That’s right! Rose colored glasses! Most sellers I meet with tend to look at their home through “rose colored glasses”. I’m sure you understand what I mean. For those that may not be familiar with the phrase, I’ll explain.
You see, sellers tend to look past their property’s deficiencies and instead view their property as deserving of top dollar once it hits the market.
When I say deficiencies, I’m talking about a property’s depreciation in value as opposed to appreciation in value. While it’s true that properties, at least in the Research Triangle Park area of North Carolina have appreciated significantly over the last 9 – 10 years (41%), many homeowners are finding that their home has appreciated much less overall. So, why is that?
First of all, these homeowners have allowed their homes to physically deteriorate over time. Realtors refer to this condition as deferred maintenance. In most cases, this is a curable condition. Realtors will often recommend to sellers to paint, or repair rotted exterior wood, or replace carpeting, or replace a roof. These repairs can result in an increase in appraised value for these homeowners and of course, a higher sales price.
While physical deterioration is readily apparent to homeowners as well as realtors, what’s not that obvious is functional obsolescence. Functional obsolescence pertains to older homes that may not have updated light fixtures or an older style kitchen that hasn’t been updated. Homeowners sometimes ask why updates are important at all. Well, for the simple reason that updates are more desirable for buyers. Then sellers will give the excuse that buyers may not like the updates they choose. Then it’s up to us to explain to sellers that we are looking to make their home as appealing as possible to the largest number of buyers we can. Luckily for the seller, these fixes are relatively simple so we call these curable.
What about the situation where the home has four bedrooms and 1 bathroom? That’s a form of functional obsolescence that we call incurable as the fix is more complicated and costly than the ones we just described.
The last type of depreciation we’ll talk about is external obsolescence. External obsolescence pertains to situations and conditions outside or beyond the homeowner’s property. For the most part, these conditions are incurable because the homeowner cannot fix the condition. Examples may include a nearby electrical tower, or the property borders an industrial park that produces undesirable, gut wrenching odors on a daily basis.
An experienced realtor can help homeowners understand why their home may not fetch the same price as other homes in their neighborhood because of these previously mentioned deficiencies.