You’re happily settled in your first home but have come to realize how much you don’t know. Let’s answer some of the most frequently asked questions from first-time homeowners.
Q: Which home improvements add the most value?
Although your house is an investment, first and foremost it is your home. Don’t view renovations solely with dollar signs in your eyes. Think in terms of how a renovation will improve your quality of life as you continue to live in the home. Take return on investment (ROI) into consideration, but also think of the pleasure the renovation will bring. Also keep in mind how long you plan to stay in the home. If you’ll be selling in just a few years, you’ll have less time to recoup the money you invest in home improvements.
A good kitchen remodel with updated counters, cabinets and appliances usually pays off in terms of quality of life and ROI. You probably won’t recoup all of your financial investment, but an updated kitchen will elevate the overall appeal of the home, enhance your enjoyment of it, and perhaps be the deciding factor for future buyers.
Remodeled bathrooms, particularly the master bath, also generally turn out to be good investments. Another interior renovation to consider is opening up living spaces in older homes that are more compartmentalized. Knocking out walls can greatly improve a home’s livability. Consult with a reputable contractor to make sure any walls you want to remove aren’t load bearing.
Some improvements with lower price tags are also good investments. Replacing a tired-looking front or garage door for a few thousand dollars, for example, can return over 90 percent of its cost rather quickly. And remember that some less visible improvements, such as adding attic insulation or an automatic sprinkler system, can pay off handsomely in energy savings.
Q: When should I hire a professional contractor to prevent a DIY disaster?
Instructional videos and home improvement television shows have helped Americans up their home improvement game. But there are still situations that call for a professional, not a weekend warrior. Hire a professional when:
- The job is dangerous, such as climbing onto the roof or installing or moving electrical outlets or gas lines.
- The job requires work done by someone licensed by the state.
- The job requires a permit and/or inspection.
- The job requires special skills and tools you likely don’t have, such as finish carpentry, stone countertops or certain tile work.
Q: What service contracts and warranties do I need?
When you buy a newly built home, the builder covers all repairs the first year. The warranty steps down to cover only major components in the second year, then fewer components through some end point, such as 10 years after purchase.
If you buy an existing home or own one for which no warranty is still in effect, you can purchase a third-party home warranty. A basic one costs $300 to $600, depending on the type of home (single family, condo, etc.) and what repairs the warranty covers. Sellers often provide a one-year home warranty that buyers can later pay to extend. Warranty claims may be denied if you or the previous owner neglected routine maintenance, or if the broken component is beyond the coverage of a basic plan.
The advantage to a home warranty is that the plan’s cost may be small compared to the cost of replacing or repairing something like an HVAC system. On the other hand, you might make years of warranty payments before something breaks, during which time you could have saved the same amount of money to pay for the repairs yourself. Additionally, you must use the warranty company’s contractor and the replacement equipment he offers when you file a claim. You’ll have little room for choices.
Q: What types of homeowners insurance policies are there?
Basic homeowners insurance covers sudden destruction from “perils” such as fire, windstorms, hail, lightning, automobiles, airplane crashes, vandalism, theft and civil unrest. These policies will cover water damage caused by a sudden pipe burst or a windstorm destroying the roof and permitting rainfall inside, but not from slow leaks, especially if homeowner neglect is a factor. Homeowners insurance also provides liability coverage if a visitor on your property is injured.
Basic homeowners policies do not cover flood damage from heavy rain or overflowing bodies of water. For that you need a separate flood insurance policy issued by the Federal Emergency Management Administration (FEMA). Coverage for earthquake damage requires a separate policy or a rider added to a basic policy.
Insurance for condominiums differs from that for single family homes. Condo homeowners policies cover the building’s interior walls and what’s within them. The building itself is covered by a common policy provided by the homeowners association.
Q: What documents should I keep?
Keep all legal documents from the beginning of your home buying experience through to the end. The title company is required by law to keep copies of closing documents, but it is best that you have your own set. These are your records should any lingering issues arise after the sale.
Specifically, keep the following documents:
- The buyer’s agreement you have with the real estate agent who helped you find and buy your home.
- The sales contract plus all addendums.
- The mortgage company’s appraisal, a copy of the inspection report and a copy of the seller’s disclosure of the property’s condition. The seller’s disclosure is important in the event the seller did not reveal a condition that later becomes a problem for which you can hold them legally accountable.
- The closing disclosure that the title escrow company is required to give you three business days before closing.
- The deed, the owner’s title policy and the survey.
- The home warranty, your homeowners insurance policy and any supplemental policies, such as flood insurance.
- Keep receipts for home improvements indefinitely to establish your tax basis in the house should you sell or the house passes to your heirs.
Besides keeping hard copies, scan and keep digital copies of all these records.
Q: How can I save money on my utility bills?
Invest in a home energy audit to spot deficiencies that are costing you money. The auditor will examine your heating and air-conditioning (HVAC) system for ducts that could be leaking into your attic. Invest in a smart thermostat that regulates temperature with money-saving precision. Keep your system air filters changed on schedule.
Make sure your house is buttoned up from heat transference. Heat naturally transfers from warmer to cooler locations. Check the insulation in the attic and the basement to ensure that you have the proper amount for your region of the country. Examine the outside of your windows and replace old, gapping caulk. Make sure the weather stripping around exterior doors is in good shape.
Switch from incandescent or fluorescent light bulbs to light emitting diode (LED) bulbs, which use a tenth of the electricity of old incandescent bulbs and last for many years.
To conserve water, invest in a lawn irrigation sprinkler system, which will more precisely control landscape hydration. Use low-flow faucets and toilets, and buy Energy Star appliances, which save electricity and water.
Related – FAQs for First-Time Home Buyers