Look for a good investment not a deal

By
Real Estate Broker/Owner with RE/MAX Action Real Estate

Everyone wants a deal in real estate or as it's been called - "the price of a lifetime."  Many home lookers won't even make an offer unless it is tens of thousands under the asking price.

My advice to this type of buyer is look at the house and its potential long-term resale.

You never know how good of a deal your home was until you one day sell that home.  If the goal is to make as much appreciation as possible then focus on the house and not the price.

Real estate is essentially supply and demand 101.  The better demand for your home the higher the price.  The worse demand, the lower the price.  Buy a home that a lot of people would buy and that may not be the home with the lowest price.

Homes backing up to busy roads are usually priced much less than homes inside of neighborhoods.  However, the vast majority of buyers will not even look at this type of a home - regardless of price.  These homes will look like deals on paper but they tend to appreciate at a rate less than homes on so-called "prime" lots.  The same can be true of homes that have some of these none-curable characteristics:

 

  • Too much elevation from street to house - unless you are in a very hilly area, sloping driveways/yards are turn offs for most home buyers.  They are hard to maneuver in cars - particularly in reverse - and the thought of a child wheeling out of control down a hill is more than most parents can stand.
  • Little to no rear yard
  • Corner lots - the lack of privacy really bothers most buyers
  • Fronting or backing up to busy roads
  • Backing up to power lines
  • Backing up to non-residential tenants such as shopping centers or gas stations
  • Bad room count - if it's a three bedroom in a four bedroom neighborhood or lacks a bath.  Some times these flaws can be corrected making a bad deal a good deal.
  • Non-prime school districts. Sorry - buyers typically want to be in the best school districts which is why they'll pay more.
  • Adjacent to drainage ditches or spillways - not safe for the kiddies

 

If you are looking for deals try to look for homes that have been on the market a while and contain the following curable deficiencies:

 

  • Old paint or poor paint colors
  • Bad decorating
  • Poor landscaping
  • Poor carpet/flooring
  • Clutter
  • Lacking a key room that can be economically added.  If homes typically have 2 full baths in the neighborhood and a home has one - can it be easily added?
  • Unfinished square footage that can be finished - in the basement or in the attic with hallway access via a stairway.  Attics that are finished but walk up off a bedroom may add square footage but kills the use of a room.
  • Maybe it just needs un updated kitchen

 

If the house has been on the market a while and you can negotiate a good price, your willingness to correct the "curable" deficiencies may mean increased appreciation when it's time to sell.

Just keep in mind you will never know how much you spent on your home until you have sold that home.  It's really very simple:

 (purchase price + improvements) - future sales price = appreciation.

So if you bought the house for $150,000 and put $40,000 in to it your base is $190,000.  If you sold that house for $230,000 you made $40,000.  You might have bought another house that was thousands less but in the end you made less.

We all want a deal but use your head and look for a good investment.

Comments (4)

Leslie Bloss, Bellevue Real Estate Professional
Bellevue, WA
Excellent Post Gary,  You put a lot into your message.
Oct 08, 2007 04:40 AM
Gary Duda
RE/MAX Action Real Estate - Richmond, VA
Thank you.  If only our clients would always listen.
Oct 08, 2007 04:50 AM
Laura Jecker
Prudential New Jersey Properties - Vernon, NJ
This is why they need a good realtor to educate them not just sell their home for them or sell them a home to them. It is all about the service.
Oct 08, 2007 07:55 AM
Gary Duda
RE/MAX Action Real Estate - Richmond, VA
You are so right.  So you work Sussex County?  I'm a Sparta High Grad.  1981.
Oct 08, 2007 07:58 AM