When is it worth spending more money when buying your first home? Let's look at the $350,000-$400,000 price range to answer this question because there are a lot of first-time buyers in this price range. Most first-time home buyers are either going to get married or they just got married. Many will eventually have kids and soon the home they buy today will be too small. They will need to sell so they can buy a bigger home for their growing family. If you find yourself in this situation it might be a better idea to spend $400,000 or whatever the upper end of your budget is if you can afford it.
The reason for this is homes in south Minneapolis that are $350,000 or less in great locations and condition are usually smaller. Typically, they are around 1300 square feet or less with one bathroom. But homes in the $400,000-$425,000 range are typically around 1600 square feet and usually have a second bathroom. The locations tend to be a little better as well. These homes also tend to have a bigger foundation, which makes the footprint of the home larger and easier to remodel because you have more space to work with.
If you spend the extra $50,000 and buy a bigger home at $400,000 home today, then you won't need to move in 5 years since you will have the larger footprint to add finished space, remodel the kitchen or add a master bathroom. In contrast, if you buy a $350,000 home or less today, but sell in 5 years when you out grow the house, then you will have the extra cost of selling and buying. This probably ends up being 10% of the sales price of your home. After commissions, loan fees, closing costs, inspections, moving, furniture, time off work, etc, the cost of selling, buying and moving really adds up. You could have up to $50,000 in total costs. So in some ways spending that extra $50,000 now ends up saving you $50,000 in five years. Plus, that $50,000 you saved from not moving can be used to remodel your house, which will not only create that extra space you need, but also build your equity in the home. That is a win-win situation.
Not all homes are created equal. Some homes are in better locations then others. Some homes have better layouts, bigger kitchens, more natural lighting, newer furnaces, or second level master baths. There are so many elements of value in a property. All of them need to be considered if you want to get a great home for a great price. There are a handful of homes on the market, but only a few are worth buying at the asking price and even fewer that are worth more then the asking price. Think about these scenarios before you buy your first home. When it comes time to buy and you need representation give me a call. I would be happy to help.