Home Buying Guide – Part 05: Resale Old Home
A home buyer always wonders whether he should opt for a new or a resale old home when it comes to buying a property. This is a dilemma faced by many home buyers who are looking to buy their dream homes. The choice is mostly subjective but the decision between a new or an old home isn’t always simple because it’s a choice between lifestyle.
So, if you are one of those who is facing this dilemma, let us look at some of the advantages and disadvantages of second-hand homes before buying them.
Advantages to Buying an Older Home
Purchasing an older home is beneficial in several ways and has its unique benefits:
Strategic and Central Location: The old saying that location is everything in the real estate is true. You should consider the factors like areas’ connectivity, surrounding environment, proximity to important areas, recreational spots and other amenities available in the vicinity before making the decision to buy a home.
An older home comes with the benefit of being in a better location and at a competitive cost. The primary advantage of buying the older homes would lie in buying it in a central, strategic and high demand location where no new supply is coming in. Moreover, due to its proximity to Malls, Educational Institutes, and workplaces, it makes it easier for the residents to walk to workplaces, restaurants, bars, shops etc.
Due to the scarcity of space in an established or central location within the city, many residential projects have been developed at the outskirts or upcoming area of the cities as there’s no space for a new development to take place in these areas. The new homes are priced higher due to all the modern day amenities and facilities.
Purchasing a second-hand home in an established and central locality is a much better choice than moving to a new property in the suburbs.
Lower Maintenance Expenses: Older properties give you clarity on maintenance expenses as it is a significant component of your budget. These properties have lower maintenance charges due to their limited amenities in comparison to the new housing complexes which offer many amenities like swimming pools, lawns and play areas etc.
So, unlike many older residential properties, new properties come along with a host of add-on expenses like parking charges and higher overall society maintenance bills. Therefore, you need to decide whether you can afford these kinds of expenses or else opt for an older project where the maintenance charges are considerably lower.
Old Construction: Older homes don’t necessarily have to be old from inside. They can also stand and weather storms for years and decades like any new building. You can shop around to find an old home that has already been renovated or remodeled to your liking or else you can do the same.
Complete Package: Resale homes may include more essentials depending on the agreement reached with the seller. It may include several appliances, furniture and other benefits included with the package. If you are in need to purchase appliances and furniture, then this may be a great incentive for choosing a resale old home.
Drawbacks to Buying an Older Home
Less Inventory: Not much choice available for selection in terms of floor, size, view etc as not many units are up for sale. It is harder to find a second-hand home due to the less inventory.
Maintenance And Repair Cost: You also have to look at the fact that older properties have to spend more on the regular structural repairs of the building. Things tend to go wrong periodically, and there’s always something to fix at regular intervals. Therefore, there may also be additional expenses to be borne by the customers for repairs to masonry, plumbing, electrical wiring, fittings, painting, waterproofing and other structural repairs. However, newer properties do not have to incur such repairing expenses in its initial years.
Often More Expensive: You may not always be able to afford properties that come up in better locations. The prices of the older homes are generally higher if they are near to the developed areas. Here, the development means good infrastructure, good roads, safe locality, access to good schools, hospitals, airports, railway station, bus stops etc. The older home may cost you more because they are closer to conveniences such as schools, hospitals, shopping centers, and other urban amenities.
In tier I & II cities where there is a scarcity or non-availability of new residential properties within cities, the older homes could be more expensive than new homes. You get the discounts only in those areas where the market is more competitive.
The Renovation Cost: The most important point to consider in buying an old home is the condition of the building. It might have major structural problems you don’t initially notice. Therefore, you should look not only at the repairs to the flat but also the general condition of the building before buying. You can check out construction quality with the help of structural engineers.
If the furnishing, tiling, and paintwork done by the previous owner might not suit your taste and the building is not in the proper shape, you may want to do your own decorating and remodeling. Moreover, the newer home are more contemporary and less in need of immediate repairs while the older home will be out of style and have at least some deferred maintenance such as replacement or up-gradation of older major components.
It would cost you more to renovate the apartment and thus increase your purchasing cost. So, this will add substantially to the financial burden of the buyers. Therefore, the cost of repairs, maintenance, replacements, and upgrades tends to make older homes less desirable.
Poor Layout: The older homes are often smaller, located in central and strategic urban areas and have poor layouts. They may have typically smaller rooms especially bathrooms and closets. Therefore, if you decide to buy an older home, you might have to settle for a smaller and less ideal home to get the right location.
The Indian housing market is in a constant state of evolution and the housing styles have changed with time. Now, the newer homes are available in large numbers located in suburbs with many modern features. It may be possible that you do not find these features and amenities in an older building.
Acceptance In Neighborhood: Normally, the neighborhood might be in decline as the people who are staying from the very beginning are more close to each other rather than people who move in after many years. Many neighbors know each other as older homes are passed down through many years and decades.
Higher Post Purchase Expenses: Purchasing an older home often requires paying some mandatory expenses like registration fees, stamp charges, transfer fees, utility transfer fees and real-estate agent fees among many others. The other minor expenses may include a home makeover, parking, security charges, society membership fees etc.
Sometimes, the sellers may not have cleared the dues with the society, building management or against the house. So, ensure that the previous owner doesn’t have any dues to them which you need to pay later.
Bank Funding: Obtaining a loan for older properties can be a challenge as the age of a home also affects the home loan prospect. Besides, financing could be tricky in resale properties as there is a cash component in the deal. The sellers look to save on capital gains tax by under-reporting the sale value of the properties. But, banks do not finance the cash component as they only fund the part of the agreement value that is on agreement paper. Therefore buyers are left to arrange for their own finance to makeover the cash component.
Tips On Buying An Older Home
There are certain essentials that need attention when purchasing a flat from the resale market. We have provided an important checklist for buying a house to make your job easier.
Documentation And Procedure: It is an essential and foremost thing to check the documentation of the resale old home property carefully while completing the buying process. The buyer of a resale flat should ask for proper chain of documentation and a clear ownership history. The title search report of the property tells you the age of the property and also let you know if the property had a chain of previous owners.
All the documents that are applicable to a primary residential property sale would be required for a clear resale transaction. The original sales deed, encumbrance certificate, possession certificate, latest property tax receipt, occupancy certificate, NOC (No Objection Certificate), sale and purchase agreement and the Society share certificate are the most important property documents to do the transaction. The seller should be able to produce all the original documents.
There have been many cases of fraud where the same property has been sold to multiple buyers. If you are buying the property via a home loan, the bank will do the routine due diligence to verify the legal aspects. However, you can avail the services of an expert property lawyer to complete the home buying process faster. These experts could advise and legally guide you to complete the buying process very smoothly.
When Home Is Mortgaged ?: Before you consider getting a loan to buy an older property, check if the flat is mortgaged with a bank against some loan amount. Banks will only be able to sanction loan once the mortgage has been cleared and there are no debts against the property. Once the original documents have been released along with a no-dues certificate, you could be eligible for a loan.
Property Inspection: It is imperative to have a home inspection done to check the physical condition of the resale flat and find out the age of the property before purchasing it. If the property has several structural problems such as cracks, roof leaks, faulty plumbing, and electrical wiring, you might end up paying more. Therefore, draw up an estimate of what needs to be repaired and remodeled and then make a decision.
Bargain: Prices and payment terms are always negotiable when buying a resale home from the individual sellers where you have higher bargaining power than with developers. Sometimes, the owner of the resale property might be under pressure to sell the property at the earliest, so do not forget to bargain. Identify all the defects and press to get additional discounts. If there are a lot of renovations to be done, cite these reasons to get a good deal. Understanding the reason behind the sale will help you with uncovering any problems and issues with the property. However, because of more competition among buyers due to less inventory the chances to get your offer accepted is also very less.
Property Valuation: Do some background research and check the market price of the property. Go through the current price trends and get an estimate or seek a professional’s help to evaluate the second-hand property.
So, if all the other factors work in your favour, it might be a good idea to invest in a resale old home.
Ajay Verma, founder, and writer of The Housing World, a real estate and mortgage news website. He has over fifteen years of rich experience in the above-mentioned industries.