The “Red Flags” Of Real Estate

The Unforeseen Flaws Of Real Estate

Whether you are buying or selling a home, it is imperative to understand what influences price in the marketplace. Here are some of the most important “red flags” to be mindful of when you buy or sell. The term “red flags” does not mean do not buy this property, nor does it suggest, I cannot sell this property. What it does mean is stop and consider the impact to you if you do move forward. You need to understand the affect flaws have on the value of that particular home.

What Am I To Look For If They Are Unforeseen?

Years of observations and experience have demonstrated that these flaws are real issues in the minds of a segment of buyers coming into the marketplace. When priced accordingly, most all property, regardless of its limitations, can be a good value. Below is a list of “red flags” or conditions that will influence the price a buyer will pay for a house in any marketplace. This list describes some of the issues to look for when buying or selling a home. While these are the significant factors, there may be other issues that can affect the sale or purchase price of a particular house.

When buying any house with red flag issues, realize that the same red flags that may allow you to buy a home for a “great price” will still be there when you sell the house in the future.

The Common “Red Flags”

1. Future of the Area – Are home values increasing or decreasing in the general vicinity? If values are rising, you may have more resale potential. Just be sure the neighborhood information you receive is accurate and current.

2. Local School System – Although you may not have school-age children, investigate the schools in the neighborhood before evaluating a home’s value. The school’s reputation may affect demand for your home in the future.

3. Economic/Other Factors – Local or neighborhood economic factors, like high property taxes, labor strikes, plant layoffs, etcetera, can affect a home’s value.

4. New Subdivision – Before buying a home in a new sub­division, ask the developer to see specific plans for the development of the remaining lots. Understand that developers sometimes have external factors that force them to sell, change, or abandon plans for the subdivision’s development. Are there restrictive covenants? If so, are they recorded at the courthouse? Always obtain and keep a copy of them.

5. Vacant Land and Oversize Lots – Vacant land presents the risk of the unknown. Find out who owns the adjacent vacant property and what their plans are for it. Remember, regardless of the owner’s intent, that intent and zoning can change with time and circumstances.  

6. Adjacent Property Features – The property next to, behind, and across the street may have a bearing on its future sale potential. Ask yourself if the price is consistent with neighborhood variables like condition, size, zoning compatibility, junk in the yard, etcetera.

7. Floor Plans and Amenities – Consider the layout and size of rooms when evaluating a home. Does a two-bedroom house fit into an area of mostly three-bedroom homes? Be cautious when a floor plan requires one to enter a bedroom only through another bedroom. Houses lacking a garage in an area where garages are standard should be of concern. Unusual floor plans and over sized rooms may not work efficiently for some families. Further, missing amenities, such as no half bath in high traffic areas when most other homes in the area have them, can sometimes affect marketability.

8. Over Investing – Owning the most expensive home in a neighborhood is not necessarily the best move because the surrounding homes may not be able to support an above-average price range. Homes with luxurious and extravagant decor or amenities or homes that are larger than the other homes may limit the value of the investment.

9. Flooding – Always check FEMA maps for flooding. Problems such as re-occurrences of water damage, inconvenience, and personal danger, can limit marketability.

10. Additions – Older homes with new additions or remodeling may not cause concern. Still, they should encourage questions and research about the project, about floor plans, and permitting. Incomplete construction or incomplete renovation can affect the value of a property. Considered it when making a purchasing decision.

11. Poor Construction and Condition – Keep in mind that cleanliness, upkeep, and outward appearance all affect the value of a home. Check the quality of building materials and quality like miter joints, door frames, mop boards, consistency in plastering, woodwork, and painting. Also, check significant parts like the roof, off-brand HVAC systems, support beams, and basement leakage. Also, look everywhere for evidence of previous considerable water damage.

12. Extended Market Exposure – Be aware and take into consideration the length of time the home has been for sale. Why are people not looking at it? Or if they are, what is keeping them from buying it? Is it just price? When you suspect a home has been on the market for a long time, ask the agent for a copy of the property’s listing history for the past five years. A neighbor can also be a good source of information.

13. Negative Environmental Concerns and Hazards – Groundwater contamination, leaking underground storage tanks, asbestos, urea-formaldehyde foam, radon gas, waste disposal sites, and even busy streets are generally a matter of public information in neighborhoods. Ask your representative for help in determining the degree of concern and where you can find more information on the subject.

OK, So Now What?

To the potential buyer, I say to weigh the factors above carefully if one or more are present in the home: the more “red flags” present, the more significant effect on the value. There is no such thing as the “perfect” home. Remember, the seller may have already considered the “red flags” in determining the asking price.

To the seller, I would say, if your home has a “red flag” be alert so as not to overprice your home. Remember that there is a buyer for every home. I have observed that objections seem to melt away as sellers reduce the price. The point is that money cures all deficiencies. The real trick is not to get excited and overreact.

This list of “red flags” is not all-inclusive. Yet, potential buyers and sellers can utilize it to raise awareness of conditions that affect a home’s value. This list creates awareness and points a buyer in the right direction. It calls attention and says, be mindful of the items explained on the list.