As you shop for your dream house, it’s easy to focus on the details that make you personally fall in love with the property. After all, to turn a house into a home, you definitely need a place that fits your style.
At the same time, it’s wise to keep in mind how other buyers view each house you’re considering. You may appreciate that quirky Victorian cottage, but do other people find those creaky floors charming? You might love being the only modern house on a street full of colonial style, but are some buyers turned off by that stand-out vibe?
It may seem odd to think about reselling a house before you’ve even purchased it, but according to Brad Graves, a top real estate agent in San Antonio, Texas, resale value is something that homebuyers need to weigh before making a decision. The house you purchase will eventually need to be resold, and you don’t want the headache of an “unsellable” property.
That’s why we’ve compiled a list of 16 home resale value factors to watch for as you continue your homebuying journey.
Source: (Curtis Adams / Pexels)1. The home’s current and historical sales price
Until we develop a real estate crystal ball to tell the future, historical data will have to drive resale predictions.
Compare the current list price with what the home previously sold for. Tax records can provide the history of every time the house was sold along with the closing price; Your real estate agent can help locate this information, and it’s also available in public property records. Looking at historical price data will tell you if the value has gone up over time, and it is a decent indicator of what you can expect when it’s time to resell the property.
2. The comparable sales
Valuation is always determined in part by comparable home sales (comps) in the area. Graves says that while the nationwide average appreciation usually runs around 2% to 3%, local growth can show tremendous variation.
Talk to your agent regarding the availability and compatibility of comps. Are there lots of comparable homes nearby, or is it hard to find similar properties? Good, close comps help to bring objectivity to the valuation process — something that’s important when you’re thinking about resale value. If it’s hard to find good comps now, it will be just as hard to find good comps later.
3. The location and neighborhood
While your agent cannot legally comment on the location and neighborhood, you can ask him or her to direct you to local data in order to come to your own conclusions. Research crime trends, potential new infrastructure plans, and zoning laws.
You’ll also want to look at how quickly other homes in the neighborhood have sold; This is an indication of the neighborhood’s desirability among buyers. Make a list of any additional features that the neighborhood offers, such as security measures, amenities, community areas, transit accessibility, or a homeowners association (HOA).
4. The market
Talk with your real estate agent about the current reality of your local market. If you’re house shopping in a buyer’s market, you’re likely to get a good deal, but if it’s a seller’s market, you may be paying more. Market information is important now, and it’s also something to keep in mind as you think about resale.
Markets fluctuate all the time, so it’s impossible to make a prediction with certainty. But as a general rule of thumb, if you’re buying low (buyer’s market), chances are good that it’ll be easier to make a profit during resale. If you’re buying high (seller’s market), it might take more time to realize a gain, and therefore could be a greater risk in terms of resale.
5. The size
According to census data from 2017, the median square footage of new homes built for sale in the United States was 2,480 square feet. If you assume that new builds reflect the current desires of homebuyers, that would mean a home around 2,500 square feet has a good chance of holding its value.
However, trends vary greatly depending upon locale. In urban areas, smaller square footage is more common, while in the suburbs, buyers may be accustomed to something much larger. In some areas, the tiny home trend is becoming more popular as buyers focus on minimizing clutter and debt. A top real estate agent can help you determine what size home is most popular in your city.
Source: (Pixabay / Pexels)6. The layout
Over the years, layout styles and preferences have changed. And while individual buyers definitely rely on personal tastes when it comes to layout, there are a few highly valued trends that play a role in the resale value of a home.
Number of rooms: Have your agent give you local data regarding the number of rooms that sell best in your area. Take note of the bed-to-bath ratio.
Open concept: This is a real estate buzzword for a reason. Many buyers still want an open concept, and therefore it increases resale value.
Master suite: A single master suite is almost required these days; Dual master suites are even better.
Split plan: Buyers want the master bedroom separate from the other bedrooms. (Not to be confused with split level — many buyers don’t want that layout.)
Guest house: In certain markets, a well-made guest house adds value.
7. The age
The age of the home affects the resale value because buyers start to think about the lifespan of major elements like the roof, appliances, windows, electrical systems, plumbing, and HVAC systems. Homes that fall in the 20-to-40-year-old range are especially questionable for buyers since most insurance companies will not fully insure roofs over 20 years old.
New construction is always in demand; there’s nothing like being the first to live in a home. But Graves says that new construction in a builder-developed neighborhood will typically only experience good resale value after all homes have been sold. Until then, you’re competing against the builder, who often has the ability to offer closing incentives and brand-new homes compared to your “gently used” one.
Similarly, some older “antique” homes enjoy the value-added benefits of being in a desirable historic district. But despite the charm, some buyers will still focus on the potential maintenance costs of owning an older home.
8. The condition
Which leads us to an even more important point — condition. Age doesn’t have as much effect on value, as long as a home is kept in top condition.
In fact, a study done by CoreLogic found that appraisers adjusted an average of $14,000 for “overall condition,” whereas the average adjustment for “age” was only $1,000. What does this mean for you as a buyer thinking about resale value? It means you can go ahead and buy that older home, as long as you commit to keeping it well-maintained. Also, ask the seller to provide receipts for any updates that they’ve made, and keep those on file.
Source: (Elina Sazonova / Pexels)9. Storage space
Let’s face it, we’ve all got stuff, and that stuff has to go somewhere. In today’s market, many buyers are looking for at least one walk-in closet in the master, along with ample closet space in other areas of the house. Mudroom and laundry room storage add appeal as well.
Outdoor storage such as sheds or storage closets are often cited positively on property listings, meaning they could attract buyers even if the added monetary value is slim. Plus, appraisers add an average of $4,000 in value for car storage, which may include assigned parking, carports, and garages.
10. Upgrades and updates
As a general rule of thumb, upgrades and updates bring an increase in value, though not all home improvements are created equal. Obviously, a complete kitchen renovation will add more value than just replacing the cabinet hardware. A bathroom overhaul will add more value than upgrading the window treatments.
Check out our guide to renovation valuation, but keep in mind there is still a certain level of subjectivity that needs to be addressed. For example, a neutral-colored kitchen renovation will likely appeal to more buyers for a longer period of time than one that features a trendy cabinet color and bright mosaic backsplash. (See point 16 below.)
11. Nearby features
While you’re looking at potential homes to purchase, be sure to take a drive around the local area. Take note of the nearby features, and think like the general buyer. Buyers often desire close proximity to parks, museums, transit systems, grocery stores, and local hotspots, so those things would add to your resale value. On the other hand, buyers may turn their noses up at nearby power lines, train tracks, major highways, airports, and factories.
12. The home’s potential
As a homebuyer, you’ll also need to take a home’s potential future value into account. If you’re looking at a fixer-upper and you’re planning to complete significant renovations, then you can add that into your resale value considerations. As previously discussed, upgrades and updates add value, so be sure to calculate the potential ROI (return on investment) of any improvements you plan to make.
In addition, if the home you’re looking at is in a high-rent district, that will be seen as a positive factor for potential investors in the future. Ask your agent about the typical rent in the neighborhood.
13. Energy efficiency
Buyers look for energy-efficient homes in order to lower their monthly bills. Energy-efficient windows, doors, insulation, and appliances all add value. Tankless water heaters and newer, more efficient HVAC systems are bonuses as well.
As you’re looking at homes, ask sellers about their monthly utility bills. If they seem high, consider ways you might be able to improve the efficiency prior to reselling the home.
Source: (NTWRK / Pexels)14. Outdoor appeal
Outdoor spaces play an important role when determining resale value. Buyers tend to value the following aspects when looking at the exterior:
Privacy: A nice privacy fence will attract buyers, especially those with pets or kids.
Views: Desirable views, such as water or mountains, can increase value by 15% to 80%.
Patios: Outdoor entertaining areas continue to be popular among buyers in most markets.
Landscaping: Curb appeal adds 1% to 10% in value according to our HomeLight agents.
15. Liens and past issues
Liens, or legal claims against a property, are part of public record. A lien usually means that there is some debt that needs to be repaid, and as such, properties with a lien are less likely to obtain financing. Be sure to have your agent check for any liens on the property that you’re considering, and have your title agent do a thorough title check (and get title insurance!) prior to closing.
Similarly, past problems such as flooding, foundation issues, and other major repairs may cause buyers to balk when the time comes to resell. Hopefully, your seller will have a complete list of disclosures along with permits and invoices to show that proper fixes have been made. But just to be safe, have your insurance agent run a report of prior claims on the home. Keep in mind that even if repairs have been made, some buyers will still see past issues as a red flag.
16. Unusual quirks
Any feature that seems “unusual” could possibly limit the pool of potential homebuyers in the future. Quirks of a home can add charm and individuality, but because they’re based on personal preference, things like stained glass windows, extreme hardscaping, bold paint colors, or elaborate built-ins can have a polarizing effect.
Take paint colors, for example. According to a 2019 HomeLight survey, neutral colors like Agreeable Gray (by Sherwin-Williams) and Revere Pewter (by Benjamin Moore) have the widest buyer appeal. That means not everybody will love that turquoise accent wall that you adore.
The good news? Paint is one of the most cost-effective renovations; On average, an exterior paint job will cost $2,843 while the average full interior paint job costs $1,782.
House shopping should be fun and enjoyable. By focusing on what makes you happy while also keeping these resale value factors in mind, you’ll be able to pinpoint the house that will bring you all the best, both now and in the future.
Header Image Source: (Devon Rockola / Pexels)
#MakingSenseOfPropertyValues #Buyers #Financing