Recognizing Value

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Buyer's Class

Getting ready to buy a home ... Recognizing Value

Buyer Overview
Getting Ready to Buy
Things NOT to Do
Is Buying a Good Idea?
Advantages of Home Ownership.
How to Recognize Value
How to Make An Offer
Are You a SMART Buyer?

There are many things that should be considered when buying a home. Since most homebuyers expect to buy a bigger and better home someday in the future, resale value is an important factor in decision-making. You use the proceeds from selling one home to buy the next one.

While no one can guarantee that your home will grow in value, there are steps you can take that maximize your potential gain.

"Location, location, location," is a common and almost hackneyed 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?

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.

Focusing on resale value requires you to make several different "location" choices. The first choice you have to make is "which community?" At the very least, you should narrow your choice down to just a few local communities.

Community ...

Before you can actually pick out a house, you need to choose what cities or communities you would like to live in. There are many factors you should pay attention to, not only for yourself, but because you intend to eventually sell the home to someone else. Carefully choosing your community is the first step in "location, location, location" and can help maximize your future potential resale value.

When choosing a community for your purchase, it makes the most sense to buy in a city with a viable and stable economy. Five, ten, or even fifteen years from now – when you want to sell your home – you can have a reasonable expectation that your community will still be a desirable place to live.

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.

In fact, you should take a drive and see how well the community is maintained. You have probably heard of "pride of ownership" when referring to an individual home or an automobile. Look to live in a city that demonstrates community pride, as well.

In addition to community pride, check on the services provided by local government. One example would be the local library system. Are there several library branches? Do they stock a good selection of books, including recent best sellers?

You should also look into local crime statistics and see how the city compares to the national average and other local communities. 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?

Another area of inquiry is community services. Does the city sponsor youth sports and have well maintained athletic facilities and parks? 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.

You will want to know if the local schools are overcrowded. Take a drive around and see if there are auxiliary trailers outside the local schools. Call up the local school district and see if elementary aged children always attend the school closest to their home. If not, ask why. Are there enough schools to support the local population? If not, are there plans to build new schools? How will building new schools affect local property taxes?

You should also check to see how local students score on the standardized tests. You can ask your agent about these things, but you should also get the local phone numbers so you can ask yourself.

There are also school reports available for free on the Internet.

Property Taxes...

Property taxes may be higher in one town than another nearby city. This can sometimes affect whether potential homebuyers view a community as a desirable place to live. Often, they will choose not to purchase in a community with higher taxes, though this decision is not always justified. Higher property taxes often mean newer and more modern schools, well-maintained roads, and bountiful community services.

In addition, you will often find that the "cost per square foot" of homes is lower in cities that have higher property taxes. This means 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 in each city.

However, many agents and prospective buyers have a bias against a community with higher property taxes. If resale value is important to you, make property taxes a consideration when choosing the location of your new home.

Neighborhood ...

The term "local neighborhood" refers to an area wide enough to cover your residential area plus nearby stores such as the "neighborhood grocery store."

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.

One thing you should look out for, though. If your local shopping center is in decline, it could be an indicator that the local neighborhood is in decline, too. Check to see if a lot of storefronts in your local center are vacant or available for lease. If they are, you might want to consider moving your purchase a few blocks.

Within your residential neighborhood, you want the nearby properties to be fairly homogeneous – alike in style, size, and structure. This does not mean they should all be exactly the same, either. Owners will put their own unique stamp on their homes.

Your future home should be located as close to the center of this neighborhood as possible. Avoid the edges. In short, you do not want your property to back or side to a busy street. If you are buying a single family home, you do not want your property to border a condominium, apartment complex, business, school, or even a park.

You also want to make sure the street you buy on is not used as a shortcut between two busier streets. Nor do you want to buy a house on a corner lot, as those tend to attract more street traffic and are not as safe for children. Buy in the middle of the block or on a cul de sac.

Like we said before, you want your home to be neatly tucked away in the center of your residential neighborhood.

A home with a VIEW...

Homes with a pleasant view of the horizon often sell at a premium above similar homes without the view. However, if a view is important to you, buy it mostly for your own pleasure and not as an investment. Though you may place a considerable dollar value on the view, future buyers may not be so like-minded. It may take you longer to find a buyer when it comes time to resell the house. Or you may end up dropping your price to more nearly match other sales prices in the neighborhood.

In short, if you are buying a house with a view, try to pay as little extra as possible. Otherwise, you might not get your money back.

Landscaping...

Even though most real estate value is usually concentrated in the building, the lot is important, too. Obviously, it should be as level as possible. Assuming the property is in a typical neighborhood, the lot should be rectangular – no odd shaped lots or oddly situated lots.

Yard sizes are smaller in modern homes than in older homes, but there should still be a decently sized front and back yard. Do not buy a house where the entire back yard is taken up by a swimming pool, for example.

Do not purchase an over-landscaped property, either. You would normally pay a premium for that, which you may not be able to recover when you sell. You will get your best value if the house is moderately landscaped or under-landscaped for the area. You can always improve the landscaping during your ownership by improving the grass and adding bushes and trees. Just do not spend too much.

House size...

In each residential neighborhood, houses will vary in size and rooms, but they should not be too different. If resale value is an important consideration, you should not buy the largest model in the neighborhood. 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.

On the other hand, if you buy a small or medium house for the neighborhood, the larger homes can help pull up your value. This is one of those times where determining your "wants" versus your "needs" can be extremely important. Buying what you need in a more prestigious neighborhood may provide more financial reward than getting what you want in a less desirable neighborhood.

Bedrooms and Bathrooms ...

Three and four bedroom houses are the most popular among homebuyers, so if you can stick in that range you will have more potential buyers when it comes time to resell. Five is okay, too, as long as you do not have to pay too much extra for the additional bedroom.

There should always be at least two bathrooms in a house, preferably at least two and a half. One bathroom with a place to wash up for day-to-day visitors, one for the master bedroom, and at least one to be shared by the other bedrooms.

Closets, Garages and Laundry ...

Walk-in closets are extremely desirable for the master bedroom. For the rest of the house, just be sure there is plenty of closet space. Don’t forget space for linens and towels.

Garages add to the resale value and you should always make sure to get at least a two-car garage. Lately, three-car garages have become desirable in some areas of the country. A converted garage is generally an undesirable feature that lowers property value even though it may provide more "living" square footage.

The laundry facilities should be located somewhere convenient on the main floor of the house, but not in a place it will create an eyesore. Think about whether you want to walk up and down stairs when carrying loads of laundry.

Kitchen...

Family activity centers around the kitchen, so this is the most important room of the house. Larger kitchens are better, and they should be provided with modern appliances. Obviously, the dining room and breakfast nook should be located adjacent to the kitchen. In newer houses, the family room should also be extremely close to the kitchen.

There should be easy access to the back yard, as there will be occasions for barbecues and outdoor entertaining. In addition, it should be a short trek between the garage to the kitchen so hauling groceries in from the car does not become a horrendous chore.

Fireplaces...

The only room where you absolutely have to have a fireplace is the family room. A fireplace in the living room may be nice, but you pay extra for it and will probably rarely use it. At best, it serves as a focal point of the living room, but does not add much in real value.

Swimming Pools ...

Swimming pools do not provide as much added value as they once did. Safety issues about families with younger children have become more publicized than in the past, so families with small children tend to avoid homes with pools. As a result, having a pool may actually reduce the number of potential homebuyers when you try to resell the home.

Buy a home with a pool for your own enjoyment, not as an investment.

Since we are on the subject of swimming pools, here is a word of advice: If you want a pool, buy a home that already has a pool. Paying a contractor to install one for you is like throwing money away. You will never get a dollar-for-dollar return on your investment

Things NOT to Do • A good idea? • Don't Pay RENT! • Recognizing Value • The Offer • SMART Buyer Guides