You found a house that seems like a great deal. It seems a little quirky, perhaps made specifically for one type of person but you are oddly interested in it. Your offer is made, contingent upon the home inspection. There are reasons not to buy a home after inspection, and this contingency is normal, so don’t feel bad about having the home inspected before inking the bottom line with your signature. Your bank is going to require it anyway.
It’s helpful if you and your significant other decide before the home inspection
when to walk away. If you both agree that a total roofing job is not what you want, but you might be able to handle updating some other things, you'd better know how to react when the inspection is revealed. How do you know when to walk away really quickly? By knowing your limits before the inspection and agreeing beforehand that you will walk away, united, in this case.
When is it ok to walk away from a home after inspection? Whenever that inspection reveals a major expense that is going to have to be taken care of and the owner of the home has no interest in doing it for you before the sale. Let’s suppose that your inspection has come back with a new roof is necessary and there is evidence of mold in the bathroom that will require the walls to be torn out and taken care of. The expense of both things is estimated at $30K to have done.
If the home is already undervalued with a selling price of $40k under market value, then it makes sense to do the work. If the home seller is willing to meet you part of the way on the repairs, by lowering the price another $15k, then it’s a risk you might be willing to take. Conversely, if the seller has zero interest in helping you out with repairs and the home is already priced at fair market value without taking the repairs into account, then you should run away from the deal.
Walk away, reality is everywhere for sale.
There is always a title search done on the property before the bank finalizes the loan. This is title insurance and it guarantees that the due diligence has been done to ensure that the home is free of liens or encumbrances under the law. If there is any reason that you cannot be granted title insurance - walk away.
Reasons that might happen are that anywhere in the history of the home there was a lien placed on the home for debts owed by the owner at that time. This could go back a hundred years but impact your interests in the home. The lien makes the home effectively unsellable because no one can secure the title until that old debt is satisfied and the lien is removed.
Heirs can come forward and contest the sale of a home for reasons due to the illegal settlement of an estate. These are matters that you simply don’t want to be involved in. Matters associated with the settlement of an estate might take years to sort out and they may not end in your favor. Move on.
Sometimes a home that is very unique might seem appealing but you should consider the long-term value and ability to resell. You might think this is the place that you’ll live in until you die. A lot changes in 20 or 30 years. Your grandchildren that are still unborn may entice you to live closer to them one day. When you try to sell that home with the weird triangle-shaped rooms, you might find that you’re stuck with it.
A home is not just something you live in. It is the largest investment that most people will make in their lives. You pour your money into it for 10, 20, and 30 years. As you become more liquid by having more equity in your home, you are worth more money. Your equity is the amount of your home that you ‘own’ after the pay-off still owed to the bank. By the time you’ve paid for 20 years on your mortgage, you’ve got quite a nest egg that can be tapped into with a home equity loan or through sale and downsizing when the kids are gone.
Many people find that in 30 years, their home is now valued at more than 10X what they paid for it. This adds to your equity at a much higher rate than a regular savings account. In fact, homeownership
is a better investment than stocks or bonds. Real estate nearly always increases in value - but not when the home is just too weird to entice a buyer.
This is a sad reality for many people - they move into their dream home and within a week find out that the house next door has a garage band that plays heavy metal music for twelve hours per day. If you have a married couple living right behind you who love to get their drink on and have knock-down screamfests in the middle of the night that turn into major domestic violence episodes, it can quickly turn your dream into a nightmare.
Take the time to scope out the neighborhood. Park and observe the neighborhood. Talk to people who would know the neighborhood. Waiting for the mail delivery person is a fantastic way to find out all the gossip in that area. The postal delivery people know everything going on. They’ll tell you who is running a meth lab in their basement and who is visited by the police ten times per month.
These aren’t the only reasons but they are a good start. Remember to buy only what you can easily afford, be in love with the neighborhood before you move, check out crime rates, schools, and tax rates. The more homework that you do, the happier you will be living there for however many years you stay.