Boston Home Buyers: Due Diligence You Don't Want to Miss

Fall is looming around the corner and that means one thing in Boston, an influx of students and young professionals into the housing market. Despite record high building permits being issued by the city, Boston’s affordable housing stock remains low as NIMBYISM and draconian zoning laws incentivize developers to over-invest in luxury properties. Alas, if you’re like the millions of millennials who managed to scrape together that elusive downpayment for your own home, here are some simple but critical areas of due diligence you don’t want to miss:

Jobs. Jobs. Jobs.

All of real estate is local and in some areas of Boston, it’s HYPERLOCAL. This means that while some macroeconomic changes will have regional effects, some areas are more resilient than others and you want to know why. One key indicator is jobs. This is not a big mystery as most folks want to stay closer to work to shorten their commute. However, buyers typically underestimate the impact of a new job market. Let’s take the new Amazon Alexa Headquarter in Seaport as an example. Bezos will be adding ~2000 new jobs directly into the market. However, the real housing demand would be much larger. We must consider the employees AND the families/loved ones they’ll bring with them into the new market. Lastly, these new transplants will have a demand for tertiary services such as lawn care, plumbers, waiters, babysitters, and more. So the original 2000 new jobs can easily translate to more than 6000 new demand for housing. Aside from net new jobs, it’s also important to consider the diversity of industry in the area. Is everyone in town working for one giant autocompany (ex. Flint Michigan)? Or is there a good mix of different employers (ex. Academia, Energy, Research, Healthcare, etc.) in the area that can help absorb the shock of any single market depression? There isn’t a perfect formula to time/discover the perfect market but according to David Lindahl's Emerging Real Estate Market, the 4 key indicators that capture a housing market are: Jobs, Vacancy, New Constructions, and Rental Rates. A little bit of research will put you light years ahead of most first time home buyers!

Don’t Break the Piggy Bank

Yes. You will have to somehow figure out how to pay for the house but a little bit of prep work could help save you time, money, AND make you that much more attractive to the seller. That comes with understanding both your personal and the property financial outlook.

Very few banks will give you a 30 year loan to buy that nice Birkin bag or that Yeti Cooler you’ve been eyeing. However! They will gladly lend you the hundreds of thousands of dollars for a home purchase. Why? Because real estate is an appreciating asset and it can produce rental income. But the banks will only lend you money based on your ability to meet the repayment criteria, or your financial outlook. This means asking yourself a few simple questions. Do you have a stable income that allows you to comfortably repay your monthly payment (see DTI for more info)? Do you have the required down payments (typically 20% of the total sales price)? Some banks may even require you to have some cash reserves in addition to your downpayment. If you’re receiving a gift from a family for the down payment, there might be seasoning requirements where the fund must be available in the account for x amount of time. Most listing agents won’t even entertain an offer from a non-approved/qualified buyer so stay ahead by getting a pre-approval letter.

Winter is Coming. Again

One unavoidable fact about living in Boston is masshole drivers and… the Winter. While you can get away from not having a working air-conditioner, you ABSOLUTELY will need heat during a Boston Winter. This is not a mystery BUT many, many home inspectors will not thoroughly test the heating system, particularly if you’re buying in the midst of Summer. This usually leads to a cruel awakening in January when your 15 year old furnace dies and you’re stuck with a $500 bill. So either shop during the Winter or ask your inspector to pay special attention to the HVAC!

Another physical property you want to inspect is the plumbing, specifically the placement of certain pipes. We’ve probably never lived in a house without indoor plumbing but most of the houses in Boston were actually built without indoor plumbing. I know shocker 😲! And when the luxury of indoor plumbing came along, some unscrupulous builders decided to route the water pipes along the exterior wall rather than through the inside of the house. This is problematic when it gets cold which will likely cause your pipes to freeze and potentially break. Ask the inspectors to thorough check how the pipes are routed so you don’t get a wet surprise this Winter!

Buyer Beware

Sorry - the intent of this article is to not scare you, nor is it designed to be comprehensive. As we’ve mentioned in the previous house hacking article, one of the first steps to buying a home is assembling a team that you trust. However, our goal is to reinforce some tips and tricks when it comes to buying a home in Boston. If you think we missed anything, please leave a comment below or reach out to [email protected] for more information. Cheers and happy house hunting!