Even Though Home Isn’t Old, It May Need Upgrades
Question: The home I’m buying is in a desirable neighborhood, but it was built in 1980 and seems old. I’m concerned about functional obsolescence, noncompliance with newer codes and what it might cost to renovate the building to current standards.
Have construction codes undergone major changes since this house was built? Is it worth the cost to make upgrades? These questions have me in a quandary as to whether I should proceed with this purchase. What do you advise?
Answer: Renovations of a home typically entail far more money, time, stress and commitment than people envision at the outset. Therefore, much consideration should be given to your plans before you embark on a project of this scope. Even though the home is not significantly old, considerable changes might be needed to achieve what you have in mind.
Many changes have occurred since 1980 with regard to building codes and construction standards. Upgrades and revisions to the code are continuous, with revised editions appearing every three years. Your home in question was built seven code versions ago.
Significant code changes since 1980 include safety upgrades to electrical systems, smoke alarms and guardrail systems. In some areas of the country, seismic safety standards have been improved, and energy-efficiency requirements are continually being upgraded. The list is seemingly endless, but for those who are satisfied with a relatively older home, these changes do not make a 1980 residence undesirable.
If the price is right and the home inspection report discloses no major problems, the vintage of the building should not be cause to walk away. However, if you’re planning to bring a 1980 home into compliance, then number crunching is essential.
Consult a general building contractor for an estimate of costs to affect the building upgrades you have in mind. Increase this figure by about 25% and add that amount to the sales price of the property. This figure might approach what you will actually spend for the final product. Then compare that total with the price you would pay for a comparable home of recent vintage--one that does not need upgrades. These numbers should help you determine the advisability of proceeding with the project.
Don’t Drop an Inspection to Speed Up a Home Sale
Q: You often stress the importance of a home inspection with every real estate purchase. But when the market is hot, an inspection can be a disadvantage. Sometimes the only way to get an acceptance is to bypass the inspection. How do you view this situation?
A: Waiving the right to a home inspection in an overheated market gives a buyer a competitive edge in the rush to escrow. It can help to score big points in the first quarter of the transaction but can cost you the game later. Real estate investments involve major capital outlays with large long-term consequences. A long-term game plan at the outset can determine whether you win or lose in the end.
Hot markets, the kinds that entice buyers to make rush-to-judgment offers, have often been described as “feeding frenzies.” These are emotionally driven environments in which the rush to buy can be an invitation to financial disaster and years of regret.
There is no limit to the numbers and kinds of problems that can be discovered in the course of a home inspection. The unseen problems you might acquire, just to meet the demands of a sellers’ market, could saddle you with major repair costs not anticipated at the time of your no-contingency offer. Worse still, there could be unknown safety problems of a significant nature, ranging from electrical hazards to a faulty fireplace; from substandard gas piping to a furnace that leaks carbon monoxide.
So how do we satisfy two conflicting needs, obtaining an accepted offer in a hot real estate market while acquiring essential disclosure information? How do we make a no-contingency offer without committing to a blind purchase? One approach is to make an offer that includes your right to have a home inspection for information purposes only, but without hinging the deal on the inspector’s findings. In a sense, there is still a degree of risk, but now it becomes a fully informed risk, taken with open-eyed information. In the event that the home inspection reveals problems so major as to eclipse the desirability of the property, you can still walk away from the deal. You might not recover your purchase deposit, but in some cases that would be a minor loss compared with the ache of a regretted acquisition.
It is possible to enter a frenetic real estate market without giving up the consumer protection provided by a home inspection. When big stakes are involved, it is seldom wise to charge in without taking a critical look. Regardless of the market, the best advice is to know what you’re buying, before you buy it.
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If you have questions or comments, contact Barry Stone at www.house detective.com. Distributed by Access Media Group.
