When comparing home prices in an active market you need to remember that the true cost of ownership is more than the purchase price. You cannot really make an informed decision until you are able to understand and estimate the total cost of owning your chosen home.
The true cost of ownership is not just the mortgage payment but the sum of many expenses that impact what you will actually pay while you live in the home. Without a way to estimate and quantify theses additional costs of ownership, you could be making a mistake when selecting a home for purchase. A systematic approach is needed to help you see the big picture. In addition to mortgage payments, the following are some of the cost elements that should be considered in order to estimate the full cost of a home:
Home Value Appreciation – this can be affected by location (neighborhoods), amenities, curb appeal, features, age, contemporary nature of the home, etc. A lower estimated appreciation rate based on these factors as compared to other home options represents an actual cost to the owner when it comes time to sell the home.
Maintenance and Repairs – these costs can vary significantly and are affected by the age of the home, roofing, mechanical equipment, appliances, exterior materials, flooring, etc.
Utility Costs – these costs are affected not only by local utility rates and costs of city services, but of equal or greater importance are home’s insulation values, heating and air conditioning system efficiencies, the quality of the windows, weatherproofing, solar panels, etc.
Upgrades – costs for desired or necessary upgrades to bring the home in compliance with your expectations should be well understood and possibly added to the mortgage in order to avoid large out-of-pocket expenses just after buying a home.
Taxes – rates can vary somewhat by area and should be estimated.
Insurance – rates may vary based on the home’s location, age, roof condition, extent of remodeling done, proximity to water, availability of emergency services, etc.
Landscaping and yard care – the need for new or improved landscaping and fencing should be factored into your home cost analysis. The availability of secondary water can have a big impact on landscaping maintenance costs.
Storage – a lack of storage space in your home of choice can result in additional ongoing costs for offside storage facilities and should be factored into the home’s total cost.
If you just add together the home ownership costs that have been listed, they can begin to approach the value of mortgage payments. So, one must consider that the impact a selected home has on these expenses is almost as important as the price of the home itself. This means that the true cost of ownership could be higher for a home that is actually selected on the basis of a lower price, with fewer of the features that the buyer wanted! Until the buyer can see the whole picture an informed decision cannot really be made, and an informed decision is the best way to avoid buyer’s remorse. Wasatch Associates – Integra Realty will help you estimate the total cost of ownership and see more clearly which house is truly the right house for you.