Five property flaws that can kill your home’s value

The summer months of the year are upon us and this is typically a hot (no pun intended) time of the year to sell. Many families would like to move during the summer so that when school rolls around they will be settled in. Everybody wants their home to sell for as much as possible so I thought I would take time to review issues I’ve seen in my 24 years of appraisal experience that can kill your home’s value.

property flaws that kill value

1. Over Improvement For The Neighborhood

A fallacy most people have is that of equating cost to value, meaning that when you spend $10,000 in home improvements that the value of your home goes up by $10,000. A common problem is homeowners over improving their home so that the money they spend on the features is not recouped when they sell their home, and that’s where value is killed. The further you move outside of what is the norm for your neighborhood the less value you get for your investment. If a 1,500 s.f. home is average for the area but you build an addition so that your home is 4,000 s.f. then you are over improving and the home’s value relative to the investment you put into it will be minimized.

2. Bad Floor Plan

Examples of bad floor plans that I have seen include pass through bedrooms and bedrooms without closets. A pass through bedroom is when you must “pass through” one room to get to a bedroom. This is what appraisers call functional obsolescence and it is has a negative impact on the appraisal value. Another problem that I see more in older homes is bedrooms with no closets. From an appraisal perspective these rooms cannot be classified as bedrooms. I have seen this occasionally in newer homes where there is a room being used as an office that has no closet. My advice to anyone building a home would be to add a closet, even if you are going to use the room for something other than a bedroom, then you will get a little more value for it being a bedroom.

3. Not Keeping Up With Home Maintenance

During an appraisal inspection appraisers take detailed notes on the condition of a home including such things as damaged siding, broken windows, condition of interior flooring, and plumbing and other fixtures. This information is used to compare the subject’s condition with that of the sales comparables. If this has not been maintained then this will negatively impact the value of the subject property.

4. Bad Workmanship

Have you tried to take on a home project that may have been a little over your head? If you do, and the quality of work is not up to that of the rest of the home, then this can kill your home’s value. You might save a little money by doing it yourself but this may bite you when you go to sell. This is seen a lot in basements where owners attempt a job that may be bigger than they thought. Another related issue I have seen is unpermitted improvements where no building permit was obtained. This can become an issue if electrical and plumbing work is done that typically has to be approved by a county building inspector. I once did an appraisal on a home where this occurred, and after the bank found out about it they would not do the loan because the county building inspector had not verified that the work was done to code.

5. Changing Your Home From What Is Typical Of The Area

I once did an appraisal in a neighborhood where most of the homes were fairly similar to one another with enough variety to make it attractive to potential buyers. Every home had a two car garage, however the owner of the home I was appraising had converted the garage to a large family room. While this did add extra square footage it also created two problems. It made the home larger than what was typical for the area and it took away a feature that was typical and expected for the neighborhood. This violated the “Theory of Conformity” which states that maximum value is achieved and maintained when there is reasonable conformity among properties. This home ended up appraising and selling for less than what the other homes did because buyers in this area wanted a garage more than they wanted extra square footage. This is more noticeable in a “cookie cutter” type neighborhood than it would have been in one where a variety of homes were present and diversity was accepted.

While there are other flaws that have a negative impact on value these are some I have seen recently. Leave me a comment below and let me know what features or property conditions turns you off when house shopping, I can’t wait to hear from  you.

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Comments

  1. Recently a neighbour in a group of four units decided to put some cheap looking solar lights on the exterior of their house. It cheapens the value of all four properties. The lights are inconsistent in operation as well as in appearance. Do you have an article on how cheap exterior lighting can diminish a property’s value? Thank you!

    • Jane, I’ve never ran into the types of lights you describe. To estimate the amount that a home’s value would be diminished by the appraisers must first come up with properties that have sold that had that feature and then compare it to properties that did not have the feature and see if there is a difference. One thing that came to mind when reading your comment was whether the lights conformed to possible guidelines imposed by a home owners association. Does your development have a HOA? You might want to look into that. Good luck!

  2. Tyler Davis says:

    Great info., Tom. I think these are also useful tips for what buyers should be looking for when touring properties. I’d love to have you do a guest post sometime for my blog!

    • Great point Tyler. If they avoid these types of issues when buying then they can maximize the resale value of their home. That sounds great about guest posting, I’d love to.

  3. Good insight, Tom. I always say, conform in real estate, but not in life. You are so right about how important conformity is. A house that stands out too much from the rest may not be a good thing for value.

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