Buying a Historic Home: What You Need to Know

If you’re reading this, it’s likely that an historic home has caught your eye. We get it: Historic homes are beautiful, have unique histories behind them, and often come with bigger lots. 

If you’re considering buying a historic home, make sure you’re aware of the potential downsides as well as the obvious upsides, so you know exactly what you’re getting into.

Read on for what you need to know before you buy a historic property. 

How to determine if a home is historic

Just because a home is old doesn’t mean it’s considered historic. Homes that are officially considered historic are registered with and monitored by the National Park Service. States and municipalities can also designate a home as historic.

A home should be at least 50 years old (there are some exceptions to this rule) and meet one of the four following qualifications in order to be historic:

• Connected to significant, historical events.
• Connected to the lives of significant individuals.
• Considered an embodiment of a particular master or historic style.
• Provided or is likely to provide important historical information.
  

The process of buying a historic home

You’ll find that the main differences between the purchase of a historic home and buying a new home are your financing options and the appraisal.

Historic homes present financing challenges, as some banks and mortgage lenders require additional loan guarantees for older homes. And if you want to apply for a FHA or VA loan, the home will need to meet certain criteria — if the home requires many repairs or has a major structural issue, this makes it harder to qualify for a VA or FHA loan. 

There are two FHA programs specifically designed to help buyers purchase homes that need improvements. 

• Limited 203(K) loan. You can finance up to $35,000 of repairs, and your project must cost at least $5,000. You must complete these repairs within six months. 
• Title 1 Property Improvement loan. You can borrow an unsecured amount of $7,500 to $25,000 to cover the cost of smaller repairs.
  

The appraisal is also likely to turn out a bit different than if you bought a modern tract home. Because homes with a historic past or infamous reputation (such as being haunted) attract a lot of attention, the appraisal may reveal that the home has a higher than expected market value. 

Historic home problems you can expect to run into

There are a lot of upsides that come with historic homes. Beautiful craftsmanship (it’s a cliche, but they really don’t make them like they used to), unique architectural styles, and a rich history all come with the territory. But of course, there are also some problems you can expect to run into when you buy a historic home. Let’s take a look at a few bumps in the road you may experience. 

Expensive maintenance requirements

Because historic homes are quite old, they are typically more expensive to maintain than a newer home. You may choose to buy a historic home that has recent updates, which helps lessen your exposure to repairs. If you don’t want pricey and time-consuming repairs on your to-do list, look for a historic home with updated wiring, sewer, and electrical systems. If you need to hire a contractor to do repairs, try to find one that specializes in historic home repairs. Changes to historic homes often need approval from a historic review board, which makes fixing up a historic home more time-consuming than updating a home from the 1980s. 

Potential exposure to lead paint and asbestos 

One of the first repairs you should tackle is the removal of lead paint and asbestos. Nowadays, builders can’t use these materials, but they still remain in many historic homes. It’s a good idea to hire a specialist to help you remove lead paint or asbestos from the home, as both are toxic substances and you need to dispose of them properly and safely. 

Emotions can run high

When you buy a historic home, there’s often an emotional connection to this one-of-a-kind find that highlights the history of the community. It’s easy to get emotionally attached to a historic home, especially since you often have to devote a lot of blood, sweat, and tears to make it your own. 

An emotional connection to your home isn’t a bad thing, unless you let your emotions rule your choices. Try not to make any quick decisions when it comes to the purchase of a historic home. These homes are a big commitment, so make sure you give a lot of thought to each step you take. The last thing you want is to end up with buyer’s remorse.

Mature landscaping limits your landscaping options

Because historic homes can be over a hundred years old, they often come with mature landscaping with trees and other plant life that are older. For many, mature landscaping is a perk that you can’t buy with a newer home. Trees and plants take time to grow after all. But if you have your heart set on a specific landscaping design, you may find that the removal of mature trees and shrubs is more trouble than it’s worth. 

Getting insured can be a challenge

Because homeowners insurance providers want to limit their exposure as much as possible, many times they don’t want to insure a historic home that could come with a lot of repair needs. As much as you love the unique architectural elements of the historic home you want to buy, your insurance provider will simply see those elements as expensive to replace. 

To get a homeowners insurance policy for a historic home, the insurance company may send out their own inspector to review the home before they write you an insurance policy. There are insurance companies that specialize in historic properties, particularly for homes that are over 100 years old, so they may be your best bet if your home is on the older side (even if it isn’t registered as historic). 

Are historic homes a good investment? 

Most of us want our homes to act as an investment vehicle — and thanks to some nice financial perks that come with the purchase of a historic home, you can save some money and get more out of your investment. 

Most states offer tax incentives for the rehabilitation of historic properties and a handful of states provide a 25% additional credit for homeowners. In some of these states you can even get that additional credit if the property produces income. Each state has different rules surrounding these credits, so make sure you do some research on what your state offers. (For example, in South Carolina you can get an additional 25% credit if you rehabilitate a mill, and you can get the same amount in New York if you fix up a barn. Your state’s historic preservation office will have more details.)

No matter where you live, you can benefit from the federal Historic Rehabilitation Tax Credit (HTC). This credit gives you back 20% of qualifying costs spent on a historic project. A qualified tax credit consultant will walk you through what your options are and how to navigate them. 

Even without the benefits that come with tax credits, historic homes in good locations can be a great long-term investment, especially if you keep up the home and modernize enough to make it comfortable while maintaining the home’s historic charm.