Budgeting for home maintenance; the other housing crisis


by Dan Krell © 2009

Current economic conditions are creating another housing crisis. Even though credit is tight and savings are dwindling, don’t forgo regular home maintenance. Forgoing regular maintenance can not only possibly devalue your home, but also create larger problems that can potentially make your home unlivable.

Many first time home owners are surprised by the actual cost of home ownership. Some get caught in the trap of spending their savings to purchase their home without having any reserves for emergencies, let alone regular home maintenance. If regular home maintenance items are not attended to, these items can become expensive emergencies. For example, a small roof leak left unrepaired can wreak havoc on the roof, ceilings, and walls requiring extensive repairs, as well as the potential for mold.

Adding to the impending crisis is the fact that many home owners are so bogged down with debt that they cannot save enough money for regular maintenance items. A few years ago this wasn’t so much a problem because credit was easily available; qualifying for a home equity line of credit to pay for home repairs and renovations was easy. However, presently qualifying for a line of credit is difficult, let alone trying to keep one open.

Putting off home maintenance due to a clean home inspection may not be such a good idea. Having a home inspection can determine the overall condition of the home and give you some peace of mind when you purchase a home; but the inspection is limited. In fact the law governing Maryland home inspector licensure describes the limitations and exclusions of a home inspection as not being technically exhaustive and may not identify concealed conditions or latent defects. Additionally, a home inspector is not required to determine (among other items): the condition of systems or components that are not accessible; the remaining life of any system or component; the strength, adequacy, effectiveness, or efficiency of any system or component; any future failures of systems and components; compliance of the structure with applicable provisions of local ordinances, regulations, or codes; and the existence of any manufacturer’s recalls (COMAR 09.36.07.03).

Even new homes have maintenance requirements. Sometimes, poor craftsmanship or inadequate installation techniques necessitate repairs sooner rather than later.

Relying on your homeowner’s insurance to repair your home in case of a system or component failure may not be a good idea either as some insurance policies may limit damage/repair costs and/or not cover damages due to poorly maintained systems (insurance coverage varies; you should consult your insurance agent for clarifications to your policy).

If you haven’t yet budgeted for home maintenance- start today! Freddie Mac recommends having a “home audit” to assess the maintenance needs of your home. To meet regular and emergency maintenance needs, some experts recommend an annual savings of one to three percent of the home’s value. Planning ahead can make home maintenance easier as well allow you to make informed decisions to possibly lower your maintenance costs (FreddieMac.com).

A sign of a home owner facing financial challenges is often manifested by their home’s disrepair. Homes that fall into disrepair are an indication that the home owner is struggling. If you or a neighbor needs assistance to create a home maintenance budget, contact a local housing counseling agency.

This article is not intended to provide nor should it be relied upon for legal and financial advice. This article was originally published in the Montgomery County Sentinel the week of February 2, 2009. Copyright © 2009 Dan Krell.

Know Your Rights as a Home Buyer and Make a Budget

by Dan Krell
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Buying your first home is one of the most exciting things you can do; it also happens to be one of the most stressful things in your life as well. To help cope with this wonderful rite of passage, we try to prepare ourselves by doing research and getting advice from family and friends.

In theory, all residential real estate transactions are similar. However, the reality is that every transaction is subtly different with its own problems and issues. To help prepare you for your first purchase, here are some common tips to assist you in your purchase.

Make a budget. Making a housing budget and sticking to it is one of the most important steps in the process. Your housing budget is determined by your income, your debts, and your life style. Consulting with a lender can be helpful determine your housing budget. In creating your housing budget, don’t forget to include other housing related costs such as taxes, home owner’s insurance, utilities, and regular maintenance.

Know your rights. Knowing your home buyer rights can help you make the right choices during the process. If you follow this column, you have read how some real estate professionals are ignorant or unconcerned with real estate laws and ethics. Protect yourself by becoming aware of your rights protected by the Real Estate Settlement Procedures Act (RESPA), Fair Housing laws, and predatory lending laws. You can find more about these laws at HUD.gov.

Among your home buyer rights, you have the right to choose the Realtor, lender, insurance company, and title company you want to work with. Choosing a Realtor is subjective; after all, you are putting your trust in them to assist you in one of the largest purchases of your life. Don’t feel compelled to use a particular lender or title company because your Realtor recommends them or makes promises of discounts. Shop around, get quotes and compare services.

Do your homework. Thinking through such questions as where to live, what type of home to buy, how much to spend, what type of neighborhood amenities are important, will help you in your decisions. You should conduct some research on the communities and homes you are considering to purchase.

If you are uncertain about what is important to you in a home, viewing as many homes as possible can help you determine and narrow your preferences. As you shape your preferences, you will find that it is easier to shop for a home.

Know your expectations. Are your expectations realistic with regard to the home buying process, and how much home you can buy? When interviewing Realtors, discuss your expectations of them as well as what is expected from you in return. You should also discuss your expectations of what you can buy. It is common for first time home buyers to amend their expectations during the process. If you are relocating from outside the metro area, it is common to have sticker shock and change your expectation of the size of home you can buy.

As a home buyer, using a Realtor and lender can help you through the process. In the end, however, it is your choice and your home. Do your home work and be prepared.

This column is not intended to provide nor should it be relied upon for legal and financial advice. This column was originally published in the Montgomery County Sentinel the week of 1/22/207. © Dan Krell 2007.