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Improving Resale Value
Improving Resale Value
Buying real estate will likely be one of the most, if not the most important purchases in your life. There are many factors that will influence you on where, when, why, and what type of property you may potentially buy. Whether you’re buying property strictly for personal (i.e. house to live in) or investment reasons, one of the most important factors should always consider is the resale value of the property.
Even if your primary reason to buy a property is for living purposes, you should not sell yourself short on resale value. Most homebuyers expect to buy a bigger and better home someday in the future so resale value is an important factor in decision-making. After all, you’ll most likely use the proceeds from selling one home to buy the next one.
But how do you ascertain what a property’s resale value will be in the future? You can almost compare it to buying stocks. How do you really know which ones will increase most in value over time? As with any investment, there are risks involved in your decision, but similar to stocks, there are things you can look for that may be indicative of whether it is a wise purchase. In the world of finance and trading, “blue-chip” stocks are considered excellent investments for future profits because the stocks are derived from companies that have been successful for a lengthy period of time. In the world of real estate, resale value of properties is dependent on two main factors: location and condition of the property. While no one can guarantee that your home will grow in value, there are steps you can take in consideration of these two factors that may maximize your potential gain.
If you ask any real estate professional they will generally tell you that location is the most important factor of resale value. "Location, location, location," is a common and almost clichéd phrase in real estate literature. Your agent may even throw it at you when you ask for advice about buying a home. However, what does "location, location, location," actually mean? Why repeat it three times?
Location is mostly emphasized to stress its importance to the resale value of your property. Logically, resale value is vastly improved if you buy property in a location that appeals to the largest number of potential future property buyers. This is why real estate in large cities generally has more value than real estate in small cities. The greater population and growth in larger cities creates more demand for real estate, thus significantly appreciating real estate there.
Mostly, "location" is repeated to emphasize that it is extremely important to the resale value of your home. The idea is to buy a house that will appeal to the largest number of potential future homebuyers. A careful choice of location can minimize potential negative influences on future resale value, and maximize positive influences. Even within the same city, different neighborhoods can create differences in value. For example, what would be a wiser choice: a large old house in an old neighborhood close to industrial areas OR a significantly smaller newer house (at the same price) in a new residential neighborhood? If you have a large family, then functionally the large old house would be a better choice. But if you were considering resale value, then you would expect that the new house in a residential area would have more resale appeal.
Focusing on resale value requires you to make several different location choices. The first choice you have to make is which community you want your property to be? At the very least, you should narrow your choice down to just a few local communities. Once you have selected potential villages, towns, or cities, you will need to pay attention to a few factors that will further help you maximize your future potential resale value.
Economic Stability - When choosing a community for your purchase, it makes the most sense to buy in a community with a long history of a viable and stable economy. A good economy will always bring growth to that particular area, and with growth comes an influx of people migrating to the area looking for better economic opportunities, and with more people comes greater demand for property, and with greater demand comes greater appreciation of real estate. It is economic growth and stability that makes larger cities more appealing than smaller cities, and smaller cities more appealing than rural areas, and this appeal is reflected in the value of real estate. In addition to residential neighborhoods, there should be a healthy mixture of commercial and business districts. These not only provide jobs to the local residents, but also add an income source that the city can use to upgrade and maintain roads and city services. When you’re buying property in a particular community, ask yourself, in five, ten, or even fifteen years from now – when you want to sell your home – will this community still be a desirable place to live?
The Local Neighborhood – Dropping down a scale into the microcosm of a particular community, resale value is also influenced by a particular neighborhood – especially in big cities. We all know that most communities have “a rich part of town” or “the wrong side of the tracks”. Obviously a better neighborhood will fetch more resale value than a run-down decrepit neighborhood. What makes that so? The first is quality of housing, which may cater to producing more up-scale neighborhoods. Also, the property’s location on a particular street can impact the resale value. It is undesirable if the property backs to busy streets. If possible, choose property that is as close to the interior of the tract as possible - avoid corners and intersections. Another factor is security. Obviously a safe neighborhood will be more desirable compared to one with rampant crime. Another important factor is proximity to amenities. You want to be sure all essential shops and services are located nearby. This would include grocery stores, gas stations, dry cleaners, and convenience stores. There should also be fairly convenient access to local highways, major traffic routes, and mass transit. A good indication of a good neighborhood is to go check out the local shopping center. If the shopping center is in decline, than it may also mean that the neighborhood is in decline. This can be confirmed if you’re seeing many storefronts that are vacant or available for lease. If they are, you might want to consider moving your purchase a few blocks. Another indication of whether a neighborhood is good is to take a drive and see how well the neighborhood is maintained. You have probably heard of "pride of ownership" when referring to an individual home or an automobile. Look to live in a neighborhood that demonstrates this pride.
Local Government Services - Services provided by local government should be investigated when deciding on a community to buy property. One example would be the local library system. Are there several library branches? Local crime statistics in comparison to the national average and other local communities will give you a good idea at hoe effective the local police force is. Is the police force effective and responsive to community needs? Are fire stations located strategically around the community so that they also can respond quickly in an emergency? A good indication of the quality of government services is to see how well maintained public parks and facilities are. Well-maintained parks that are a source of community pride usually mean that citizens are satisfied with their municipal services. Another area of inquiry may be to find out whether the community sponsor youth sports and have well maintained athletic facilities. Do they sponsor community events, such as an annual parade? Are there activities available for children, teenagers and senior citizens?
Schools - Even if you do not have school-age children and do not intend to have children, you must pay attention to the local school system. That is because when you sell the property, many of your potential buyers will have concerns of this nature. It is well-established fact that being in close proximity to an excellent school can boost the value of your property. You can find out whether a school is highly regarded by talking to local citizens and looking in the local newspapers. You can also take a drive around to look at the local schools. If you see auxiliary trailers (portables) outside, that are usually a sign that the school is overcrowded – not the best quality you want in a school. Are there enough schools to support the local population? If not, are there plans to build new schools? Call up the local school district and see if elementary aged children always attend the school closest to their home. You should also check to see how local students score on the standardized tests. There may also be school reports available for free on the Internet.
Property Taxes - Property taxes may vary from area to area, city to city, and even neighborhood to neighborhood. Taxes always causes a collective groan among people, and so property taxes (or amount thereof) can sometimes affect whether potential homebuyers view a community as a desirable place to live. Many prospective buyers are understandably deterred by high property taxes, although this many not always be well justified. Although taxes are a pain in the butt, it often means that there are newer and more modern schools, well-maintained roads, and exceptional municipal services. In addition, you may often find that the "cost per square foot" of homes is lower in communities that have higher property taxes - meaning you can buy a bigger house for less money. Since the mortgage payment may be lower, but the property taxes a bit higher, the monthly housing costs may be approximately the same when compared to another house that has low property taxes but a higher mortgage. If resale value is important to you, make property taxes a consideration when choosing the location of your new home.
As much as location is important in resale value, the condition of the property will ultimately have as much sway. After all, like they say in business – a good product will sell itself. As an investment, you want to have a property, whether it is a house, condominium, townhouse, or cottage, to be in tip-top condition. Equally important is the property’s potential. That being said, you may find yourself a real deal by purchasing a ‘fixer-upper’ and considerably raising its value with a little repair and renovation. I’ve seen many stunning property transformation with some grunt work. But it sure pays of especially if you’re considering selling the property a few years down the line.
Resale value is reflected by both the interior and exterior of the property, so it is important to take both into consideration before investing. Don’t get too caught up in simple things that can be easily fixed such as leaky pipes, paint jobs, ghastly cabinet doorknobs, etc. But rather pay attention to the things that you can’t change, or will take a significant amount of money to change (renovation) – its intangible qualities.
View – Very few people crave a piece of property that looks out to an unattractive view. That is the reason why properties with a pleasant view will always sell out a premium. Surroundings invariably contribute to a person’s state of mind, so it’s no wonder why the quality of view is so important to resale value. Just think about it – you’ve probably found that you feel more alive and invigorated when you have a view of stunning natural beauty like a beachfront or a mountain view. You just have to look at the example of a condominium building. You’ll find that condos that have an open view will go for considerably more money than units that look out onto a brick wall. As a rule of thumb, properties with a view of the horizon are more desirable and will often have considerable more value. However, it should be noted that if a view is important to you, then you should invest in a property with such an excellent view for your own pleasure first and foremost since future buyers may not share a similar view of views. Popular views include:
- Beach views
- Ocean views
- Lake views
- Harbor views
- Views of a national or state monument
- Views of a famous attraction (i.e. the Brooklyn Bridge)
- Mountain views
- Views of the countryside
- Views overlooking the city
- Views of the horizon
Lot and Landscaping - Even though most real estate value is usually concentrated in the actual building structure, the lot is important too. In terms of resale value, a home’s lot and landscape are very important since it contributes to the property’s “curb appeal”. Curb appeal refers to how a home exterior looks from a distance. Homeowners who are trying to sell their homes should keep in mind that the outside of the house will make the first impression on potential buyers so the lawn and garden should be well groomed before the house is put up for sale. It is well known that over-landscaped properties will sell for much more than one that isn’t. With that in mind, many people will often prefer buying property whose landscape is slightly tattered since it can be remedied and repaired with some time investment and dollars. Potential buyers who see homes with high-maintenance gardens might be put off by the amount of work that is necessary to maintain such a landscape, particularly with people who already have horrendously busy schedules. Some tips in improving resale value by improving the quality of lot and landscaping of your property include:
- Laying sod and adding some bushes and trees for aesthetic appeal.
- Fill a barren garden with flowers, and also add some potted plants on the front porch or steps. This creates a welcoming ambience, especially for prospective buyers.
- Landscape appropriately if your property’s yard is not level or has an irregular plot shape. Properties that are level and have a distinct square or rectangular lot shape are more desirable from a resale perspective.
- Don’t do anything to make your lot look too gaudy. The most common example is putting in a swimming pool that takes up the entire back yard.
- Inspect the house’s exterior and check to see if there are any spots that needs a fresh coat of paint – notably the front door, siding, and window shutters.
House Size – This is pretty safe explanatory. It makes sense that a larger property will have greater resale value compared to a smaller property, if they are both located in a similar area but there are some complexities to this statement. In each residential neighborhood, houses will vary in size and rooms, but they should not be too different from one another. When determining market value, the homes nearest to yours are most important. If most of the nearby houses are smaller than your house, they can act as a drag on appreciation. Alternatively, if you buy a small or medium house for the neighborhood, the larger homes can help pull up your value. With that in mind, it is important for you to weigh your “wants” and “needs” in your decision making process. Buying what you need in a more affluent neighborhood may provide more financial reward than getting what you want in a less desirable neighborhood.
Another time-honored tradition that many homeowners take in order to increase their resale value is renovation. The objective of renovation is often to increase the size of the home by putting in additional rooms. Although increasing the overall size of your house is not that essential, it can be a greatly significant move if you focus on renovating and remodeling your kitchen and bathrooms. A spacious new kitchen is highly desirable, and can be the highlight of any house. The kitchen is arguably the most important room in the house. Adding or revamping a bathroom can also be extremely practical. These days having only one bathroom can be a turn-off for prospective buyers. Adding an ensuite bathroom to a master bedroom, or a bathroom to the floor in your house where one doesn’t currently exist is always a sensible option.
Bedrooms and Bathrooms – Three and four bedroom houses have become standard these days, and anything less will have poor resale value, unless it is in a highly desirable location. Five bedrooms are nice, but the extra costs involved in obtaining a house of that size is usually out of range for many people. This goes for bathrooms as well. It is commonly standard now to have at least two bathrooms in a house. Anything less may be adverse, particularly from a functional standpoint especially if there is a family involved or if you expect frequent visitors. Adding an extra bedroom and/or bathroom can be done if you renovate. But be sure you weigh both pros and cons since renovation will be a costly venture, although it will significantly improve your property’s resale value.
Closets, Garages and Laundry - Closets, garages and laundry are features of the house that are often overlooked but make a massive impact in terms of comfort and convenience. There are certain standards that are expected by homebuyers when it comes to closets, garages and laundry rooms. In regards to closets, large spacious closets are highly desirable in a house. Almost every room and each hallway in the house should have a closet, with some large walk-in closets being preferable. Large closets become even more important if your house lacks a laundry room. That way, a stackable washer and dryer can then be placed in a closet. Besides the size of a closet, its condition is also important for presentation purposes (if reselling). Be sure that the door can open and close tightly and/or do not fall out of their track. Tattered closets will give an impression of a poorly maintained house. In regards to the garage, the larger the better. These days, most folks look for two-car garages, and some will even opt for three-car, but unlike closet space, a spacious garage is a luxury that people can go without. You should be sure that the garage is properly insulated and well maintained. Inspect the electrical systems and the garage door. In regards to laundry, obviously a laundry room would be ideal and most new homes usually will have them. The laundry facilities should be located somewhere convenient on the main floor of the house or in the basement. It is also a good idea to replace old washers and dryers to maximize resale value. Also, many people will pay extra for updated appliances and these new appliances can indicated to a potential buyer the amount of time and money that has been put into a home.
The Kitchen – The kitchen is arguably the most important room in the house, and also the most important room that influences resale value. It makes sense since the kitchen is where many families spend the bulk of their time together. Also food preparation and cooking is a critically important chore, so you want a comfortable spacious environment to work in and not cramped, crowded conditions. If you do have a small kitchen, that you can expect to wait a long time if your putting your house on sale. This can be improved by remodeling. Kitchen remodeling can result in the biggest payoffs when it comes to resale value so before you address any other remodeling and renovation concerns in the house, be sure to take care of the kitchen. Major kitchen remodeling can cost anywhere from $10,000 to $40,000 so it’s important to explore all of your renovating options and concentrate on the ones that usually pay off in terms of resale value.
- Most people look for kitchens to be close to both the family room and the dining room in the house.
- The ideal kitchen also has a door leading to the backyard for easy barbequing and garden party accessibility and is relatively easy to get to from the front door of the house.
- New major appliances (fridge and stove) not only look nice, they also attract potential buyers and improve resale value because there are usually warranties attached to these products so that if they break down the cost to the new owner is typically covered.
- Inspect and repair damaged flooring and countertops, cupboards and drawers, and any faulty plumbing.