Understanding the Basic Principles of Buying a Home

Good news. It doesn't matter whether you buy a log cabin, Cape Cod colonial, French provincial, Queen Anne Victorian, or California ranch style house. You can make money on any property by following fundamental principles to select the home you buy. As you read the following guidelines, remember that they're not hard-and-fast rules — exceptions do exist.

The principle of progression: Buy one of the cheaper homes on the block

An appraiser will tell you that the principle of progression states that property of lesser value is enhanced by proximity to better properties. English translation, please? Buy one of the cheaper homes on the block because the more expensive houses all around yours pull up the value of your home.

For example, suppose that your agent shows you a house that just came on the market in a neighborhood you like. At $175,000, it's one of the least expensive homes you've seen in the area. The agent says that the other homes around it would sell for anywhere from $225,000 to $275,000. You start to salivate.

Don't whip out your checkbook yet. Do a little homework first. Find out why this house is so cheap. If the right things are wrong with it, write up the offer. If the wrong things are wrong with it, move on to the next property.