Filed Under (Real Estate) on 07-19-2012
While there are good reasons to buy a home in Colorado, home ownership also comes with liabilities and responsibilities. If you are weighing home ownership versus renting, it’s fair to see both sides of the picture – and understand the advantages of renting.
1. Responsibilities and Liabilities: The owner of a home has the responsibility and liability for all home repairs and maintenance, which can be expensive. If there is a plumbing issue or the heat goes out, the expense for the repair is all yours. Homeowners are also responsible for replacing the home components that wear out. A roof may have a 20-year lifespan; a hot water heater maybe a 10-year useful life; and many appliances will only last five to seven years.
As a tenant, you must make repairs if you cause the damage, but you are not responsible for ongoing maintenance or replacement of worn out features of the property.
2. House rich and cash poor: Many first time homeowners face the challenge of figuring out how much house they can afford, and some do not budget properly for the initial spending (furniture, window coverings, etc.) and the ongoing expenses of home ownership.
It is easy to call a lender or go online and figure out how much of a loan you will qualify for, and how much house you can buy given your cash on hand. But if there are extra expenses that cut into your discretionary income; you may be “house rich and cash poor.”
3. Let the buyer beware: The concept of caveat emptor (buyer beware) is alive and well in the real estate business. While it is customary for buyers to hire an inspector to examine the property and report all potential problems, building inspectors are not perfect and can miss issues. Sometimes, in the excitement of the purchase, homebuyers also don rose-tinted glasses and overlook what can be potentially serious flaws with their prospective home.
4. Changes in the market: While real estate has historically appreciated in value, and signs are pointing to a market uptick in 2012, there’s no guaranty that property values will increase. In fact, from 2006 to 2010, the value of many homes in Colorado depreciated, or declined.
If you have to sell your home within a few years of buying it, you may not be able to sell it for as much as you paid for it. Even with a modest increase in value, your profits could vanish after paying the transaction costs – paying a Realtor for selling the home, closing costs, moving costs, etc.