Even in a down economy and exponential change in everything in every facet of life with technology and globalization, purchasing a home is still a key part of the American dream. Everything happens quickly in the electronic age, and the purchase of a home is no exception.
However, given it will take 20 to 30 years to pay a home off, the process should not be rushed. There are a lot considerations that should not be lost in the rush. At Ciyou & Dixon, P.C., we believe a rush to purchase is laden with risk. Avoiding legal dispute at a later time requires doing the “home”work on any potential “home.”
The way to mitigate such risk is to consider the most commonly encountered issues with a residential real estate purchase. Any of the problems identified in this post should not cause a purchaser to walk away from a purchase, but consider the issues and account for the “what-if's.”
Typically, all such problems, assuming a lender does not decline to lend on an identified defect, can be reduced to a dollar value. The purchase may go forward, but only with escrow of funds to correct the problem and/or reduce the purchase price:
Radon is a naturally occurring radioactive material found in certain soils in certain regions of the United States in particular. Long-term exposure can result in cancer. Thus, a radon test should be considered.
In homes that are abandoned and closed off, radon levels may be higher than normal. If radon levels are high, remediation is not very expensive and is very effective. In most circumstances, elevated radon levels should not be cause for alarm. A normal cost is $750 to $1,500.
✔ Staked Survey Versus Boundary Survey.
Most lenders only require a boundary survey when purchasing a home. A boundary survey only verifies the home is within the real property boundary. It does not confirm actual boundaries, such as where fences are, could or should be located.
In the excitement of a purchase, this may not seem important. However, boundary questions are frequent and lead to litigation. Depending upon the cost of a staked survey, it should be considered.
✔ Older Homes.
Old homes provide a level of construction and value not found in new construction. In addition, they often provide styles and aesthetics not otherwise available. Nevertheless, some construction materials are no longer used because they are toxic and harmful. This should be considered in any potential purchase.
Three common issues found in old homes that may require expensive remediation are lead based paint, asbestos siding/tile and non-grounded electrical (or in rarer cases aluminum wiring). Given the unknowns associated with these construction materials, it is best to fully account for their removal at the time of purchase.
✔ Engineered Materials.
In newer homes, there are all sorts of materials that have later been found to be defective. Most have been identified and addressed through litigation, nevertheless a skilled home inspector may save you tens of thousands of dollars by identifying any such materials remaining in the home.
These include certain synthetic siding, commonly known as LP siding, which internally degrades, causing a costly replacement of the home siding system. This requires tear-off and replacement and repainting of the siding.
Certain rapid construction developments in the 80s caused warm-weather shingles to be used on homes in the Midwest. These have a shortened lifespan.
One of the more common engineered materials that have failed are certain Chinese manufacturers of dry wall. While in dispute, the legal position has been the materials used to manufacture this drywall causes a wide variety of health conditions, depending upon personal sensitivities.
Nevertheless, engineered materials often provide a better value for the dollar and are more effective building materials compared to natural counterparts.
Mold has existed for all of recorded history. It is naturally occurring. However, certain types of mold are toxic and require expensive remediation. A theme throughout this and other Ciyou & Dixon, P.C. blog posts is risk mitigation. A way this is accomplished is by a home inspection. A mold issue may or may not cause a concern or be an expensive repair. Be mindful of mold.
✔ Taxes, Assessments, and Covenants.
Indiana has undergone a recent taxpayer revolt on property taxes. The property taxes should always be considered in any potential purchase. In areas that are growing, it is likely property value increases may lead to more than incremental increases in taxes, which are to be expected to keep up with inflation.
Related, the monthly mortgage payment may vary dramatically if a special assessment is on a parcel of real estate for improvements, such as sewer and water utility addition. Again, these should not prohibit purchase, but should be carefully considered in the overall monthly budget and impact on future sales.
Finally, while the free and unfettered use of real estate is a hallmark of American real estate, and quite different from the model in Europe, restrictive covenants are powerful restrictions on land use found in many editions.
These may prohibit anything from what may be parked in the driveway to signage posted in the yards. Again, it is understanding the full deal that is the key to making an informed and prudent purchase. Great caution is urged where editions are not completed, as developers may be able to deviate from covenants for subsequent construction.
✔ Flood Zone, Neighbors, Criminal Events.
An old consideration, but one that can cause insurance problems, is parcels of real estate that lie in flood zones. This increases the cost of insurance. However, it is possible to have this determination removed in certain circumstances. Again, inspection and awareness of such an issue is the key to an informed purchase that will provide a life-time of memories, not headaches.
The neighborhood may appear removed from the consideration of finding a “dream home.” It is not. A neighbor who is a hoarder or throws wild parties may decrease the value of the home and ability to sell it. As with a marriage to a spouse, you marry their family–you also marry the neighborhood.
When considering the neighborhood dynamic, it may be prudent to make visits to it several times before making the choice to make an offer and purchase. A morning train run, or local bar dumping bottles, may dramatically impact the quality of the living experience. A hostile neighbor may also make the “dream” a “nightmare.”
The last major factor of consideration is whether the home has been subject to a crime or the neighborhood has a high crime rate. Related, a home’s orientation to a registered child molester may dramatically affect the quality of the owner’s life or ability to sell it at a later time.
Despite the most careful of steps, at times, the potential purchase or post-purchase raises these an other issues that benefit from consultation with legal counsel. At Ciyou & Dixon, P.C. we understand the emotional impact these matters raise. If you face such legal matters, we may partner with you to evaluate your situation and legal courses.
Do your “homes” homework.