Your Finance: Tips for buying a previously owned home

Nassau's rising home prices -- the median sale Nassau's rising home prices -- the median sale price in Nassau was $470,000 in August 2014 -- did not carry over into Suffolk County, where the median home price slipped by 3.3 percent compared with the previous August, to $333,500, Multiple Listing Service of Long Island reported Tuesday, Sept. 16. Photo Credit: AP

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If you are in the market for a new home, you have probably noticed that almost all the houses in your local listings are anything but new.

According to a recent survey from research firm RealtyTrac, 71 percent of U.S. single-family homes were built before 1990. In some states, particularly in the Northeast, pre-1990 houses make up 80 percent of recent sales.

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Experts say the new-home drought is mainly due to a hangover from the real estate bust. Homebuilding, which practically came to a halt five years ago, has been slow to restart as big developers have remained skittish. Furthermore, builders have focused on multifamily homes.

According to RealtyTrac, the average pre-1990 home recently sold for 9 percent less than a newer one in the same market.

If you are willing to do some major layout rehab on an older place, you may get a great bang for your buck. But remember that this will raise your cost of ownership and that older houses tend to be more expensive to own anyway.

Total first-year costs of home ownership, consisting mainly of line items like fuel and maintenance but excluding mortgage payments, are 23 percent lower for new homes than for those built before 1960, according to a study by the National Association of Homebuilders.

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Even a minor remodel on an older kitchen, including cabinet refacing, countertops and midrange appliances, costs an average of $18,000, according to Remodeling magazine.

If you are in the market for an older abode, here are a few guidelines to follow:

 

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Know when to walk away. Signs of water damage or mold in the basement? Pass on the place. Termites and structural issues, such as cracks in the foundation, are also extremely costly to fix.

Do the walk-through with your inspector, rather than hanging back during the inspection. Besides bringing any red flags to your attention, the inspector should be able to give you a ballpark figure for what it will cost to tackle more minor repairs.

Budget for energy-efficient upgrades. Fuel costs represent a large share of the extra expenses of an older home. Investments in new insulation and an energy-efficient furnace or air-conditioning unit will pay for themselves and then some in the long run.

Plan for a few big expenses. Even a 10-year old home is probably going to need some modifications, like new appliances or carpeting. If you buy a home that was built more than two decades ago, you are probably looking at costly fixes such as new heating and cooling systems, plumbing and a roof in the near future, if not immediately.

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