How to Evaluate Houses Like a Real Estate Pro
We want to help you learn how to evaluate houses like a real estate pro and have put together our top five tips!
Most people don’t buy houses very often. The average American home is sold every 13.3 years, which means the average homeowner only owns a few houses in a lifetime. House purchases are also the most expensive complicated transactions most people become involved in. It’s an intimidating process, made even harder because it happens so rarely.
Professionals who regularly evaluate real estate for sale tend to look at houses differently than typical home buyers. Some things which most aspiring purchasers find problematic are no concern at all for a pro. However, some seemingly small details can be deal-breakers for investors. While your goals as a homeowner may be different than what some investors are seeking, knowing how the pros consider a house listing may give you a helpful new perspective on what matters when house shopping. Here are a few tips on how to evaluate houses like a real estate pro:
Shop for Value.
The residential real estate business thrives on the same marketing methods used to sell clothing, cars, and jewelry. Houses are hyped and polished to maximize their apparent value in the MLS listing, justifying the highest possible price. Smart sellers do minor upgrades right before listing, like new flooring or mini remodels to optimize the house’s appeal to new owners. Inexperienced buyers do not accurately consider the actual cost of these upgrades compared to the property’s listing price, paying more than the cost of the upgrade. This is great if you’re selling, but smart buyers look for the sellers who didn’t do these things – sellers who missed their opportunity to maximize the property’s market value. A real estate investor will rarely purchase a property that has just been flipped by a seller because they know they can do that work themselves and obtain even more value for less money. To recap, tip one is to look for properties others won’t find as attractive.
Looks are Often Cheap.
The visible surfaces and fixtures in a typical house account for less than half the total cost of construction. A house can be refinished inside and out for about a third of the cost of building the same house from scratch. As long as you can work with the existing structure and avoid major pitfalls, it is usually possible to make an aging midrange home into a beautifully stylish upscale modern living space for less money than most people expect. Real estate professionals view problematic houses as opportunities for improvements and upgrades. The less ideal a house’s appearance is, the more value can be gained by improving it yourself. The best value is usually found in a house that is overdue for renovation or has some other obvious cosmetic problem that makes it unappealing on the surface. Most buyers can’t see past these things to recognize the property’s potential, so fewer buyers are willing to consider it, driving the price down. Tip 2: Don’t judge a book by its cover.
Details are Everything.
If real estate professionals don’t care about superficial appearance, then what are they looking for? A solid foundation – literally and metaphorically. People who buy houses regularly know that the real serious problems are often not obvious. Structural failures, electrical and plumbing disasters, water damage, and legal issues are major deal-breakers. Whether it’s a collapsed sewer line, a neighbor with an old driveway crossing the backyard, or an unpermitted addition the County Assessor doesn’t know about yet, these sorts of problems are rarely worth dealing with. Why? Because other buyers don’t realize how expensive and difficult these things are to fix, so they are willing to pay more than they should for the house. A house can look great inside and out, yet still be a terrible money pit that you’ll regret. Professionals look past the overall appearance and focus on each specific detail of the inspection reports and title report to make a rational decision. Tip 3: Let someone else buy the real problem houses.
Pay for Information.
A home inspection costs about a tenth of a percent of the price of a house. Add in an electrician’s inspection, a contractor’s walk-through to discuss renovation ideas, and a plumber with a sewer camera, and you may reach $1500 in inspection costs. These valuable consultants will help you find the hidden problems you don’t know to look for – and none of those problems can be fixed for anywhere close to the cost of these inspections. The last thing you want is to save a few hundred dollars on inspections and end up in a house with severe termite damage. The cost of good advice and careful opinions from multiple professionals is entirely worthwhile. Tip 4: Don’t guess, knowing about problems will save you time and money.
Location is Unfixable.
Unlike bad landscaping or ugly flooring, a location problem can never be fixed. Professionals find value in a home by looking for fixable problems others overestimate and avoiding unfixable problems others underestimate. A junkyard next door or a high voltage transmission line along the street is not fixable. With few exceptions, professionals will avoid any property with a location defect like this because it makes the property harder to sell later. Even if you pay a low price, the difficulty of finding a buyer later may not justify the deal. There are other houses out there without unfixable location defects, so smart buyers usually choose to skip the bad ones. Tip 5: Location, Location, Location.
Recap: How to Evaluate Houses like a Real Estate Pro
The finer points of evaluating houses for sale can fill entire bookshelves, but these basic points may help you focus on how to evaluate houses like a real estate pro. Working with a good real estate agent is important, we can help you navigate the pitfalls and negotiate the best deal and resolutions to common problems. So when looking for your dream home remember:
- Look for properties others won’t find attractive
- Don’t judge a book by its cover.
- Let someone else buy the real problem houses.
- Don’t guess, knowing about problems will save you time and money.
- Location, Location, Location.
Thanks for reading!
Start your search for your dream home today.