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🤔How to Determine if A House Has Good Resale Value
Most home buyers make a choice on a home purchase with a combination of emotion and reason. When it’s all said and done, most people want to fall in love. They want to come home to a place that makes them happy. Before you fall in love, make sure that the house you fall in love with has good resale potential. Even though you may think of the home as your “forever home”, life is unpredictable. You never know if your situation may change to the point where you may want to sell sooner than you had planned. When buyers are shopping for a home, it’s wise to consider the important aspects that typically result in good resale value.
💵Make Good Financial Plans Before You Search for a Home
The best approach to buying a home is to get your financial situation figured out first. Before you ever start looking for a home, figure out how much you can afford and particularly, how much you want to afford. (Contact us for a list of reputable local lenders for preapproval)
If you start looking in earnest before you are preapproved…you will only frustrate yourself. You’ll see a lot of beautiful homes that you might not be able to afford and you’ll only be disappointed when the one you fall in love with is either out of reach or sells before you are ready to buy.
While you are figuring out your financials, one very important consideration that many people miss is this:
💰Make room in your budget for home maintenance and home improvement. The first and most important part of ensuring your home’s resale value is to maintain and repair your home throughout the time you own it. Deferred maintenance will kill your home value!
🎵What’s Love Got To Do With It?
When you are preapproved, then you are ready to start the home search. Inevitably, as you search, you will find a home that touches your sensitivities… you fall in love. It’s just better if you fall in love with something that has good resale potential.
Home buyers usually make the final decision on which home to buy based on emotion. Buyers choose a house that just “feels like home”. It’s a subjective end to what usually starts out guided by reason and logic. That’s OK, it’s supposed to be a perfect merger when right brain and left brain buy a home together!
Besides, when you write the mortgage payment month after month, you want to love the place where you live! You just don’t want to let love overshadow your logic when it comes to resale.
💔When NOT to Fall in Love with a Home
Emotion becomes difficult when buyers fall in love with a home that has what we consider a “fatal flaw”… the glaring issue that will make resale difficult. It is heartbreaking to see a homeowner trying to sell a home with a fatal flaw. The home sits on the market for a year, but it doesn’t sell because… it sits under the power lines, next to the highway, backs to a steep hill with no back yard, downwind from the dump… you get the picture. Here are the typical fatal flaws:
- Not enough bedrooms. Statistically, homes with 3 or more bedrooms sell faster. But if the comparable homes in a neighborhood have 4 bedrooms on average, then you don’t want to buy the only home in the neighborhood with 3 bedrooms.
- Not enough bathrooms. Homeowner expectations have changed over the last four decades. In many homes today the thought of children sharing a bathroom is outdated!
- Dysfunctional floor plan. Open floor plans are very popular. But even if the house doesn’t have the most contemporary open concept, it’s not a deal breaker. What IS a tragedy is a floor plan with bad flow patterns that deviates too far from normal everyday living.
- Missing too many common features of comparable homes. If you plan to fix items during the time you own the house, then you really have to be honest about the cost and time you’ll need to invest to bring the home value up.
- Too many major items that need to be replaced. When it comes to the expensive items…roof, HVAC, electrical and plumbing, too many outdated items will be too expensive to tackle.
- Don’t buy the largest home in the neighborhood; don’t buy the smallest home in the neighborhood.
When someone bought the home with the fatal flaw, it was probably because they fell in love with some aspect of it and ignored the rest. Maybe they just had to be in that particular neighborhood, or they went nuts over the gourmet kitchen, but the dis-functional floor plan missed their attention: The lack of bathrooms, the lack of living space, or that strange layout.
Functional Obsolescence. That’s what we call a home that has a fatal flow. Buyers often say… “We’ll fix that…add a room… do some landscaping…Tear down that wall…” Then life happens and they don’t get around to it.
🛒Think of Resale When You Are Home Shopping
The trick to understanding the resale potential is to know what the majority of homeowners want. Let’s call it the desirability factor. What’s popular? What upgrades do people expect? What’s dated? Can something be easily changed if it’s outdated or when it’s no longer popular? It’s always a good idea to keep aware of trends in home design and home technologies.
If you buy a home that needs updates, you can often get a good deal, if you know what to look for. The only trouble with this plan is that sometimes, people have good intentions but bad follow-through. They underestimate the work or the cost. They procrastinate. Sometimes homeowners make improvements or modifications that don’t really add value. If you buy a bargain with the plan of fixing it up, then be honest with yourself about your capabilities and your pocket book.
The ultimate tip: Take your Realtor’s Counsel!
💘When to Fall in Love with a Home:
- Location, Location, Location. School systems have a huge influence on home values. Proximity to desired amenities, commuter routes, neighborhood quality and amenities…it all matters.
- Pleasing and proportional yard. Panhandle lots are less desirable. Oddly shaped lots are harder to sell. Don’t buy a home with no back yard…or a steep hill for a yard. (even if the builder gives you a discount to get rid of the lot no one else wanted!)
- Curb appeal matters at resale. Studies show that most home buyers make their decision in the first 30 seconds of seeing the home. First impressions matter.
- Buy a home with a desirable, modern floor plan. The desirability factor will extend further into the future than the home with a dated floor plan.
- At the very least, similar features to comparable homes. If the normal expectation is for natural stone counters and upgraded cabinets in the kitchen, don’t buy the home with laminate counters and builder-grade cabinets unless you are prepared to renovate the kitchen.
- Buy a home with ample storage. We all have stuff.
- Buy a home with a garage. In most communities it should be a two-car garage.
⚖️How to Keep Perspective
There are several ways to make sure you keep resale in mind when you search for a home. Before you start your search, take into consideration all the good advice you’ve gotten from your research and make some logical, rational lists:
- List your Must Haves
- Make a list of your Negotiables
- and make a list of your Absolutely Nots
- Listen to your Real Estate agent’s guidance.
Your Buyer’s Agent is there to represent your interests. Most real estate agents will help you weigh all the pros and cons and help you see things that they know from experience but you may not be aware of. Use your agent like a trusted adviser, that’s what they are there for.
👛How to Determine the Value of Your Home
Are you selling a home and buying another? You’ll want to know the value of your home, as well as the value of the next home you’d like to purchase. Local real estate market statistics will shed the most light on home values. The local MLS (multiple list service) will have the most recent data on home sales. You’ll want to look at home sales from the most recent six months. A local real estate agent will be the best resource to interpret the data.
What you DON’T want to do is look at online valuations. Zestimates and other online estimates are not reliable, they are a general ball park number. They are calculated by an algorithm that sorts all kinds of data, but they don’t have the ability to parse local, nuanced anomalies.
While an online valuation is a good place to start, it should never be considered with the same value as a market analysis from a local Realtor®. A local agent knows those all-important local market details and can do a custom market analysis that takes into consideration all the nuances of your home, your current market, and your local area.
A home’s value is very dependent on what comparable homes are selling for. Sometimes homeowners mistakenly think that home values are determined by static calculations…”if I put X dollars into my home, I should get X dollars out.” The value of a home is exactly what a buyer is willing to pay for it today. It depends on market forces. That’s why real estate agents do a comparative market analysis, which is based on what comparable homes are selling for right now.
Some home improvements add value that is dollar for dollar, but most don’t. Some home improvements have a very low return on investment. Making wise choices in home improvement is also important to maintaining and improving your home’s value. Making expensive upgrades that are not necessary will be a waste of money in the long run, as you won’t be able to get a good return on the investment.
Additional Resource: What is My Home Worth? Exactly What Someone is Willing to Pay for it. by Conor MacEvilly, Seattle WA Real Estate Agent. Conor point out the ways most people assume have relevance to quantifying a home’s value, but in the end, the CMA, comparative market analysis is the best tool to get a price range that works to place a home on the market. He also points out the pros and cons of cash offers.
👍🏽Your Real Estate Agent is Thinking of Resale
Let me be totally transparent… when you are ready to sell in 8 to 10 years because you got a new job or have outgrown your space, I want you to call me. I’ll be thrilled if you had such a good experience with my service that you think of me when you want to sell.
I won’t be thrilled if you bought a house with poor resale value. I won’t be thrilled for you. It really does break my heart when a homeowner contacts us with a home that … sits under the power lines, next to the highway, backs to a steep hill with no back yard, downwind from the dump… you get the picture. Because now I am bound to disappoint you. Your house will be a hard sell… neither of us will be happy. You will end up making the concession on price, because if the price is right, it will sell.
So save me, and yourself, of course, the grief and don’t buy the fatal flaw. No matter how much you love it.
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