Buying a House in Delaware: Read This First

Buying a House in Delaware: Read This First

Posted on Jun 22, 2022

Delaware is a popular state to move to, especially for residents of nearby Pennsylvania, New Jersey, and Maryland thanks to Delaware's low tax rates and easygoing way of life. Delaware often manages to fly under the radar despite its affordable homes, beachfront property, and easy access to multiple east-coast cities. 

If you're thinking about buying a home in Delaware - especially if you're a first-time homebuyer - there are a few things you should be aware of first.

The Delaware Real Estate Market is Competitive 

According to Redfin, the current Delaware real estate market is nothing short of highly competitive. Over the past year:

  • 50.2% of homes sold above their listing price
  • The number of homes for sale dropped 10.3%
  • The median home price rose 16.9%

Of course, a lot can happen to change this - especially with mortgage rates rising and inflation hampering how much home buyers can afford to put down.

Still, home buyers should be prepared to move quickly and decisively when they find a home they like. 

“The market's still hot, especially in North Wilmington," explains local Realtor Stephanie Tang. "We’re still getting multiple offers and homes are still in high demanded by buyers from New Jersey, Pennsylvania, and New York."

The median listing price of a home in Delaware is currently $323,100 (June 2022).

data via Redfin

Property Disclosures in Delaware 

Delaware is a disclosure state, which is a good thing for home buyers - this means that home sellers need to list out any known issues with the home, rather than it being “buyer beware.” The disclosure document will cover known defects like roof leaks and zoning restrictions - it will also cover what items are included with the home sale (like the refrigerator, or drapes). 

Keep in mind that a disclosure document is not a home inspection, and if buyers want to protect themselves and their investment, it’s always a good idea to get a home inspection. A home inspection will reveal any issues the home sellers are not aware of (and there is almost always something, even if it’s not major).

Resource: 16 Things You'll Need to Note on the Delaware Property Disclosure

Delaware’s Housing Stock is Relatively Young, So Don’t Expect Too Many Problems

Although Delaware was one of the original 13 states, its housing stock is relatively young. According to the National Association of Home Builders, the average owner-occupied housing stock in Delaware is 31-35 years old. Nearby states like New York, Pennsylvania, New Jersey, and Massachusetts, on the other hand, have housing stock that averages 61-79 years old.

This is a good thing for home buyers because older homes - while often sturdy, due to the fact that poorly built older homes have since been demolished - often have more extensive problems, such as issues with the roof or foundation. They’re also less likely to have eco and energy-friendly insulation or architecture. 

When it comes to older homes, Tang cautions potential homeowners to know what they're getting into. 

"Most homes in North Wilmington are still using oil heat - some of them have been converted into gas heat, but there’s still some out there using oil," she says, advising that homeowners who want to avoid this may need to extend their search outside of the area. "North Wilmington is made up of older homes - it's harder to find newer construction there," she notes.

Property Tax in Delaware

Property tax is an important part of homeownership because of its impact on your mortgage payments. And unlike the interest and principal of a fixed rate home loan, property tax will rise over time - so it’s something you need to budget for. 

If you’re thinking about buying a house in Delaware, you’re in luck. According to Smart Asset, “Delaware boasts the seventh-lowest property tax rate of any state in the U.S.” 

The average effective state property tax rate is 0.56% - for a $350,000 home, you’d owe just $1,995 to the state of Delaware. 

Consider that in nearby New Jersey, the effective state property tax rate is 2.42%, meaning that the same home would cost you $8,470 annually.

Not surprisingly, this has made Delaware a popular place to own a home - especially with retirees who are now living on a fixed income and want to keep their annual costs low.

Local Realtor Stephanie Tang notes that The First State has plenty to offer residents.

"Delaware is a tax-free state - you don't pay sales tax, in addition to the low property tax. It's also conveniently in the middle of everything. You can usually get to NY in two hours or less, you can get to Maryland in an hour and a half, and DC in approximately two hours. It's very easy to get around to everywhere by car," she explains.

Where to Live in Delaware 

Delaware is a small state, so popular areas to live in are often suburbs of cities - including nearby cities in other states, like Philadelphia. Here are a few locales that often make the list of "best places to live in Delaware."

  • Wilmington: Wilmington is a small city with an emphasis on community. Residents benefit from all the amenities of living in a city, without dealing with the runaway high costs other cities in the U.S. are facing. Stroll along the Delaware riverfront after enjoying a meal in town. This city is only 30 minutes from nearby Philadelphia.
  • Dover: If you think of a small city capital that has all the essentials but more of a small-town feel with a simple lifestyle, that’s Dover. Expect bars, for example, but not a raging nightlife. Proximity to the beach is one of the many advantages residents enjoy here.
  • Middletown: This family-friendly town balances small-town charm with thriving economic opportunities for job seekers. Expect a very suburban vibe - you’ll get to know your neighbors, and it might be a fifteen-minute drive to the nearest grocery store. Middletown Main Street represents a revitalized town center, complete with restaurants, boutiques, and a CrossFit gym.
  • Greenville: this peaceful commuter town has numerous parks and museums, as well as a laid-back, art-filled coffee house to help get you up and moving in the morning. This suburb of Wilmington has a similar vibe to nearby North Star and Hockessin.

Flipping Homes in Delaware

If you’re planning on flipping a home in DE, it’s neither the best nor the worst state to turn a profit in. Homes have been appreciating quickly here and the market has been hot, which is good - it’ll be easy to sell the home once you’ve fixed it up. Local colleges and a growing population also help fuel the demand for housing. 

However, it might take some extra work to find homes worth flipping - and this is important because you can only make a profit on your home if you buy low and sell high. Right now, buying low will be a challenge since many buyers who would normally have looked for more turn-key properties have been forced to purchase fixer-uppers just so that they have somewhere to live. The cost of construction labor, if you need to pay for renovations, is additionally on the high end in Delaware.

Look for FSBO (for sale by owner) homes and foreclosed auction homes for deals, and take a look at this guide for flipping houses: though it’s for nearby Pennsylvania, most of the facts apply equally to Delaware. 

According to New Silver:

  • The average revenue for a Delaware house flip is $79,030
  • Median purchase price $167,820, median resale price $246,850 (2021)

According to Money Worths, the four best cities for house flipping in Delaware are:

  • Dover 
  • Newark
  • Middletown 
  • Wilmington

Home Loan Assistance Programs 

Most states and cities have home loan assistance programs available, and they’re worth exploring - especially if you’re a first-time homebuyer.

Delaware provides down payment assistance money for its residents who are first-time home buyers and even move-up buyers who need help with the down payment and closing costs. The state’s program for this is called “Kiss Your Landlord Goodbye!

The Delaware State Housing Authority (DSHA)  offers down payment loans between 2% and 5% of your mortgage amount.

Many first-time home buyers in this state will qualify for a reduction in transfer taxes (which are part of closing costs). 

According to Delaware's Division of Revenue, "All first-time home buyers are entitled to a one-half percent (0.5%) reduction in the rate paid by the buyer (which for most buyers will result in a reduction from 1.25% to 0.75%), which may be claimed at the time of closing. The maximum value of this reduction is capped at $2,000 (and may only apply to the first $400,000 of property value)."

Note: residents of certain municipalities may experience different tax rate reductions, so consult with your Realtor and lender to get a more exact idea of what you'd qualify for.

"In New Castle County (North Delaware), first-time home buyers who've never owned a home before can save on the transfer tax," notes Tang. This means buyers don't need to pay their half of the .75% county transfer tax fee at all. For a $400,000 home, this means saving about $1,500 on closing costs. 

Is Buying a Home in Delaware in Your Future?

When it comes to finding the right home in Delaware, Tang says to focus on the big picture, beyond the fresh coat of paint or eye-catching updates. "Look for good bones," she advises. "The kitchen and bathroom could be dated, but you could always renovate the interior - and then make it your style."

And while it's a competitive environment for homebuyers still, she advises having patience - and hope.

"Just be patient, you’ll find something. Don't be disappointed if you get outbid the first three, four, five times - just keep going, you’ll eventually get one. Don't rush, don't be annoyed, don't give up, " she says. "You'll get what you're looking for."

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