If you are in the market to purchase your first home or relocate to a new home, it's easy to get caught up in the home-buying process and forget some of the details. The clock is ticking, your landlord has issued you notice or your house has received an offer... it's time to move. You've found the perfect home on the perfect street... nothing left to do but put in an offer right? WRONG!
While location definitely matters, it's important to take note of the other properties on the street. Is the property you're purchasing the most expensive home on the road? Before you put pen to paper take a look at comparable homes in the neighbourhood. If there is a significant gap in prices from your dream home to the other properties in the area, there should be warning bells going off! If you decide to ignore them you will eventually end up with two problems.
The first problem is the appreciation of the value of your home. The appreciation on the best home on the block is always going to be dragged down by those around it. If you place a million dollar property in a neighbourhood of $350,000 homes, it's value will decrease considerably because the neighbourhood cannot support it.
Your second issue is "hemming". Since you own the most expensive property on the block, your appreciation potential is limited. This becomes a bigger problem if you want to add onto the home or renovate it's interior. Not only will you not be adding value, you may lose money. Let's say you complete $50,000 worth of renovations, you may only see a $10,000 gain in home value. You've just lost $40,000.
Be weary of these potential red flags as well:
- Freshly Painted Basements. We all know basements can leak. Make sure to take a look around the outside perimeters of the home to see if there are any telltale signs of a basement leak.
- Unusual Smells. Our nose is one of our best methods of avoiding deception. It is difficult to mask the smell of mould.
- Suspicious Piles. I once had a client who had purchased a home where the seller had piles of packed boxes lining a wall in the unfinished basement. No one moved them to see what was behind it. After a $10,000 repair the ant nets were gone. It turned out that the sliding patio doors just above had been leaking, the floor joists were wet and full of mould and thousands (and I mean thousands) of ants had taken up housing in her basement. If it looks out of place - ask!