BEYOND PRICE: WHAT MAKES A HOME COST MORE?

Property Taxes

As you view houses for sale, make note of their annual property taxes. (You'll find them listed on the fact sheets provided by the agent). Compare the taxes for different houses and municipalities. Your agent should be able to tell you which municipalities have higher and lower property taxes, and which ones have raised taxes without providing a comparable increase in services. When you buy a house, you immediately become responsible for paying its property taxes. Depending on the time of year you make your purchase, you might even have to reimburse the seller for prepaid tax installments. Therefore, all things being equal, you could focus your house hunting in areas that have the most favorable taxes for the services provided.

Utilities

Energy for heating and cooling a home are a major carrying cost. As you view houses, note the type of fuel used, the heating system, insulation, air leakage, and windows and doors. You don't have to be an expert to observe these things. Simply ask what kind of fuel the house uses. Natural gas (where available) is usually cheaper, with oil second, and electricity the most expensive. Ask what the annual heating cost is and have the amount verified with copies of past heating bills. For a rough idea of the insulation, look in the attic and basement for places where the insulation is exposed. Is it fiberglass or foam? Also, how old is the house? Older homes are generally not as well insulated as newer ones. If the house has high heating bills but is otherwise what you want, find out why it costs so much to heat. Then get estimates on what it will it cost to correct the situation (fix the furnace, convert to a cheaper fuel, insulate, or upgrade windows and doors). With these estimates, you can negotiate a lower price.

Major Repairs

If you consider buying a house that needs repairs, you must add the cost of those repairs to the purchase price. That will give you a more realistic picture of the true price. Money spent on repairs does not add value to the house. (Value is gained only when the money is spent on improvements). Therefore, negotiate a lower price to offset the cost of repairs. You might not always get the full cost deducted from the purchase price but you should at least get 50 percent. Never accept that the asking price has already been reduced to reflect the full devaluation of needed repairs. There is a tendency to overlook some of this when appraising a property.

Condominium Fees

Condominiums will typically require that you pay a monthly maintenance, or condominium fee. This fee and what it covers should appear on the fact sheet provided by the agent. Some fees cover all utilities and services and others cover only certain ones. Determine the value of the fee by comparing it to the cost of those same services and utilities if you were to pay for them directly. Condominiums that include utilities in their fee will cost you more than those in which the owners pay for their own utilities. That's because buildings with flat fee utilities have as much as 20 to 25-percent higher utility use than buildings where each unit is individually metered and billed. Also, ask when was the last fee increase and how much it was. Some buildings levy annual increases with no appreciable service improvement. Also, check the entire building or townhouse complex. Look for evidence of needed repairs. Knock on some doors and talk to the occupants. Ask about the condition of the building or complex. Are there problems with services? Are there plans to renovate common elements such as fences, recreation facilities, and so on? If the condominium plans to do major repairs, it could increase the fees or demand a special assessment. An assessment is an extra payment shared by all owners when a major expense cannot be covered by regular revenue.