is custom wording in the purchase contract that guarantees that you will pay the difference between the appraised value and the contract price, up to a certain amount, if an appraisal gap becomes an issue.

From the seller’s perspective, this lowers the risk of a financing-contingent deal falling through by guaranteeing an acceptable appraisal gap amount that can occur without giving the buyer a way out of the deal.

For the buyer, it makes their offer more compelling and allows them to walk away if the appraisal gap is bigger than the agreed-upon amount, which is clearly stated and outlined in the contract.

Buying a home in this market is complicated. Be sure to discuss all your options with The Columbus Team before submitting or accepting an offer and definitely before signing a contract! 

There you have it. Everything you need to know about Appraisal Gaps and how to use them to your advantage. Happy House Hunting!

How to Make an Offer on a House

How to Make an Offer on a House

Making an offer on a house is the pivotal moment of the homebuying process. By this point, you have been working with one of our expert Realtors and have found the home that is right for you. You have determined that this home fits your budget and you are ready to make an offer. This can seem overwhelming, but our team will help you through every step.

Here is how to make an offer on a house that will result in a successful home purchase:

1. Compare Prices

While considering what offer to make on a house, one of the first steps is to compare the price to other recently sold homes in the area. Your real estate agent will help by running the comparisons for you. It’s important to understand what similar homes in the area have sold for over the previous six months. By examining not just the seller’s asking price, but how it compares to others on the market, you will be able to assess what the property is worth. From there, your agent can help you decide on the right amount to offer.

2. Decide on an Initial Offer

Consider whether you are competing against other bidders and how close the research of similar sales is to the asking price.  There is a lot of negotiation involved in buying a house. A common misconception about buying a house is that an aggressive approach is best. Our Realtors know, however, that there is a delicate balance to be found. You don’t want to start too low and risk insulting the seller. An aggressively high offer can sink the process just as fast. Your agent will work with you to find the perfect balance and help you make a great first offer on your potential home.

3. Submitting and Negotiating

After confirming with your Realtor what your offer will be, you submit the offer in the form of a contract to the sellers. Upon receiving your offer the seller can either accept it, counter it, or decline it. If they accept it, then congratulations! Your agent will begin to prepare you for the closing process. The most likely next step, though, is a counteroffer. This means that the seller has come back with some negotiations on price, contingencies, or the closing date. If they want to make a deal with you, then there will most likely be some lengthy negotiations. Our expert agent will help you through every step. If you can come to an agreement with the seller, then you can start the closing process!

4. After the Offer is Accepted

After you have made an offer on a house and it was accepted, you will start the closing process. Your Realtor will guide you through the mortgage process, inspections, and closing before you move into your new house. At this stage, you can breathe a sigh of relief, since you have now pivoted from homebuyer to future homeowner! If you have any further questions about how to make an offer on a house, or any other part of the home purchase process, please don’t hesitate to reach out! Our team is always happy to help.

What Credit Score is Needed to Buy a House in Ohio?

One key item to consider when financing a home purchase is your credit score. Your credit score determines what loans and interest rates you qualify for. It informs lenders whether your regular repayments will be reliable. Unless you are planning to pay cash for a house, you will need a loan, and therefore will need a decent credit score. Here is what credit score is needed to buy a house in Ohio.

Lenders determine how much home you can afford based largely on your credit score, or you and your spouse’s combined scores.

What is a Credit Score?

Your credit score is a numeric score based upon the information contained in your credit report. This credit report contains information on your financial transactions, such as credit cards, loans, and payment histories for taxes, utilities, and sometimes even rent, as well as other information including your pursuit of new credit. This information goes back for 7-10 years or more. It allows financial institutions to quickly and objectively evaluate whether you are a good credit risk based on how you handle your past and existing debt.

There are five categories that make up your overall score:

Payment History – This is about 35% of your score, the most important area of all. Have you made payments on time consistently? Are there any bankruptcies, liens, or other signs that you’re a risky borrower?

Amounts Owed – This is about 30% of your score, the second most important area. How much do you owe in total? Are your balances at or near the limit? Has there been a change in your spending habits recently? How much new credit do you seek? What is your debt-to-income ratio?

Length of Credit History – This counts for about 15% of your score. How long have you had credit? How long have you had a good credit score? Bear in mind, being an authorized user on someone else’s credit, even if you paid the bill, is NOT establishing a credit history. This begins with your own first credit card, apartment, or loan.

Credit Mixture – This counts for about 10% of your score. If you have only high interest accounts or loans, if you don’t have any credit at all, this can count against you. Higher scoring mixtures include a sample of credit cards, loans, and other types of credit. Financial institutions want to know you can handle multiple payments, and that you’re responsible with all your financial obligations.

Inquiries – This counts for about 10% of your credit score. Have you been seeking a lot of new debt lately? If you have, it’s a red flag, and a lower score, as it may indicate you’re taking on too much, too fast. If you DO need to shop around for a credit card or a mortgage, do it quickly. Typically you will not be penalized if there’s a short period of time that your credit is being checked. For example, eight mortgage inquiries made in any 14 day period will count as one inquiry.

Scores range from 300 to 900; as a measuring stick, 720 is considered a good score, but most lenders are looking for a score of at least 620. There are a number of different loans available, even if your credit score is not that strong.

Credit Scores and Mortgage Types

If you have a high credit score, you’re going to want to get a conventional loan. This is the most popular type of loan and almost every lender will offer it. The only qualifications needed are a credit score of 620 or higher, a debt-to-income ratio lower than 43 percent, and a down payment of at least three percent. This loan is your best option when it comes to getting the lowest rates for your mortgage.

If your credit score is lower than 620, don’t worry, there are still loans accessible to you. With low down payment options and a lower credit score limit, an FHA loan will probably be your best choice. Some of the benefits to this type of loan include qualifying even if you have filed bankruptcy and they can incorporate the closing costs into the loan.

To qualify for an FHA loan your future home:

1) must be appraised by an FHA-approved appraiser,

2) must be your primary residence,

3) must be occupied by you within 60 days of closing,

4) must undergo an inspection.

Unlike a conventional loan, you will have to pay a mortgage insurance premium on your FHA loan.

Credit Dos and Don’ts:

1. Don’t make large purchases during the mortgage process…even if there’s delayed payments. The total will still count in your debt-to-income ratio…and can change your pre-approval status, so beware!

2. Don’t open a series of credit accounts or take on several small loans to increase your credit history quickly. Remember, balance is the key, and a bunch of new accounts can make you look financially unstable or risky.

3. Do make regular payments and pay down any high balances. Hard work, but worth the increase in credit score.

4. Don’t close a bunch of accounts to “clean up” your credit score. A sudden reduction in accounts can count against you. If you do choose to close an account or two, try to choose a “younger account” as that will raise the age of your average history and improve your score. Closing all the older accounts will count against you.

5. Do check your credit report annually. Errors and identity theft take time to correct, and while you are trying to get a mortgage is NOT the time for lengthy resolutions!

6. Don’t assume that paying off balances at the end of the month will improve your score. While lowering balances is good, eliminating monthly payments on debt gives FICO less to score, and less history of on-time payments…so do pay some balances over time, to keep your score up and your credit history healthy.

7. Don’t get overwhelmed while figuring out what credit score is needed to buy a house in Ohio, contact us with any questions and remember our team is here to help you every step of the way.  

To learn more about purchasing property in central Ohio, don’t miss the Ultimate Guide to Buying a Home in Columbus, Ohio.