Real estate jargon quickly becomes part of common conversation through marketing and social media, but here is one term that you probably haven’t heard of: external obsolescence.
While it sounds highly technical, it’s a pretty simple concept. An external obsolescence is something outside of a property, off-site, that negatively affects its value. This is not the 500-pound gorilla of a pest report sitting in the basement; it’s more like a 5,000-pound dragon looming down the street. Definitions of external obsolescence often include the chilling term “incurable” and examples are trains, traffic, commercial properties (liquor stores, nightclubs), institutional properties (hospitals, firehouses), geologic conditions (slide and seismic zones), and industrial installations (high-voltage wires).
In our current low-inventory market, buyers don’t always have good choices. And if buyers want to live in a neighborhood at the top limit of their budget range, their choices are even narrower. So how should a buyer approach a home with these issues? Carefully and realistically.
Here are a few factors to consider when looking at a house with external obsolescence:
For Buyers:
- Learn: Reading the disclosures is essential, but rely on your own observations and investigations as well.
- Fix: There are sometimes ways to make a nuisance more tolerable, like reducing noise or upgrading seismic restraints.
- Assess: Only you can decide whether it’s a condition you can live with.
- Calculate: The least attractive homes will suffer more in a down market.
- Appraise: Give careful consideration to the possibility of a low appraisal based on the problem condition. Either have an appraisal contingency or sufficient cash to compensate for a low appraisal.
- Consider the alternatives: Have you explored other neighborhoods, smaller houses, or cosmetic fixers?
For Sellers:
- Think about timing: Unlike the external obsolescence, the “seller’s market” is not a permanent condition. Your property will be more difficult to sell in the future.
- Price it right: Don’t risk being a drive-by. Make it seem like the best deal in the neighborhood.
- Get real: Expect to get fewer and lower offers than similar nearby properties without that external obsolescence.
- Break out the lipstick: You can’t slay the dragon, but you can tame the effects with staging, credible reports, and good marketing with the right Realtor.
And, speaking of marketing, are you or anyone you know in the market to buy or sell property? Let’s get in touch to tame any monstrous fears that might be holding you back.
