Over the past two years, houses nationwide were going like hotcakes, with sellers often receiving tens or even hundreds of thousands of dollars over the asking price. Buyers often waived inspections and picked up some of the sellers’ costs in dire hopes of securing that coveted single-family home.
While the landscape has now changed because of higher interest rates, many parts of the country are still seeing bidding wars, and home prices aren’t yet experiencing a sharp decline. With inventory still lower than normal, many buyers remain hungry for a piece of the American Dream.
However, some experts are cautioning would-be homeowners about quickly jumping into the home-buying pool without doing their homework first.
“Listing prices are still high, and combined with the higher mortgage interest rates, people are going to be overpaying for their homes,” Andre Stewart, CEO of InvestFar, a real estate marketplace and database firm, told The Epoch Times. “It’s important for them to review their budget and make sure they’re not getting in over their heads.”
In the present market, the average homebuyer can expect to pay up to 25 percent more than a year ago.
“It’s one thing if you’re buying a home to live in it for a very long time, but most people live there for 5 to 10 years, and then resell it,” Stewart said. “You want to make sure you’re going to make money on that sale.”
Stewart, author of “The Real Estate Investing Diet,” advises potential buyers about other often-ignored “red flags” of home purchasing.
“During the pandemic, a lot of people were buying properties sight unseen, and they were skipping inspections,” he said. “Getting a home inspection is extremely important—even with brand-new housing developments.”
Because new construction costs have skyrocketed, Stewart warns that some new developments may not be completed as expected.
“There have been situations where people have purchased a home thinking the garage door would be arriving after they moved in, but it was never finished,” he said. “It’s worth the money to get the inspection so homeowners can have a full punch list of items to be completed before they close on the property.”
Even luxury homes can harbor hidden problems, he added, such as mold.
Mark Aakjar, the owner of Mark’s Inspections, has been servicing the New York metropolitan area for the past 14 years.
“Mold is now what asbestos was 15 years ago,” he told The Epoch Times. “Mold can be anywhere—it’s just a matter of what type and how much. Some people may not have any reaction to it, while others may suffer from allergies or severe respiratory issues.”
Aakjar noted that, sometimes, the mold isn’t visible.
“If I’m doing an inspection on a Manhattan apartment at the top of a 30-story building, I may not actually see evidence of mold, but an air test will indicate that mold is present. Then we have to start looking for it,” he said.
Concerning new construction, he cited other common problems, such as undersized boilers or air-conditioning units, improper insulation, poor-quality windows, and foundation cracks.
As a real estate finance expert, Michael Gifford cautions potential homeowners to complete their due diligence before making what will likely be the largest purchase of their lifetime. He’s the CEO and co-founder of Splitero, which offers options to access home equity without incurring debt or additional monthly payments; the San Diego-based company offers cash to homeowners in exchange for a share of the home.
“I know there’s still an urgency for people to want to jump into the market, but they need to make sure they’re putting themselves in a proper position for the future,” he told The Epoch Times. “And if they do decide to proceed, they always want to have a home inspection so they can understand exactly what they’re buying.”
Gifford noted that potential homeowners—especially first-time homebuyers—should educate themselves about the home’s electrical, plumbing, heating, and air-conditioning systems, as well as things such as the age of the roof, condition of the basement, wells, septic tank, and the home’s foundation.
While roofing and mold remediation can be costly, Aakjar noted that windows are often overlooked big-ticket items.
“Sometimes, builders will install rubber gaskets instead of metal ones, which after time can cause windows to constantly look foggy,” he said. “Windows are a cosmetic, but if you have 25 windows that need to be replaced, you’re looking at a major expense.”
Potential homeowners also should be aware of any curling, damaged, or missing shingles on the roof, as well as the growth of mold or moss. Gutters, trees, oil tanks, and the placement of electrical outlets can be potential hazards, and basements often conceal hidden issues.
“The hardest thing is to predict how often or if a basement gets water,” he said. “Telltale signs can be a washer or dryer a few feet off the floor. Just about every basement in the Northeast gets damp, so many homes will need a dehumidifier.”
Aakjar highly recommends that homebuyers attend the inspection.
“Buying a home is a huge purchase, and they’ll understand so much more when they’re walking through and asking questions,” he said.
Based on current red flags within the global economy, Stewart believes the housing market could be in for a dismal January and February 2023. Gifford predicts that things could swing back to a buyer’s market early next year.
“The fourth quarters are historically lower due to the holiday season, so it’s difficult to predict what’s going to happen in the coming year,” he noted.
Regarding home prices and interest rates, Gifford indicated it may be more difficult for sellers to get into a better home or something just as good for about the same amount of money. On the other hand, he said, buyers may be losing motivation because of rising costs associated with the increased mortgage rates.
“It always goes back to supply and demand,” he said. “It’s just a really tough situation predicting what turn things will take in the new year and where that will leave buyers and sellers.”