Originally Published on Mortgageloan.com
Published on April 29, 2019
Written by: Aaron Crowe
If you’re the owner of a historic home, you may not be able to say that George Washington slept there, but you should at least be able to find some sort of interesting story you can tell about the house after you’ve secured a home loan.
And if the past doesn’t offer any tales, you’ll probably have plenty as you pay for renovations and updates to a home that may have been built 100 or more years ago and is in need of restoration and continual upkeep.
If you’re considering buying a historic home for its beauty and as a chance to own a piece of history, among other benefits, you should also be aware of the true cost of buying it. Chances are it will cost more to keep running than a modern home — for many reasons beyond age. Local regulations may limit what types of work can be done on it.
An analysis by realtor.com in 2016 of the National Register of Historic Places found that historic homes were 5.6 percent more expensive than similar-size homes in the same ZIP code.
If the home is in a historic district, its value is likely to increase over similar but undesignated neighborhoods, according to a 2007 study by Jonathan Mabry, a historic preservation officer in Tucson, AZ. Historic districts saw property values increase 5 to 35 percent per decade over similar neighborhoods that weren’t designated as historic districts, Mabry found.
Not every home in a historic district is necessarily historic. A new home may legally be built in a historic district, and would be less regulated.
Historic districts can have strict guidelines for owners to follow to maintain and protect the neighborhood and the historic homes. For example, vinyl siding may not be allowed, certain types of curtains and shutters may be required, the yard can’t be altered, and the pitch of the roof can’t be changed. If an addition is being made to the home, it may be required to match the scale, size and style of the original structure.
Mabry found that such restrictions restrain property owners so much that owners of historic homes in a historic district experience a loss of their property rights and could sustain economic losses. Some researchers he cited found that a historic district actually reduces a home’s value by up to 15 percent.
To cover maintenance costs, Wally Conway, president of HomePro Inspections in Jacksonville, Fla., says he recommends owners of historic homes budget 1 percent of their mortgage payment for each year of a home’s age — saving the amount each month.
For a home with a monthly mortgage of $2,000, Conway recommends saving:
“Many months you will have no maintenance expenses and on occasion you will need to replace a roof or heating or cooling system,” he says. “The idea is preparing for the increased expense of homes as they age.”
Bringing wiring and plumbing up to code can be needed in historic homes. Rachel Stewart, a financial advisor at Simplifynance in Baton Rouge, Louisiana, found out in 2013 when she bought a home in the historic district of Baton Rouge that the home built in 1935 had cast iron pipes that were failing.
The full replacement cost quoted to her was $15,000 to $20,000. But since the cast iron was holding strong in most areas of the home, she decided to do the replacement in sections, starting with the failing areas. Replacing the pipes in the kitchen cost $1,500, and she’s saving to fund the full job in about three years instead of taking on debt to cover it when it’s not absolutely necessary.
Another expensive maintenance area Stewart found was caring for oak trees on her historic property that required keeping them clear of dangerous limbs. Tree trimming for four oaks costs $1,500 to $2,000 every two to three years, she says.
Replacing an old furnace at a historic home made of field stone and built in 1928 cost Tamela Ekstrom about $3,000 for a more energy efficient furnance. Ekstrom, a real estate agent who owns Haven Real Estate + Design in Detroit, Mich., says old furnaces can leak carbon dioxide and may need to be replaced after 25 years.
“Some older homes even have wall furnaces with open flames,” Ekstrom says, and certain loans such as FHA loans, require that they be removed before closing on the home.
Along with everyday maintenance, older homes may need several structural repairs, says Alex Berezowski, owner of The Foundation Experts in Ottawa, Ontario, which specializes in historical home restoration.
“Older homes were typically built with materials that are not as advanced as the materials used nowadays,” Berezowski says. “Moreover, these materials have been withstanding weather and wear and tear for years, making them even more susceptible to damages.”
Older homes with a stone or rubble and mortar foundation could suffer water infiltration or deterioration, and repairs or reinforcements to the interior structural or load bearing elements such as bearing beams, posts and floor joists, he says, costing thousands of dollars to repair.
Asbestos insulation, lead-painted walls and corroded pipes are often found in homes built before 1980 and pose a health threat, says Colin Ruggiero, a home safety expert at the Mesothelioma Cancer Alliance in Wallingford, Conn. A home inspection can test for any toxicants.
“If these materials are found to be present, it is important to have them properly handled,” Ruggiero says. “For materials such as asbestos, depending on the condition it is in, the safest option would be to have it removed from the home and replaced with an eco-friendly alternative. While there is an associated upfront cost, this will limit the risks of exposure for both present and future occupants and also increase home value.”
The cost of asbestos removal depends on where it’s found in a home and how widespread its usage is throughout the home, he says. On average, inspection plus removal costs $1,500 to $3,000. If asbestos is found in all areas of the home, it could cost $20,000 to $30,000 to fix.
Historic houses often require materials or repair methods no longer in use, so rebuilding them if they’re damaged or destroyed will almost always cost more than repairing a new house. This makes insurance for historic homes more expensive.
National Trust Insurance Services, a subsidiary of the National Trust for Historic Preservation, says that standard homeowners insurance policies won’t fully pay to replace a historic home because they don’t adequately estimate the value of historic properties.
If a historic building is damaged, it will likely need highly skilled craftsmen, hard to match materials, extra time to rebuild because of the labor-intensive process of historic renovation, and help in recertification and recovery of tax benefits.
There are few insurance companies that offer coverage for historical homes, so comparing prices is limited, says R.J. Weiss, a certified financial planner at founder of the personal finance site The Ways to Wealth.
“However, if you want to properly restore your home, which may be a requirement of your area’s historical society, you’ll need this enhanced coverage,” Weiss says of insuring for guaranteed replacement cost and not the actual cash value.
Published on April 29, 2019
Written by: Aaron Crowe