With all the recent MN Housing Market activity here in the Minneapolis-St. Paul areas, it’s important as a first time homebuyer to keep a level head throughout your property search. Many first time buyers become emotional, and can overpay for houses after losing out on multiple offers. But the biggest mistake is to not consider the Resale Value of the home you are looking to purchase.
In most cases this occurs because the home-buyer is purchasing a primary residence for themselves, and simply tells themselves “I can live with that imperfection”. However, as a home-owner and eventual home-seller, you need to be aware of some factors that will affect the future value of your home.
This is probably the biggest and most important factor to consider when buying a home. Not only the broader picture such as the city/county that the house is located in, but also the small details like the position on the block and proximity to encumbrances such as railroad tracks or highways. Most people like to avoid living on major roads, and don’t like the “noise pollution” caused by highway traffic or schools, factories and airports. You also need to be conscious of the school district that the home is located in, since some buyers will have children and will be looking for a reputable school. The old cliché in Real Estate is “location, location, location” and that certainly pertains to the Resale Value of your future home. So even if you grew up next to a train yard and are ok with the noise, that doesn’t mean most potential buyers in the future will be as forgiving. In the end, this just means you’ll be limited the potential buyer list for your house.
If you’re buying a single-family home or townhouse with yard space, the lot size and dimensions are something to be aware of. City lots will usually be rectangular, and the most common placement of the house is slightly towards the front of the lot, allowing for a smaller front yard and larger backyard space. Most suburban lots will be irregularly-shaped, and could have a larger front or backyard depending on the location. Typically you’ll be better off if you conform to the neighborhood norm. This means if most houses on the block are located near the front of the lot, you’ll get a better selling price by finding a home in that neighborhood that is situated towards the front of the lot also. Some older homes in the city will be situated further back on the lot, which allows for a large front yard but barely any backyard space. Having a “unique lot” can sometimes work against you when trying to resell your property, because buyers who are looking in that area are usually looking for a certain type of house and land configuration.
In the same vein as the last point from above, you want to have a layout and style of home that is similar to others in the region. Buyers are looking for a particular style of house, and if the neighborhood is made up of mostly 2-story and 1-1/2 story homes you may have a harder time selling a bi-level split house or single-story property. It all goes back to the buyer’s expectations, and in some cases they won’t want to stick out from the crowd in regard to the style of homes in that area. This goes for the interior layout of the house as well. Having 3 or even 4 bedrooms on the same level is a big deal to some buyers. But if those 3 or 4 bedrooms are in the basement, they may not be as excited about the home. This plays into the style of the home, and what most people expect from certain layouts. And this is not a purely cosmetic issue either. A lot of houses will lose some of their functionality if the layout is too far removed from the norm. Having a kitchen and dining room near each other is often taken for granted. But if a previous owner decided to build an addition on the back of the house and convert the dining room into a bedroom, for example, this could greatly affect the “flow” of the house and be a turnoff for the new owners.
The term “cosmetic” is probably widely overused in the Real Estate Industry, but it does a good job of encompassing several details in and around the house. This typically would include things like paint colors, wood finishes, tile counters and floors, light fixtures, carpet and flooring types, and anything else that can be “easily changed” in the home. While some of these items can be more “easily” (or cheaply) changed than others, many home-owners overlook these specific cosmetic details when they actual live in the property as their primary residence. However they become extremely important when reselling your home. Repainting to “neutral colors” and swapping out light fixtures can add a nice updated look to a house without spending too much money. On the other hand, if you spend thousands of dollars installing a unique tile floor in the living room but most buyers are looking for carpet in the living room in that area, you may have lost money on a negative-equity update. A lot of buyers say they are ok with taking on cosmetic updates after they move in, but they do factor these items in when making an offer on a house. And that could mean a lower price if there are costly updates and upgrades that they feel need to be made.
This certainly doesn’t include all the elements that go into the Resale Value of your home, but you should at least have a good idea of some of the major factors to be aware of when looking at homes for yourself. I realize that selling your house may be the last thing on your mind when searching, but as the famous author Stephen Covey once said: “Begin with the end in mind”. Make sure you are an educated first time home-buyer and avoid some of the mistakes that others have made before you!
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