Hey guys, I’m a first-time homebuyer and just looked at a Habitat-built house in this ‘up and coming’ neighborhood. It’s listed by the owner for $40k below appraisal value, and I noticed that neighboring houses are going for 2-3 times that price. However, since it was built by Habitat, there are some deed restrictions in place, like Habitat having the right of first refusal and no rental income allowed. So, I’m wondering if this would be a good move for me. Any thoughts?
Honestly, I would never buy a house with those kinds of deed restrictions. A lot of potential buyers will definitely be put off by that. Why limit your buyer pool and your ability to rent the house later? If you could qualify for a regular house without those restrictions, that would probably be a better choice, in my opinion.
Just so you know, they do this because of some issues that happened in Washington state back in the 90s. It’s pretty standard for homes built by Habitat because they use skilled volunteer labor along with the homeowners.
You should know that you’re technically buying the house, not the land. In the 90s, there were several Habitat homes in desirable areas that were sold, which is why they have to be priced below market value now. The land usually belongs to Habitat for a certain number of years.
Habitat homes are built for specific criteria, like being in need of affordable housing, meeting certain income requirements, and being able and willing to pay an affordable mortgage. Plus, you have to attend some homeowner education classes. You can check out more on their website if you want.
How much do other homes with similar deed restrictions sell for? In some areas, below-market condos can be worth a lot less, but they usually have limits on how much you can sell them for later, not just for renting. Sometimes, it still makes financial sense to buy below market value if the savings outweigh the restrictions.
In my experience, deed restrictions can significantly limit your upside potential. It’s not just about missing out on cash; it can also mean that while other homes appreciate, yours may not. In 10 years, your house might be worth the same while everything else goes up 20% or more. It could make traditional home ownership feel out of reach down the line.