Help a dunce with real estate

I am a real dunce when it comes to real estate. I mean, I seem to understand nothing. How much should one spend on maintenance of one's home? (As a percentage of purchase price?)
"Maintenance" is, in my conception of things, incidental stuff like brooms, some garden tools, some tools for leaky faucets, cleaning stuff, and for bigger projects like painting the exterior every five years (?), the expenses of hiring people.
I carefully ran a budget based on mortgage payments and utilities, then added what I thought was reasonable estimate for maintenance. Since then I've found I had to pay pro's to re-do the A/C ducting, re- do the sprinkler system, repair the heating, explain to me that a house built in the 1980's will never be energy efficient, fix the wood rot, replace the electric panel, and the expenses seem to go on and on (e.g. I will need insulation in the attic and a new ladder) ... new sod, new trees to shade the new sod, big water bills too, and this is not at all what I expected.
The roof is three years old, so I expect I won't have to handle that for at least ten years. I apologize if I have offended you more knowledgeable folk's common sense with the above, but I would appreciate some guidance as to just how much a home *really* costs.
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dapperdobbs wrote:

Several movies, some funnier than others, plumbed this dilemma fairly well "Mr. Blanding's Dream House" and "The Money Pit" are two that I remember. View them and weep. Welcome to the joys of home ownership.
Chip
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Our experience with 12 years of home ownership (3 houses in Atlanta, DC and Boston is that you will spend 2-3% of the purchase price just to keep the home in the same condition as when you bought it. About every other year you will need something major, exterior painting, refurbishing a bath or kitchen, window replacement, driveway resurfacing, refurbishing/rebuilding a deck, termite damage.
And this doesn't count yard maintenance, normal cleaning and preventive maintenance on a whole bunch of stuff. But most of that you can do yourself for a minimal cost, as you can for most interior painting.
If you are handy the cost can be a lot lower, but you end up giving up a lot of weekend fun working around the house.
Most people grossly underestimate what this costs. Or they spend a lot less, and the condition of the house deteriorates over time, and they just don't notice. Or they count replacing a 20 year old fridge/range/ dishwasher as an "upgrade" rather than maintenance.
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On Fri, 23 Jul 2010 19:02:48 -0500, dapperdobbs

Many people come late to the knowledge that owning a home is expensive. Thumper
======================================= MODERATOR'S COMMENT: Please trim the post to which you respond. "Trim" means that except for some brief material to provide context for your remarks, the previous post is deleted. Thank you.
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Based on my experience what you are going through is not typical. It sounds like whoever did the inspection on your place at the time you bought it was either incompetent or on the realtor's payroll. You can have a lot of problems with homes built in the '20s and '30s, particularly with energy effciency (insulation was unknown in those days), electrical and plumbing but you should not be having the problems you describe with a house that is 25 years old. It is difficult to imagine why you would need to replace the breaker panel unless you are adding an addition, finishing a basement or making some other major renovation.
--
.Bill.


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Thank you guys, and please, keep the replies coming! I'm beginning to get a clearer picture.
More data: 4 bd, 2 ba, 2500sf, community, not 'gated' not 'posh,' just nice. Very nice looking place, new kitchen and baths (all black granite counter-tops, oak cabinets), two fireplaces, new oak floors, small pool (lower chlorine costs), not a large lot (lower work load).
I guess I made the mistake of not taking the inspector down into the dungeon for interrogation. I assumed the 'infrastructure' of the house (the systems) would be at the same levels the interiors were. Over the past year, I've spent close to 3% of the purchase price in total, working on getting the place up to standards. New furniture and improvements are long forgotten. The mortgage payments (interest, taxes, insurance) run a bit over 6% of purchase price. Total = 9% of purchase price per year. It seems to be working out so that I can budget a max amount each month. I did get a bug guy, so no more roaches and hopefully zero termites. The inspection did mention the electrical panel (made by a company no longer in business, and potentially defective, so I got a repair allowance that would cover the new GE one). The inspection did NOT say that the house is built like a chicken box with lots of holes so the chickens don't suffocate. It should not cost $450/mo to keep the place at 82 degrees in summer, and above 68 degrees in winter.
Just to add to the 'fun' here are some indexed data points:
42k - October 1999 100k - August 2006 (Zillow, peak valuation) 91k - listed for sale November 2008 77k - I bought it May 2009 80k - Jan 2010 (Zillow) 66k - current (Zillow)
I realized a couple of days ago that my 'maintenance' allocation for this coming year is going to be another 2-3% and only after that, maybe, I can think about some patio furniture (once I get the cheap new coat of patio paint, improperly laid down without preparation, off). It's not as bad as "The Money Pit" (or The Twilight Zone) but it is beginning to qualify as a mini version - at least in my mind.
This looks something like the inverse of buying stock. The capital change does outweight the dividend; in real estate, appreciation outweighs the costs of owning; yet the dividend / cost are significant.
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dapperdobbs wrote:

You have my sympathy. As you have now learned, one thing you always get before making an offer is copies of all utility bills for the last twelve months.
--
.Bill.


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Bill wrote:

But the real estate agent said that the home's utilities averaged only $200/mo! Aren't they supposed to tell the truth?
Chip
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Chip wrote:

They are supposed to but you should not expect them to. Real estate agents are commission sales people. 100% of their income comes from the commission on the sales they make. Both the buyer's and the seller's agents have one and only one goal and that is to close the deal so they both get paid.
For example, in theory, the sellers agent should be trying to get the highest price for his/her client and the buyer's agent should be trying to get the lowest price for his/her client. In fact, the sellers agent is subtly trying to get the seller to take a lower price and the buyer's agent is trying to get the buyer to make a higher offer because if the buyer and seller do not strike a deal both agents earn zero. That is the reason that you should never ask what the utility bills are. You need to ask for actual copies of the utility bills.
Any real estate agent is working in the best interest of one and only one person and that person is himself/herself.
I may sound cynical but it is cynicism born or experience.<g>
--
.Bill.


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Bill wrote:

Glad I could be your straight man.
Chip
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A rule of thumb that I've found useful is that operating a house costs about 5-6% of the current market value of the house. That does not include mortgage principle and interest, but does include utilities, property taxes, repairs, and appropriate upgrades. It obviously varies some, but as a rule of thumb, it's not bad. Also, when you buy a house, you tend to do a lot of stuff in the first few years, so some of this will decline over time.

You probably want to have a energy audit done to see where that money is going and get recommendations on how to fix it. My larger 1940's house doesn't get that bad in the worst of a Texas summer. If you're not aware, there is a federal tax credit of 30% for many energy improvements through the end of the year.
-- Doug
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wrote:

That might work where you live, but not around here. Houses are expensive here. I don't mean big and fancy, just expensive. So what goes for $800k here might go for $150k elsewhere. 5% of $800k is $40k/year. Way too high.
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Good point, re: maintenance as % of market value. Joe pointed out scalability as well. There must be some way to estimate normal maintenance costs that would be useful to prospective buyers.
Heating and A/C are a major system these days. Residential units peak out at 5 tons, so maybe estimates of bills and replacements could be made on that basis.
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dapperdobbs wrote:

Again, that is highly variable. In Phoenix a good rule of thumb for a reasonably well insulated house is one ton of A/C for every 450 square feet of floor space. You don't need a very big house to get past five tons.
--
.Bill.


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Talk to an insurance guy. The house has insurance which is scaled according to the cost of rebuilding/replacing the building itself. While the building price may vary with localities, the vast majority of the huge price differences between a place with $150k houses and a place with $800k+ houses - is the land value.
An insurance guy may have some good idea about the breakdown.
Then, once you know the building cost/replacement value - the price of maintenance and such should be scaled to that, not the land value.
--
Plain Bread alone for e-mail, thanks. The rest gets trashed.


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snipped-for-privacy@fractious.net wrote:

Very good suggestion.
--
.Bill.


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On Jul 26, 9:52pm, snipped-for-privacy@fractious.net wrote:

On Jul 26, 9:52 pm, snipped-for-privacy@fractious.net wrote:

I read you. Doing a little late-night browsing, I found "First Time Homeowners Survival Guide."
"For many new homeowners, the euphoria that comes with buying the perfect new house can soon turn into total panic."
Most books on the subject seem to cover saving on repairs, but understanding the systems should lead to scheduled expenses. I'll let you all know if I have an epiphany.
My major problem is insulation - 9% of the purchase price. That budget- bullet, together with maintenance catch-up bills, became massive confusion. I arrived at that realization after carefully reading and re-reading everyone's replies here. Thank you for the time and thought. I appreciate it!
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On Jul 26, 6:52pm, snipped-for-privacy@fractious.net wrote:

Another point to bear in mind is that a house is potentially a source of income for the owner, because it can be rented to tenants. Or, part of the house or a room or two can be rented for extra income. That should be considered in the own vs rent equation. As I recall, some years back a formula for estimating a reasonable price for a property was 100 times monthly rental income. So, if a house could be rented out for 2000 per month, a reasonable purchase price would be 200,000. That formula wouldn't work in most places today, but the principle is the same. Where land is expensive, rents are usually higher too.
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Wallace wrote:

Aren't the repair and replacement, taxes, and utility bills as proportionately high as well?
Chip
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no.
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