New Home or Resale for You?

No matter what items a home buyer has on their wish list, they are typically constrained by the home price. As a result, the buyer is often limited in their choices. Accordingly, buyers prioritize home features and benefits when comparing homes. Deciding between a new home or resale becomes a part of the buying process.

Nonetheless, home buyers often have a choice between a new home or resale. Besides the allure of contemporary design and modern building materials, the benefit of new construction is the minimal maintenance during the first year of ownership. Although many home buyers desire to buy new construction, the combination of their budget and criteria lead them to a resale home.

A resale refers to a home that is being sold by a home owner, rather than the builder. The average age of a resale home can vary depending on the location. It’s not uncommon to find a resale in a new home development. However, when resale comes to mind, most think of homes where they grew up.

Although the home buying budget is a main consideration, there are other reasons why home buyers decide to purchase a resale rather than new construction. One of the main reasons, as stated above, is that the resale fits their criteria for price, location, size, etc. It’s typical to get more house and yard when purchasing an older home, when compared to a new home of similar price. Resale homes tend to be located in established neighborhoods, whereas new home developments’ amenities are often not yet completed.

Regardless, some home buyers are attracted to older homes. It seems as if there is a correlation between a home’s age and the charm it exudes. The older the home, the more likely a home buyer is captivated by its charm. When explaining a home’s “charm,” buyers usually describe a combination of style and craftsmanship. They often refer to the saying “they don’t build them the way they used to.”

Although most home buyers want a turn-key home, some buyers find opportunity in older homes that are in need of repair or updating. These buyers feel they can create a home that meets their needs and lifestyle without breaking their budget.

When buying a resale, don’t expect the home to be perfect, even if the home is relatively new or has been renovated. There is no getting around the fact that living in a home promotes wear-and-tear. Consider that a home is made of many components each having a limited life span. Regular maintenance can prolong a home’s life. However, you will eventually have to replace components and systems.

Resale homes are not maintenance free, and deferring maintenance creates costlier repairs. Experts recommend that you have a repair budget. You shouldn’t just budget for regular maintenance and repairs, you should also budget for future updating. Ask your agent about a home warranty that can help you with repairs on a fixed service-call fee. Get a thorough home inspection. Home building has changed dramatically over the last one-hundred years, so make sure you hire a licensed inspector that is knowledgeable with the engineering and materials in your home. (Keep in mind that home inspectors are not perfect, so there may be a chance of finding conditions that eluded the inspection.) Even if the home appears to be in good condition, the inspection is likely to find items in need of repair. You and your agent can decide on the best negotiating strategy of inspection repairs.

Original article is published at https://dankrell.com/blog/2019/12/15/new-home-or-resale-for-you/

By Dan Krell
Copyright© 2019

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Disclaimer. This article is not intended to provide nor should it be relied upon for legal and financial advice. Readers should not rely solely on the information contained herein, as it does not purport to be comprehensive or render specific advice. Readers should consult with an attorney regarding local real estate laws and customs as they vary by state and jurisdiction. Using this article without permission is a violation of copyright laws.

February 7, 2014December 13, 2022

Reclaiming the charm and appeal of old homes

“They don’t build’em like they used to…”

… is often heard by those who praise the virtues of an old home. Many home buyers might talk about the character and charm that exudes from an old home, while others might point to the quality of materials and workmanship that cannot be matched by new homes built today.

In some respects, it’s good they don’t build homes the way they used to because some materials used in the past that were thought to be beneficial have been found to be toxic and/or hazardous. Building materials have changed through the years and continue to evolve for safety, strength, durability, and environmental impact. Many home components are engineered and prefabricated to make installation straight forward, as well as make the home increasingly efficient and environmentally friendly. Floor joists and trusses are engineered to allow for larger and open home designs; while roof and siding components engineered to help reduce heating and cooling costs. Foundation and basement construction techniques and components are designed to be effective in preventing water penetration.

Workmanship has also changed over the years as well. Because engineered materials are typically prefabricated, onsite custom design and installation is not necessary; construction crews are basically required to know how to use and install the pre-manufactured components.

Hazardous materials aside, there is something about old homes that grabs our attention. Because the building materials and components were not mass produced or prefabricated, perhaps it’s the workmanship of the construction that demonstrates that the on-site craftsmen were not just masters of their trade – but artisans.

Although new homes incorporate modern fixtures and appliances designed for comfort, functionality, and efficiency; many are drawn to the antique quality of the old home. Old home parts are highly sought after items for modern homes too. Many are lured by the appeal and personality of vintage home parts, but I also sense there is also something about the durability of the parts that lets them continue in service. Vintage doorknobs, especially the crystal type, are collectible and sought after antique home parts.

Those who appreciate old homes talk about the hearty materials that were used in construction. Compared to the new engineered components manufactured to an exact specification, the craftsmen who built the old home onsite appeared to use ample materials that made the construction feel sturdy and robust. This “over-engineering” is typically frowned upon today; using too much raw materials is expensive and considered wasteful.

Another comparison between old vs. new homes is the lumber that is used in a home’s construction. Some are keen on old homes because they were built from first generation lumber, compared to engineered composites typically used in modern homes. Compared to the wood composites often comprised of glued wood pieces and fibers, first generation lumber is believed to be stronger and more durable. Also known as old growth lumber, first generation lumber refers to lumber that was milled from virgin forests where trees were hundreds of years old. Because of deforestation, old growth lumber is no longer harvested for construction materials.

To incorporate the virtues of vintage and old building materials in modern homes, many reclaim those resources from tear downs. From classic fixtures and hardware to first generation wood, the reclaiming industry has become popular not only to be environmentally friendly – but to reclaim the charm and character of a bygone age.

by Dan Krell ©

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Disclaimer. This article is not intended to provide nor should it be relied upon for legal and financial advice. Readers should not rely solely on the information contained herein, as it does not purport to be comprehensive or render specific advice. Readers should consult with an attorney regarding local real estate laws and customs as they vary by state and jurisdiction. This article was originally published the week of February 3, 2014 (Montgomery County Sentinel). Using this article without permission is a violation of copyright laws. Copyright © Dan Krell.

June 6, 2013November 23, 2021

Unusual considerations when owning an unusual home

by Dan Krell © 2013
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“Be different and be damned…” is a telling quote from Margaret Mitchell’s Gone With The Wind. Social commentary aside, the quote can be somewhat of a warning to those who build or purchase that unique, unusual, and one of a kind home. Although it is just a quote from one of the highly celebrated novels of the twentieth century, “damned” is a strong word to use in a real estate column. However, because of the many considerations of owning a unique home, there may be an occasion or two you might feel “damned.”

When would you consider a home as being unique? Mostly, the degree of uniqueness can be to a person’s perception of a home as well as what they consider to be unusual. However, there is some consensus to what is generally accepted as “mainstream” in the real estate industry; and if a home falls outside these norms through its construction, size, floor plan, etc – it may be considered as unusual/unique.

Some homes are so extreme in their construction, either in size and/or building materials, that it is clear they are unique and one of a kind; there are other homes that may have been converted from commercial or industrial buildings that may also indicate a unique flair. However, there are many homes that appear to fit in their respective neighborhood, but the custom nature expresses a specific style and preference; which is often found in the luxury home market.

Some considerations you might think about when purchasing a unique home include: financing, insurance, maintenance, and resale.

If you’re set on purchasing a home that is unique, check with your mortgage lender about financing; lenders may have objections on lending on an unusual home. It is also not unheard of that extreme unusual homes appraise lower than market value due to uncertainty of value. Unusual homes, including the “Über-luxury” market, may require specialized loan products that are offered by specialized lenders.

Additionally, you should consult with your insurance agent as the home may not meet your underwriting guidelines for home owners insurance. Many people don’t realize that insurance carriers may rate your home based on construction materials, zoning, size, etc, which can affect the premium. And it’s not unheard of that an insurance carrier may also limit or even deny coverage because the home does not meet their underwriting standards.

Maintaining a unique home can sometimes be challenging too. Many unique homes are constructed with materials that may be exotic, uncommon, and/or can be found in commercial applications. Repairs and labor costs can be much more than the typically constructed home. Finding replacement materials and qualified contractors to work with those materials may also be difficult.

Home ownership is often a labor of love for the home, and that emotion can be carried into the resale. You could easily be disappointed in the time it takes to sell the home as well as the sale price. Be prepared for an extended time on the market because your unusual home may have a very limited pool of buyers, and negotiation could be long and dragged out due to variances in perception of value.

“Doing it your way” may be the theme of a popular song and an advertising campaign for burger joint; but when it comes to building or buying a home – being unique and unusual can sometimes come at a cost.

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This article is not intended to provide nor should it be relied upon for legal and financial advice. This article was originally published the week of June 3, 2013. Using this article without permission is a violation of copyright laws. Copyright © 2013 Dan Krell.

April 3, 2013November 23, 2021

When will move-up homebuyers return to the housing market

by Dan Krell
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© 2013

Move-up home buyers missing from housing recovery; when will move-up home buyers return to the housing market?

I recently came across an interesting article about “move-up” home buyers online titled, “Move-up Buyer Provides The Base For A Recovering Housing Market.” The piece, published by the Chicago Tribune, is not unlike the many articles you might find today about the missing move-up buyer in the housing recovery. However, this article is different – it was published August 17, 1985 (article can be found here: articles.chicagotribune.com/1985-08-17/news/8502240441_1_interest-rates-trade-up-market-home-resale-market).

The striking similarities between the current housing recovery and a real estate market that was recovering from one of the deepest modern recessions up to that time (during the early 1980’s), includes home buyer behavior and economic concerns. And of course, the affected move-up buyer sector and the dearth of inventory appear to be familiar.

Home buyer behavior doesn’t have seemed to have changed much as many would-be home buyers are trying to time their purchase with the market bottom. At that time, like today, interest rate pressures are helped home buyers decide to jump into the market; additionally, then like today a significant number of buyers were first time home buyers. Downward pressure on mortgage interest rates, combined with the fear of rising rates affected home buyers to get off of the fence. However, peek mortgage interest rates averaged about 15% in the early 1980’s.

Another similarity between both periods is the missing move-up market. The typical move-up home buyer is sometimes described as a home owner who decides they need more space, which results in the sale of their smaller home and the purchase of a larger home. Then like today, the move- up home buyer was the missing piece to the housing recovery; the move-up home buyer provides much of the housing inventory that first time home buyers seek. However, it seems as if a “psychological barrier” (as described by the Chicago Tribune piece) holds back many move-up buyers today as it did in 1985. During the current housing recovery, many potential move-up buyers have remained in their homes.

Like other housing recoveries, one of the main issues holding back the move-up buyer is housing appreciation. During an early recovery, home owners may have a difficult time rationalizing buying a larger more expensive home when the new home could depreciate the first year of ownership, let alone the thought of a perceived loss of equity in their current home.

As home prices stabilize it would be reasonable to think that there will be an increased presence of the move-up home buyer. A good example of this was in the housing recovery that took place during 2003-2004. At that time, low mortgage interest rates helped first time home buyers back to the marketplace, and the move-up buyer sector took off relatively quickly when rapid home appreciation was realized. Of course rapid home appreciation was a function of “easy money” that generated real estate speculation that produced the “go-go market” of 2005-2006, the housing bubble, and the subsequent financial/housing crises.

The similarities of a post recession housing recovery might indicate there is currently progress. However, the move-up home buyer sector may be one of the final pieces to the recovery puzzle; and until the move-up home buyer presence is felt in the marketplace, we may yet to endure a few more years of “recovery.”

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This article is not intended to provide nor should it be relied upon for legal and financial advice. This article was originally published the week of April 1, 2013. Using this article without permission is a violation of copyright laws. Copyright © 2013 Dan Krell.

December 5, 2012November 23, 2021

Missing pieces to a housing recovery

by Dan Krell
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© 2012
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As the housing market expectantly slows for the winter months, we can start reflecting on this year’s housing statistics. Home sale figures appear to point to a year ending slightly better than last. But it may be that local home sale stats may not best those posted during the 2009-2010 period. It appears that there are missing pieces to the housing market, which if not put into place, could result in a new real estate norm. Let’s take a look at the puzzle…

First, the National Association of Realtors® (Realtor.org) reported that national pending home sales have been elevated most of the year; and although national existing home sales have increased during October, the numbers fluctuated throughout the year. Of course, trying to determine the local state of housing through the national market snapshot may be like trying to see a local road map by looking at the solar system; but there is truth to what NAR Chief Economist Lawrence Yun described as “…rising consumer confidence about home buying…”

Second, New home sales have increased compared to last year. Although the existing home sales statistics reported by the NAR may have co-mingled some new home figures in the data (due to the methodology), the U.S. Census Bureau (census.gov/construction/nrs/) reports new home sales. Not surprisingly, October new home sales increased about 17% compared to October 2011, and 2012 year to date new home sales increased about 20% compared to 2011.

A forthcoming piece to the puzzle, which may likely be reported in the latter weeks of December, is that November was another positive month for real estate. And more importantly – November may have been a brilliant month locally. A preliminary analysis of Montgomery County MLS (Metropolitan Regional Information Systems, Inc.) home sale figures (all inclusive) point to a marked sales volume increase in November compared to November 2011, as well as an increase in the average monthly home sale price (dankrell.com/realestate).

Another piece to the local real estate puzzle is home buyer behavior. Home buyers in the market are increasingly demanding about what they are getting for their money. Given the lack of home listings in the resale market (down about 27% from 2011 year to date through October for Montgomery County single family homes: gcaar.com), combined with variances in home sale prices and the cost for renovations and updates on many homes; home buyers perceive value in purchasing new homes compared to buying a resale in today’s market. This is an unacknowledged reason for the surge of new home sales this year, and why new home builders have rebounded before the resale market.

The missing pieces to improving the resale market are inventory and home prices. As mentioned, a lack of home inventory continues. If resale inventory were to match those of previous years, it stands to reason that resale inventory would also increase. Inventories are lackluster most likely because many home owners have put their selling plans on hold until they are convinced that home prices have stabilized.

It’s welcome news that the 2012 housing market is slightly better than the 2011. And although the landscape of the local market has improved, home sale figures are not much better than those posted during 2009-2010. If resale inventory does not increase, the resale market of 2013 will probably be much like that of 2012.

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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 December 3, 2012. Using this article without permission is a violation of copyright laws. Copyright © 2012 Dan Krell.