8. Buying a House Is Fraught With Risk
Buying a home involves all types of risks — from structural damage caused by termites or water infiltration to catastrophic events. "All of these possible headaches could easily be missed if the buyer didn't get a home inspection," said Brad Chandler, CEO of Express Homebuyers in Springfield, Va.
Maintaining sufficient insurance can minimize the risks, but buyers should understand precisely what is covered. "Murphy's Law applies doubly in real estate," Davis said. "Sooner or later, everything that can go wrong in a property will go wrong. And not all of those ugly surprises are simply home systems aging and needing to be replaced."
Damage can occur from sources not covered by a budget insurance policy, Davis said. For example, homeowners insurance doesn't cover damage from flooding, and many policies don't cover damage from break-ins.
"What about toxic mold, radon or health problems caused by lead-based paint?" Davis asked. "What if the family goes on a ski vacation and comes back to find a pipe burst and the entire home and everything in it are ruined? Having so much of your net worth tied up in one asset comes with its own risks and dangers."
If you are planning to buy a home, do so with your eyes wide open, said Janine Acquafredda, a licensed associate broker with House N Key Realty in New York. "Agents and sellers will tell you everything fabulous to get you to buy the house, but they may not tell you the ugly truths — bad neighbors, a casino being built down the block, soaring property taxes, failing schools," she said. "Be sure to do your due diligence."
Keep Reading: Step-by-Step Guide for First-Time Homebuyers