Owning a historic home can feel like owning a piece of history itself. Old houses require a lot of work, but some buyers are driven by a love for history or a desire for a challenge. If you’re considering purchasing a historic property, you should know the benefits and drawbacks of owning an old home and what you can do to set yourself up for success.
What Makes a Home Historic?
There’s a difference between a home that feels historic and one that’s officially recognized as a historic property. For a home to officially be considered historic, it has to be on the National Register of Historic Places, a list created and maintained by the National Park Service.
The National Register of Historic Places sets specific criteria that properties must meet. A home must be at least 50 years old and meet at least one of the following four conditions:
- Connected to a historical event.
- Owned or inhabited by a significant historical figure.
- Historically significant in the way it was designed or constructed.
- Has provided or could provide important historical information.
States and municipalities can designate homes as historic, too. Their criteria may vary from the criteria for the National Register of Historic Places.
Buying an old house that’s not on the registry can come with some of the same benefits and challenges. However, buying an officially designated historic home can create even more unique opportunities and obstacles.
Benefits of Owning a Historic Home
Connection to History
Owning a historic home can be a great source of pride, especially if you have a passion for history. Living in a house that’s directly connected to history is an incredibly special experience. Owning and maintaining the property can help you feel more personally connected to your community’s history, which can be very meaningful.
Opportunities for Financial Assistance
Historic properties also have some unique options for financial assistance. For example, you might be eligible for the Historic Tax Credit if you renovate or rehabilitate the property. This allows you to claim 20% of qualifying costs over five years as a tax credit.
There are many state and local organizations that offer grants for historic homeowners to improve or maintain their properties. Your state’s Historic Preservation Office can direct you to state-specific grants.
Potential for Return on Investment
Buying a historic home doesn’t guarantee a return on your investment. If the home falls into disrepair or is associated with a negative historical event, you might struggle to resell it.
However, most well-maintained historic homes appreciate in value faster than newer homes. Historic neighborhoods are often popular for buyers, so you could get a particularly high return on your investment if your house is surrounded by other historic properties.
Challenges of Owning a Historic Home
Difficulty Finding Financing
While you may have some opportunities for grants when purchasing a historic home, you might have to jump through extra hoops when getting a mortgage. Some lenders don’t offer financing for historic homes at all. Others will require extra documentation to confirm that the house is in livable condition. An appraisal for a historic home can also take longer because not all appraisers work on historic properties.
Regulations and Restrictions
Historic homes can be subject to restrictions, especially in historic neighborhoods with HOAs. You might need to seek approval for any additions or alterations that affect the exterior of the home.
These regulations could delay your desired upgrades or prevent you from completing them altogether. Some homeowners find it frustrating to be limited in what work they can do on their own properties.
Costly Repairs
It’s inevitable that things will break in an older home, and fixing them can be more expensive. You might be required by your state or municipality to maintain the property to historical standards, so you may have to hire specialized craftsmen.
The following are some of the most common problems homeowners run into with historic houses:
- Foundation issues
- Inadequate insulation
- Lead paint
- Termite damage
- Improper grading and drainage
- Insurance Challenges
You may have higher rates for homeowners insurance or be denied altogether when you own a historic property. Repairs are usually more expensive, so your policy will likely have higher premiums and deductibles.
Tips for Buying a Historic Home
If you have a passion for history and feel that living in a historic home will be a rewarding experience, you should pursue your dream. Here are five tips for buying a historic home:
1. Tour as Many as You Can
Touring lots of historic properties will help you gain a better understanding of layouts, pricing, common renovations, and other unique considerations. Before you apply for a pre-approval or hire a real estate agent, you could start going to open houses just to see what’s out there.
2. Consider an FHA 203(k) Loan
Many older homes don’t meet the criteria for traditional FHA or VA loans. However, an FHA 203(k) loan might be a good option. This loan provides funding for both the purchase of the property and the repairs.
An FHA 203(k) loan has similar eligibility requirements to a traditional FHA loan. Additionally, the renovations must be completed within 12 months, and you must occupy the home yourself.
3. Get a Home Inspection
A home inspection is absolutely essential when purchasing a historic property. Old houses can have costly and dangerous problems that might not be immediately visible during a showing.
Include a home inspection contingency in your offer so that you can back out of the sale if the inspection reveals a major issue. If possible, hire an inspector that specializes in historic homes.
4. Review Local, State, and Federal Regulations
Regulations and restrictions can have a big impact on your experience as a homeowner. If the house is located in an HOA neighborhood, read their rules carefully before closing on the home.
You should also look into local, state, and federal laws that could affect your ability to complete upgrades or renovations. Your state’s Historic Preservation Office may have resources or information that can help you understand what restrictions your home will be under.
5. Work With Your Local Preservation Society
Once you own a historic property, consider getting connected with your local historical society or the Historic Preservation Office in your state. These organizations will be happy to share information with you or hear more about your historic home. They may offer you guidance or financial resources for preserving your home, and they can help you get in touch with others who share your passion for history.
If you’re interested in purchasing a historic property, make sure you do plenty of research, consult with local organizations, and be prepared for some extra hurdles when applying for financing. Buying a historic house comes with challenges, but it’s a great opportunity for those looking to embrace history.