Nobody in their right mind would say that buying a home is inexpensive or cheap. In fact, it’s probably one of the most expensive purchases a person will make in their lifetime. In 2014, the average sale price of a home was $311,400. That’s no mere drop in the bucket for the majority of homeowners, yet, on average, new homebuyers spend $7,400 more in the first two years of ownership than existing homeowners.
The National Home Buyers Association (NAHB) has found that a home purchase has a ripple effect and makes most new homeowners spend more money on average. This begs the question: where are these hidden costs, and how can you avoid them?
1. Don’t Buy Furniture To Fill Up The Extra Space
A majority of new homeowners buy a house that has more space than where they were living previously. Of course, the natural inclination is to fill up that empty space with furniture. According to the Consumer Expenditure Survey from the Bureau of Labor Statistics and the NAHB, new homeowners spend $5,025 on average on new furnishings. That’s $3,364 more than people who are existing homeowners.
Much of this is spent on bedroom furnishings, specifically mattresses. New homeowners outspend existing homeowners six times when purchasing bedroom furniture. Spending a bit more money on bedroom furniture than an existing homeowner seems logical, though. Sometimes families purchase a new home because they’re adding a new family member and they need more room – with that new family member comes a new bed and new bedroom furniture.
However, another big-ticket item that new homeowners purchase is a couch, spending $746 more than what an existing homeowner spends. Remember, when you buy a home, don’t feel like you need to go out the next day to purchase brand new furniture. It’s OK to have some empty rooms and space in your new abode, especially if you don’t need to have a guest room or extra sofa right this minute.
2. Don’t Undertake Remodeling Projects Right Away
One of the bittersweet parts of moving to a home is you no longer have to worry about having a landlord, but it also means you’re responsible for the maintenance of your home — and there will be maintenance. Appliances will break down, systems will fail, and you’ll have to foot the bill every single time. According to US News, homeowners will spend between 1% and 4% of their home’s value on maintenance costs each year. However, according to the Bureau of Labor Statistics survey, new homeowners end up spending $4,642 if they purchased an existing home, which is $2,229 more than individuals who already own their home.
Where does this extra spending come from? For buyers who purchase brand new homes, the $4,275 they spend mostly goes toward remodeling projects (think patios, new driveways, or fences). If you’re looking to save money, don’t start remodeling within the first year of homeownership. If it’s a project you can live without, save up for it over the years.
For new homeowners who purchase existing homes, they spend a bit more than homeowners who have purchased new construction homes, but not by much (only $367 on average). Most of this is spent on repairs and replacements for old and worn-out systems and appliances.
To combat this extra expense, it might be a good idea to look into a home warranty. Home warranties will cover most systems and appliances in a home if they fail from normal wear and tear (not neglect). Prices for home warranties average between $300 and $600, depending on the level of coverage, with a $60 flat rate fee for a service request to complete the repairs or replacement. The average household opens 1.7 service requests in a year, according to Landmark Home Warranty’s data. That means a home warranty could reduce the amount of money spent on repairs and replacements by more than half.
3. Don’t Buy Brand New Appliances
Many times, homeowners get to their new homes and expect them to be just that: new. Instead, they find used fridges, washers, dryers, and dishwashers and realize that they want to start fresh — they want brand new appliances with their new house. Unfortunately, they spend an average of $2,665 on new appliances in their first year, which is over a thousand dollars more than existing homeowners tend to spend annually. This is ultimately surprising, since most homes come with installed appliances, but many homeowners just want their newer models. New homeowners typically spend the most on new televisions, fridges, washers, dryers, and computer systems.
Although it is really tempting to get new appliances when you buy a home, most of the time these older appliances work just fine, and can work quite efficiently with proper maintenance. By using the appliances that come with the home, new homeowners can save a lot of money in their first year of homeownership. Plus, if the homeowner has a home warranty, their plan will most likely cover the repairs and replacements on a well-maintained system or appliance when it fails.
Featured photo credit: Markevich Maria via shutterstock.com