Cleveland Home Buyer Education Series: Future Resale Implications

I think that’s what I would think if I were to hear those two words for the first time.
But, those two words can have a serious, future financial impact on you when it comes time to sell a home you are considering buying.

How so?  While there is no easy, cookie-cutter answer to this question, some things will be easy to understand intuitively, and others take an astute buyer’s agent who has their pulse on the market, understand what drives value, understands buyer preferences and trends, understands appraisal principles such as:

After all, very few people live in a home forever these days, so keeping an eye towards future resale is important.

Just as important is an understanding of how some of these issues may very well impact the enjoyment and use of the property while living in it.

This is not a set of standard rules that applies the same way to each property, each neighborhood, etc. as each community, neighborhood, and property is unique.

Let's look at a few examples (in no particular order):

• Different zoning classification adjoining the property. Let’s say you are interested in a single-family home, but this home backs up to a 10-story apartment/condo building, or even a 2-3 level garden style apartment/condo building. Having neighbors that rise above your property lessens your view, may lessen your natural sunlight, may increase your noise, may increase the ability of these multi-unit dwellers to see into your home at night if your blinds aren’t completely shut as they tower above you.
  
  
• Property is located on a major thoroughfare.  A property on a 4-lane commuter/major local artery of transportation is generally harder to sell. Harder to sell means it takes longer on the market to find and secure a buyer.  A longer marketing time means greater carrying costs for a seller, and oftentimes, since the property may take longer to sell, the seller has less negotiating power, resulting in a lower price.  One simple reason is main roads typically result in an increased noise level and less quiet for the owners.  When you in a home during the day with activity going on, one generally does not hear outside traffic zooming by. At night, while awake but in bed right before falling asleep in a quiet home, sounds that are largely irrelevant during the day can become pronounced at night.  When the pavement is wet, rubber on wet roads magnifies sounds.  Some people are light sleepers and this could prove a big impact in getting a good night’s sleep.  Others are not so bothered by the additional noise.  Some properties, even within a mile of a major interstate highway system, one can hear the noise.  The closer to the road, the louder it becomes.  I have been over to friends homes whose homes back to major interstate highways and the noise can make outdoor entertaining more difficult.

• Winter Views.  When the leaves are down (in Northeast Ohio, that means November – Mid-May), the view of neighbors can be quite markedly different if the property contains mostly deciduous trees that will drop all their leaves, leaving a property perhaps completely open to its neighbors.  So, that view when you saw the property in June on a nice warm, summer day or in October when the leaves are changing may not be the views for 6 months out of the year.

• Topography.  Does the property have a steep ravine in the backyard? If so, the number of interested buyers will decrease.  Does the property from the street sit below-grade? Does the backyard have a negative grade where water would shed down a hill towards your foundation?

• Location within a neighborhood.  Is the home the first one in the neighborhood? Or on a main drag in a neighborhood and not tucked away on a cul-de-sac? If a neighborhood has community amenities, how close is the property to the community amenities?

• Corner lots can be either a plus or a minus, depending on the siting of the structure on the lot. Oftentimes, corner lot properties have a bigger front and side yards, at the expense of a smaller and less private backyard.  If you are sitting on your deck or patio sunbathing and the neighbors on the side yard walking their dog on the sidewalk can see you, does this impact your private enjoyment?  Corner lots also have more restrictive fencing regulations and building regulations as many municipalities view the side yard as a front yard when it comes to setbacks for installing fences or improvements.  In other words, you might not be able to put that fence as far on the side yard as you might think. If there is a stop sign, you will also hear starting and stopping of vehicles that you won’t hear even a few doors down.

• Natural Light.  Which way does the home face? Are the primary rooms you want to use southern facing to maximize natural light and sunshine?  Is the home completely surrounded by tall, thick, mature trees that while may be good for energy efficiency, prevents natural daylight from entering? Mature trees close to a foundation can also have a negative impact on sewer drain tiles, water intrusion in the basement, increased gutter cleaning maintenance.

• Adjoining Properties.  If you are someone who likes privacy but the next door neighbor’s backyard looks like huge, fat mess of projects underway, toys and junk all over the backyard, landscaping that hasn’t been taken care of, a hot rod up on blocks being worked on, outdoor dog kennels, etc., you may not find the peace of mind you hope for if your neighbor’s lifestyle is polar opposite.
  
  
  
  
  

• External Influences.  Do major electrical grid power lines run nearby? Visible? What about a community retention pond (think mosquitoes and keeping a watchful eye on small children)?
  
  
  
  
  
  
  

• Swimming Pool.  An in-ground swimming pool can be a huge resale impediment, unless it’s in a neighborhood that exudes luxury, lifestyle and is really well done.  Why? Risk to human life, stress of wondering if a neighbor kid will hop over the fence, insurance premiums, maintenance and upkeep, etc.
  
  
  
  

• Let’s move inside now…

• Imbalance between the # of bedrooms versus the # of bathrooms.  Are there four bedrooms but only one full bath? Is it a newer home with four bedrooms and only two full baths upstairs, or is the layout optimal: master bedroom with a master bath, two bedrooms share a jack-n-jill bath, and the 4th bedroom has its own private bath. Knowing trends, what other homes in the neighborhood have, etc., are important considerations.

• Kitchen: Galley or one-way in/out?  Buyers prefer large kitchens, command central. Having table space or even a café-style eating area so cooks can entertain and converse while in the kitchen are desirable attributes today. Galley kitchens don’t support this and lend a feel of utilitarian.  Some kitchens only have one entrance, or even if there is a 2nd entrance/exit, it’s oftentimes to the basement or side door.  Flow is important.

• Narrow rooms.  Family rooms that are say < 12 feet wide can make it more challenging to create a balanced and homey room.  Factor in individual desires for HUGE TVs and furniture placement becomes a challenge.

• Living and Family rooms adjoin and are open to each other.  No French doors separating the two, just a wall that comes in a foot or two on each side.  It’s hard to have two different uses going on in adjacent and open rooms, too much noise conflict, etc.

• Bedroom sizes.  People desire larger bedrooms today.  Are one or two of the bedrooms tiny?

• Biggest home in the neighborhood?  Having the biggest home in the neighborhood puts the owner at greater financial risk and volatility.  The appraisal principle of regression says that the value of a superior property is adversely affected by its association with an inferior property of the same type.  In other words, smaller home values are more likely to go up towards the mean and larger homes are more likely to go down towards the mean.

• Pretty Eye Candy -- Dated Infrastructure.  Don’t look at the cool paint colors on the walls, the incredible furniture or artwork, the home will be empty when you move in and a home can easily be painted relatively inexpensively.  Instead, take a critical look at the ages of all the major components such as the roof, windows, furnace, AC, H2O tank, septic system, well, flooring, kitchen, appliances, bathrooms, electrical panel amps, age of the plumbing pipes, electrical, property disclosures, water intrusion, topography, negative slopes, deferred maintenance, quality of improvements, condition of the trim, baseboards, light fixtures, presence of GFCI outlets, etc.  

• Over Improved.  Some properties have been over improved for the neighborhood/immediate area.  Some owners have lots of cash and take great pride in renovating homes with everything done with only the best.  Spending 100K on a kitchen renovation using the best of everything when most renovated kitchens in the neighborhood cost 25K will never justify the cost versus value relationship.  Just because something costs 100K, doesn’t mean the value is 100K.  In fact, the value may be 28K for that 100K investment, whereas a 25K kitchen renovation may yield an 18K return – so which is better?  Obviously, the lower-cost renovation.

• Cat Smells. Cat smells can be notoriously hard to get rid of and buyers are both keen at detecting cat odors.  Moreover, some buyers have cat allergies and can exhibit allergy symptoms within minutes.

• Pretty or Ugly.  Let’s get real here.  Some homes are ugly.  Ugly on the outside, pretty on the inside.  Or Ugly both in and out.  Or Ugly in and pretty out.  Ugly lowers demand. Pretty increases demand.  Some ugly features cannot be changed, some can.  If they can be changed, a seller would be wise, if possible, to reduce or eliminate these ugly features.  Why? If a seller cares about increasing their net financial position at the end of the transaction, they will.  If not, then just ignore it and go with the flow.  Some facades are timeless and never go out of style.  Some are cool for about 5-10 years then fall out of style.

• Style.  Split-level homes were the rage in the 60s-70s, but many buyers of today don’t care for them, they would much rather have distinct levels.  

• Utilities.  Is the home all electric when many areas nearby are natural gas?

• Ceiling Height.  Because of the energy crunch in the 1970s, some builders made ceiling heights 7’, or just a bit over 7’.  Is most of your completion 8’+ ceilings?

• Basement Height.  If you have a block foundation, the first course of block is set half under the floor level.  Count that block up to the sill plate.  Do you have an 11-course block basement? Or 12? Or even 13?  11 course block basements yield a < 7’6” height when a drop ceiling is installed, making the basement not feel like a true level of the home, whereas a 12 course basement gives a much better feel.

• Taxes. In Northeast Ohio, most property taxes are set at an individual community level.  Two adjoining communities can wholly different tax rates.  Tax rates can vary from 1.5% of market value up to 3.75% of market value.  An extra 2-4K per year for identical priced properties, year after year, after 10 years, can equal 20-40K difference in expenditures – or a new kitchen renovation.

• Grocery Stores.  How far is it to a grocery store?  If it takes much longer than many of your competition, some buyers will think twice.  Same for community distances from neighborhoods to major commuter roads.  Some buyers will pay more to be a mile away from an interstate but not willing to for a similar home that is say 6 miles away.