Article Summary:Re-sale problems should be considered before you close on your home purchase.
The selection of a home is an emotional decision, and it should be. You should tap into your emotional knowledge when choosing a home. Many personal factors will influence your selection of a place where your family can live comfortably and safely.
However, at some point in the future you may need to re-sell the home. Most people would like to receive at least 4% annual appreciation on the sales price of their home. Now is the time to look ahead and consider any possible sales objections that you may encounter. The value of your home as an investment is directly related to its marketability. If it is sought after by other buyers, your home will sell at the highest price possible for the market.
The issues noted here are not intended to be deal killers. The home you have selected may have some defects, yet meet your needs in many important ways. No home will be perfect. Your purchase decision should be given a careful evaluation and review with an eye toward resale.
Home flippers look for homes with marketing problems such as these. Homes priced below market are perfect for their remodeling solutions. You, too, may think creatively when considering a home. Many problems can be corrected or mitigated. With good design sense, you may be able to make the necessary decisions to improve the home, and perhaps do the work yourself. Or, you may be willing to get design help and use a builder for the work. Remodeling adds a level of risk and difficulty to your home purchase, but possibly, a higher level of satisfaction and monetary reward.
Here are 7 potential re-sale problems:
1. Site Difficulties
Unusual Easements or Restrictions: If unusual easements or restrictions were not disclosed up front, you may not be aware of them until you see the survey and title work. If you discover these, I suggest that you take a step back, and consider whether you will accept an unusual easement or restriction on your use of the property. Some examples: neighbors may cross the property, house expansion is limited, or major pipelines are underground.
Lack of Yard: If a home has much less yard area than others in the neighborhood, buyers tend to eliminate this choice. A steep slope may make the grounds difficult to use and maintain. Yards that have been terraced or landscaped may be exceptions. Compare your property to the yards offered by competing homes.
Commercial View: Homes in suburban areas that view office buildings or retail centers are less attractive to buyers. Buyers choose suburban neighborhoods for their concentration of single family homes, separated from commercial areas. This may not be a problem in more urban areas.
Flag Lot: These are lots with a long narrow strip, leading to the area where the house is placed. Your home will have almost no street frontage, and there may be a building in front of your home. A flag lot in a country setting with a long driveway leading to a large tract may be an exception to the rule. In a subdivision of homes with road frontage, buyers will avoid this type of lot.
2. Likely Objections
High Tension Wires: The general reaction by buyers to high tension wires crossing near the lot is to simply eliminate the choice.
Steep Driveway: I have shown many buyers who will not get out of the car when the driveway is unusually steep.
Busy Street: The noise related to a busy street is a turn-off to many buyers. This is more of a problem if the busy street is in front of the house.
Too Exposed: Most buyers want a certain degree of privacy in the back yard. If the building behind your prospective home looks down on your backyard or into your family room, this will be a sales objection. This could be mitigated by trees or screening.
3. Neighborhood Concerns
Declining Values: If you perceive the neighborhood to be declining, this is a must to avoid. Choose areas that show pride in ownership. However, if you see tear downs and new construction, then the neighborhood may be going through a renewal period, and may be a good risk.
Safety or Security Problems: If you sense that there are security problems - drug dealers, robberies, or safety concerns for your children, take a step back and look at the facts and data on these issues before buying. These kind of problems will turn away buyers fast.
4. Market Matters
Seasonal or Limited Market: Some homes have a limited market - a vacation area, a primarily student market, or an age restricted subdivision. This may suit your needs, but keep in mind that your re-sale will be limited to this set of buyers.
Remote Location: In most cities, areas that are closer to downtown tend to have a larger buyer pool than homes located in remote areas. However, you may choose to trade the privacy and setting of a country home with the resale potential.
No Comparable Sales: This indicates a possible re-sale problem. The home may be very unusual compared to homes around it, or the market may be slow. Understand the underlying reason for few or no comparable sales.
Extended Marketing Time: Has the home that you are considering been on the market a long time? Was the price simply set too high? Has the market been slow? Or, is there a problem with the house that you will need to correct?
Oversupply of Homes: This is a fundamental re-sale problem. If the balance of supply and demand tips in favor of buyers, then sellers will have to compete more aggressively, and prices are usually driven down. A common source of excess supply is from new homebuilders in the area. Or, sales may be slowed by an economic recession or high interest rates. The oversupply of homes on the market may be a temporary situation.
5. Non-conforming Styles
Lacks a Typical Amenity: In an area where nearly all homes are on the golf course, or have a pool, or include a garage, buyers will tend to overlook homes that lack these features. In an area of mostly older buyers, a home with the master upstairs may have trouble selling. Look carefully at what is generally offered in a given area to the majority of buyers.
A-typical Style: Homes that do not fit in to the neighborhood may have trouble selling. For example, the urban modern style may be a good fit in older eclectic areas, but would be hard to sell a uniform suburban neighborhood.
6. Inspection Issues
Water Drainage Problems: Poor water drainage may be a serious and costly remediation problem. Talk with an expert about improving the drainage around the house, and evaluate any previous damage caused by flooding of the interior or water standing under the house. Be sure that you have all the facts on the table and an improvement plan ready.
Structural Defects: Structural defects have an underlying cause. They may be due to loose fill on the lot, clay soil, drainage issues, or poor construction. It is crucial to know the source of the problem, and the cost to repair, before taking on a house with structural problems.
Inspection Issues: Excessive repairs noted on your inspection report indicate that the house was not maintained or was poorly constructed. Be prepared for some serious work on the house. An incorrect application of stucco or other siding may have water damage or mold behind it. A mold infestation may be expensive to remove. Be prepared to document your repairs in order to show a future buyer that the problems have been completely solved. These issues tend to have some stigma attached.
Insurance Claims: It is important to know the facts about a previous insurance claim. If it was due to a fire or flooding problem, you should have full disclosure. Large insurance claims are a red flag, and may result in difficulty in obtaining insurance on the home. Many homes have had repairs covered by insurance, such as hail damage, and these are not a re-sale problem.
7. Improvement Obstacles
Costly Improvements: You may not be able to recoup the cost of certain improvements to your home. These may include imported fixtures, unusual artistry or craftsmanship, exotic woods, European appliances, rare plants, hand decorated walls, etc. If these finishes are similar to locally available materials, they may not have a market value equal to their cost. In general, swimming pools and tennis courts do not contribute the full amount of their cost in the value of the home.
Over Improved: Homes that are over improved for the area, or have excess acreage, often have a difficult time recouping the additional cost. Most people feel safer buying one of the cheaper houses in the neighborhood.
Non Functional Floor Plan: Floor plans that make living in the home difficult will turn away buyers. Excessive level changes, rooms that are out of proportion, poor access to the backyard, low ceilings, few windows, and other layout issues will result in a re-sale problem. This may be an opportunity to take down walls, add windows and doors, and make creative changes to improve the functionality and value of a house. Design skill and a fairly high budget will be necessary.
Out Dated Finishes: Most homes have some outdated finishes - from needing freshening up, to a complete makeover. This is where design skill and perseverance can completely transform a house. If you are new to remodeling, consider your budget carefully. Often the work required is quite extensive and may grow as the project develops.
Roselind Hejl, CRS, is a Realtor with Coldwell Banker United in Austin, Texas. Her website: Roselind Hejl's Austin Texas Real Estate Guide offers a wealth of knowledge about the City of Austin, homes for sale, real estate market trends and buying and selling tips.