Be honest… is your home in need of some repairs? Because if you ever want or need to sell your property, the honest answer to that question may make the difference between sold and stuck.
Appraisers and home inspectors sometimes use the term “deferred maintenance,” which Wikipedia defines as: “the practice of postponing maintenance activities such as repairs on… real property… in order to save costs, meet budget funding levels, or realign available budget monies.”
I love it that definition. It’s so gracious! Let’s break it down…
Referring to deferred maintenance as a “practice” makes procrastination sound like an esteemed vocation, like the way neurosurgeons “practice” medicine and attorneys “practice” law.
And that last line, the one about saving costs, meeting budget funds and realigning monies? It makes being a tightwad homeowner sound strategic, like a Chief Financial Officer successfully managing funds for a Fortune 500 company.
But the reality is that “deferred maintenance” is the polar opposite of “preventative maintenance.” The “practice” of postponing home maintenance and repairs (we’ll talk about cosmetic updates in another article) in order to save time, money and effort today can cost homeowners big time in the future, whether they plan to sell or not.
It’s critical to realize that in most cases a home must be sold twice: first to the prospective buyer, then to an appraiser.
Appraisal— an expert estimate of value—is foundational to the mortgage loans that most buyers depend on. Savvy cash buyers also hire appraisers to ensure that they’re not spending too much for a property. Heck, even if you don’t plan to sell your home in the near future, appraisals are required in order to refinance existing mortgage loans.
Appraisers are a little like foster care caseworkers: both are trained to look for signs of neglect in a home. An appraiser will notice, before even getting out of the car, if your driveway has so many cracks and potholes that it looks like a satellite map of the Lakes Region. They’ll take note that the front lawn is choked with weeds and dead bushes. They’ll spot things like the unrepaired crack in the kitchen window, torn, stained carpeting in the living room, and the chipped paint on the hallway walls in between.
These and other signs of deferred maintenance can cause the appraiser to lower the value of your home, and therefore how much a lender will lend for it, or a cash buyer will pay for it.
Accordingly, a property with lots of obvious deferred maintenance can be hard to sell unless you discount the price substantially. Even with an aggressive discount, it may be difficult to sell if there’s an abundant inventory of nearby homes that don’t require as much work.
In order to sell your home you must think like a buyer. Buyers instinctively tend to overestimate how much it will cost to fix the problems noted during the appraisal and home inspection process. And evident neglect inevitably makes buyers anxious about the possibility of other problems that they can’t see. Is it merely the tip of the iceberg?
Buyers will consider the time and hassle of getting the work done, and they’ll worry about finding the cash or credit to pay for it immediately subsequent to parting with a hefty down payment and closing costs. This is especially true in today’s market, in which buyers are buffeted by both rising home prices and rising interest rates.
Think of it like this… if both cost the same, would you rather spend the night at the Bates Motel or the Courtyard by Marriot? Be honest… even if you had a Groupon discount for the Bates Motel (and Norman was away on vacation with his mother), would you rather stay there, or spend a little more to stay at the sparkling Marriott just down the road?
This example considers spending a small amount to reside in a place for a short time. Home buyers, on the other hand, are going to spend hundreds of thousands of dollars to reside in a place for a long time.
Today’s savvy buyers do not want to pay for the privilege of inheriting the present homeowner’s problems. Conversely, pride of ownership is what will get you the biggest reward in the long run.
Home maintenance is an integral part of homeownership. Sellers who invest a little in preventative maintenance along the way build more home equity than those who don’t. Sellers with well-maintained homes usually don’t have to face large deferred maintenance penalties when they sell.
So if your home is trending more toward the Bates Motel than the clean, well-maintained Courtyard by Marriott, start proactively tackling any defects that might impede the sale or refinancing of your home.
You can’t change your home’s location, or help it if your home is the smallest on the block. But you can make a list and make it a “practice” to proactively address deferred repairs to your home and its systems, which will preserve or boost your home’s appraised value and make it much easier to sell when the time is right.
Please feel free to visit www.rocherealty.com to learn more about the Lakes Region and its real estate market.