Mistake _8. Buying a Property That’s Hard to Sell

This is one the biggest mistakes homebuyers make. It happens so often that you wonder what buyers are thinking when they sign the purchase agreement. The most common reason given by these homebuyers for why they bought a certain property is that it was such a good deal. It was the biggest house they could find for the price.
Typical hard-to-sell properties are:

• Homes that back up to railroad tracks, freeways, industrial areas, frontage roads, etc.
• Homes that have been overimproved for the area. A typical example would be a 900-square-foot bungalow with an addition on the back or side. Sometimes it’s a well-planned addition that blends in; other times it’s a tacky add-on. Neighborhoods that have become run down with a high percentage of rentals or foreclosed properties.
• Homes that stray too far from the architectural mainstream of what people are buying. Typical examples are round homes, earth-covered homes, and conversions from other buildings, such as barns, silos, and sheds. They can be quaint and even be featured in a home magazine, but selling and getting back the money invested in them is not always easy. Properties that have lot or landscaping problems. Examples are a steep slope for a backyard or a gully; little or no backyard; or no privacy from neighbors. The way a house sits on a lot can also affect value. And of course the most common problem is exterior and interior colors that don’t complement or fit the house. You may love bright blue, but if you paint your house that color, you’ve just reduced its value considerably.

One instance of a homeowner making a property impossible to sell involved a buyer who spent $30,000 adding on to a small (800-square-foot) 40-year-old house. It was done professionally and did blend in. Still, the end result was an older house with an add-on. In this case, the most it would add to the house’s value was around $10,000. Unfortunately, the owners had taken out a second mortgage to do the addition, and now they couldn’t sell the home for anywhere near what they owed.
For them the worst case was that they would have to stay in the home for a few years until they paid down the loan. It could get ugly if they had to move because of a job transfer in the next few years. Another common reason buyers give for purchasing these properties is that they can fix them up or correct the problems. That may be so, but by the time they add up the costs and time, it would have been much cheaper to buy a better house or a better location. When you look at a property and see a negative but feel other features may outweigh the problems, especially price, slow down and think it through. There are red flags waving.