Major Red Flags on your First Home

Today I’m going to talk about things you should avoid when buying your first home. And this is going to be a list of things you probably aren’t going to think about initially, but really should consider because they affect the resale value of a home.

When I’m working with a client to purchase their first home, many times I get asked the question, is this house a good buy? Essentially what they are asking, is this home going to hold or increase its value well.

When I think about that question, I think about it in a very different way than I do when evaluating if the home is right for my clients.

Remember, home value is a function of supply and demand. With supply staying low in Los Angeles for the significant foreseeable future, it is therefore entirely a function of demand. Thus, instead of asking the question, “Is this home right for me”, I ask the question, “Is this home right for a lot of people?”

Another way to put is sort of a hypothetical in that, if you bought this house, then for some crazy reason I had to sell it for you next month, how hard would it be for me to do so?

If I say to you that it would be no problem, that’ll be easy, you’re likely buying good value. If my gut says that might be a shaky proposition, or something makes me nervous, that could be a sign the value isn’t there.

Remember, if the home is perfect for you but not a lot of other people, your criteria is very narrow and thus when you go to sell, you’ll have to find another “you”, someone with as unique taste that’s willing to purchase your home.

That’s not to say you shouldn’t buy a home that completely fits you, but it could be helpful to ask this question as well if you’re concerned about your purchase from an investment standpoint.

Remember, the average time people live in a home is 7 years. People move for all sorts of reasons, some expected and many unexpected, and even if you’re planning to stay in this home for all 30 years of your 30 year mortgage, that really isn’t the likely scenario.

So again, I always like to ask the question, does this home appeal to a wide variety of people? Additionally, the question we will dwell on today is sort of the opposite of that, which is, is there something about the property that will NOT appeal to a wide variety of people? Is there something you don’t consider a dealbreaker but a large amount of people will?

So, here are some things you might seriously consider staying away from when buying you first home.

First up, location. Please don’t buy any next to any type of commercial building. That means nothing next to any storefronts, gas stations, or office buildings, or any kind of commercial development.

Also, don’t buy next to vacant land unless you’re absolutely certain of what is going to be built there. Zoning laws are constantly expanding in Los Angeles, which means a small lot single family home development could go up right next to a regular single family home.

Also, stay next to similar types of homes. If you’re buying single family, try to stay away from a multifamily housing unit, and if that isn’t avoidable, make sure you have a plan in place to grow hedges or provide some other type of cover so the people in the apartments aren’t looking right into your backyard.

Finally, nothing that butts of against the freeway. Not only is it a huge noise issue, but air pollution is much worse. Even if you don’t mind, the next people likely will.

In short, the rule of thumb is: buy your home next to another home.

Now, there are many reasons people want to buy a townhouse or a condo instead of a single family home. Some like the community feel, others like the amenities, some like the fact that they are responsible for less maintenance than with your own home. But of course, you still have to contribute to the cost of these things through your HOA dues.

But remember, HOA dues do not contribute to your equity in your home, they are an expense that is paid monthly. Though I highly recommend a competent HOA that maintains the complex well and is not underfunded, I caution people against a super high HOA fee.

What constitutes “super high” Really That’s anything over 600 dollars. That should be plenty to keep a good HOA funded and maintaining the common areas, while still being able to keep reserves and address issues as they come up.

Think about this, a $1000 HOA is the equivalent of $235,000 extra when calculating home purchases at today’s rates in a mortgage payment. There are high end complexes in Los Angeles where the HOA fee is 900, 1000, even 1200 dollars in some places.

What are you getting for that money? That seems like a waste to me, and its no surprise it seems like a waste to many other people as well. A very high HOA will definitely scare off many buyers when it comes time to sell.

Here is another one to watch out for, especially when it comes to condo complexes, and that’s tandem parking. Now, I understand that at certain entry level price points in Los Angeles, this is potentially unavoidable. But ideally, you really should be on the hunt for side by side parking. It’ll of course make your life easier, but it’s also a dealbreaker for many future buyers as well.

Another one from the condo realm: community washer and dryer. This one is a hard stay away from where as I think tandem parking is more, try to avoid it if you can.

Even if you’re thinking to yourself, well I used to do laundry in the building when I rented, who cares if I have to do that when I own a condo? That might be fine for you, but most people, when they spend such significant money on a home, want to do laundry in their underwear on Sundays if the mood strikes them.

I can’t tell you how many buyers that I’ve looked with that will refuse to see a property if there isn’t laundry in unit.

Now, the one caveat to that is that if you really really love the unit, you should look into the possibility of adding laundry to the unit. To do this, you really need to call the HOA, but otherwise you can just ask if any other units have made the conversion.

If they have, this is a major value add opportunity. Many buyers won’t want to deal with the headache of making the addition, but if you are and have the cash, you now have a property that you’ve instantly added major value to...and now you get to do laundry in your underwear!

This one is a bit more broad, but try to stay away from funky layouts. An easy way to think about this is making sure the bathroom count is not equal to the bedroom count, and certainly not greater.

Very few people need a 4 bedroom home... with 4 bathrooms. The only clear exception to this is 2 bedrooms 2 bathrooms which is obviously a popular layout, 3/3 is fine but not preferred, and certainly not as you go higher.

Yes this also means 1 bedroom 1 bathroom as well. Very few people purchase a home with only 1 bedroom and 1 bathroom, so if your price point really only allows you to purchase a single bedroom, I’d consider waiting, saving up the money, and buying at least a 2 bedroom, 1 bathroom.

And of course it's not just about funky bedroom bathroom counts as well, it applies to the layout as a whole. If there’s something really odd about the flow or how the property is laid out, even if you love it, consider something that might be more friendly to more people.

Here’s another think with parking...sensing a trend here? LA is a car culture city and you need a place to put them. So of course, no parking at all is going to be a problem for a significant amount of people.

Sometimes really steep hillside houses are street parking only and that’s definitely something to avoid. Not having a garage is ok in some areas, but you at least need a driveway to pull the car off onto. Doesn’t have to be huge, even just a sliver so that you’re definitely off the street, needs to be there.

Finally, have you been curious as to why I haven’t put any problems with the house itself on this list? You know, things like an old roof, or mold, or asbestos, or drainage issues, or termites, or bad systems, or even unpermitted structures?

That’s because most of these things are not actually dealbreakers. You should be aware of them and what they cost to fix and factor them into the price you’re willing to pay for a home. And of course, set aside the money to do them since you can’t roll them into the mortgage, unless you’ve got a credit from the seller.

But again they aren’t dealbreakers, they are opportunities. All of them except for one: the foundation

Oh boy, stay away from foundation issues. And while you’re at it, stay away from retaining wall issues as well. Foundation issues inevitably involve the city, and lots of people from the city. It involves architects and structural engineers, geologists, and of course, contractors and builders. It’s a lot of money to fix foundation issues. How much?

Well a standard retaining wall might start at 30,000. The foundation itself? Try six figures, at least.

I had a client recently inquire why a home was still for sale after months and months of being on the market in a very nice area. The answer: de-stabalized foundation. The lowest cost estimate was $200,000.

No lender will lend on a property with foundation issues, and you sure don’t want to live in a home with them. Save houses with these problems for investors with lots of cash...and a gambling streak.

So there you have it, a few red flags to stay away from when purchasing your first home. Remember, you should always buy a home for yourself first and foremost, but it is always worth asking the question, does this home appeal to a lot of other people too? That’s why there may be some things that aren’t major deal breakers for you, but are to lots of other people, and thus you may consider buying a property without the deal breakers.

Thank you so much for watching, I hope you learned a few things here that make the process of buying your first home that much smoother!

Speaking of that, if you’re interested in purchasing your first home, I LOVE working with first time home buyers and taking a deep dive into what you’re looking for and how we can strategize to make that happen in this still very competitive market in Los Angeles.

To be successful you need the right agent who can market you as the right buyer and understand how to craft the right offer, otherwise MAN, is it going to be tough out there.

And if you’re looking to sell your home, I have a fantastic program that really just blows what most other listing agents offer out of the water.

I pay for all of the aspects of digital marketing from photography, drone footage, videography, 3D walkthrough and virtual open houses right out of my entry level commission structure.

No other listing agent is doing this and if they are they’re going to pass the cost along to you or mark up their cost to you, but I pay for it, no questions asked. It’s my way of bridging the gap between the virtual and the personal.