From a Value Perspective is an Older Home as Good as a New Home?

Dave,

My wife and I are moving this spring. She likes the charm of older homes, but I tend to like new construction homes. We’ve talked a lot about the pros and cons of each but when it comes down to it, we’ve decided that value is the “make it or break it” for us. From a value perspective is an older home as good as a new home? 

Thank you!

Betty & Steve, Grand Junction

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Betty & Steve,

Value, like beauty, is in the eye of the beholder and very subjective to “what” value means to you. What you value, another may not, and thus the reason true value is a very individual determination and really must be done on a case by case basis. Keep in mind that “value” to some people is measured in happiness, peace, comfort, or a myriad of other things and may only be minimally impacted by monetary considerations! For others, monetary value is the “bottom line”. How much will the value go up on one house vs. the other? For the purposes of this article we will simply look at the monetary perspective, as that is typically the main goal when people are seeking information about “value”.

I would say, in my experience, appreciation will be greater on newer homes than it will on ones that are older. This is of course a broad generalization and not an “absolute truth”. For example, if you have two homes in the same neighborhood and one is 4 years old and one is 15 years old, the newer home will gain value at a comparatively accelerated pace. This does not mean that the older home is not a good home, it simply means that the newer home is most likely more in tune with current buyer wants, finishes, and floor plans because it is only 4 years old. The house that is 4 years old most likely has oil rubbed bronze or brushed nickel finishes and the older one may have polished brass fixtures. It is simply not as up to date and thus will not gain value at the same pace. 

On the flip side, while we are on the topic of value, your best value in the long run can also be the older home! If you can purchase the home that is 15 years old for a good price, change out some of the dated features and finishes and bring it up to a more current look and appeal then your best “value” may be the older home that just needs some cosmetic updating. Let’s add one more twist, the older home has an incredible view and the newer one does not. Which one will do better given that change in scenario? I would say, all things being equal and age being the only major difference, the home with the view will outperform the newer home!  Homes with unique features or benefits tend to have exaggerated value gains. As you can see, there are so many things that go into measuring value that it gets very difficult to determine which houses will perform best over time from an appreciation perspective.

“You have to evaluate each one on a case by case basis and by using all the factors involved to make the best decision possible at that point in time.”

You have to evaluate each one on a case by case basis and by using all the factors involved to make the best decision possible at that point in time. Go with the one you love and the one that you will most enjoy living in and don’t focus only on monetary value, but  lifestyle, peace and happiness value! Focus on your house being your home and don’t worry about what you can’t control, like the future of the real estate market! Live happier, live longer! Now that’s what I would call “real” value. Hope this helped a little! Best of luck.

Dave Kimbrough
The Kimbrough Team

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How much do neighboring properties affect your home value?

Dave,

We have been watching a couple of homes that have been on the market for a couple months and we would be happy with either, but we really do like one of them quite a bit better than the other. Neither are perfect, but the one we like the most has two homes on the street, one right next door, that looks like it has been completely neglected and has junk everywhere.  When we drove by a couple times last weekend it had two cars parked on the front lawn virtually all day Saturday. We are very interested in the home but have big concerns about the impact these two homes are having on the neighborhood. What do you recommend? Thanks.

Donna, Grand Junction

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Donna,

Great question and you have good reason to be hesitant about purchasing if the next door neighbor looks like a dump. There is no question that the surrounding properties have a direct impact on any home. If the neighbors do a poor job of taking care of their property, it brings all the other homes values down in the neighborhood. The questions I would have are, is it a relatively isolated incidence? Or is it a broader problem where there is a lack of a homeowners association or an HOA that lacks the authority or structure to enforce the covenants and keep the neighborhood looking its best?

I would recommend you have your Realtor pull a copy of the neighborhood covenants for you to look over and find out exactly what things are and are not allowed. I would certainly guess that parking of cars on the front lawn would not be in the provisions designed to bolster property values. Homeowners associations are designed to protect values and help enforce a consistency of product which leads to the solid maturity of a subdivision. If the neighbors appear to be in violation of the covenants then you could always contact the HOA and find out why the property is apparently in violation and what steps are they taking to get them into compliance? Don’t be afraid to investigate and ask hard questions, after all, you are considering making a significant investment in the neighborhood. I am making the assumption that there is an established HOA, if there is no HOA then all bets are off and what you see is what you get.   

“One of the first things I do when looking a home is to look at the neighbors. Good neighbors can help make you money and bad ones will no doubt cost you money. I would be very hesitant to invest my money in a home that has a poorly kept home next door. ”

One of the first things I do when looking a home is to look at the neighbors. Good neighbors can help make you money and bad ones will no doubt cost you money. I would be very hesitant to invest my money in a home that has a poorly kept home next door. Keep in mind that this could also change. Should the neighbor move out, then there is the significant likelihood that the home would be cleaned up and updated by a new owner. Find out how long they have been there etc. Do your due diligence and do your best to evaluate their long-term viability of them continuing to own the home.

To sum it up, make sure you do your homework and remember this is not just going to be your home, but it will also be an investment in your family’s future. Location is key, not just the physical location, but the location of eyesore properties nearby, so be careful of investing where you do not feel like the neighbors are equally invested in the integrity of the neighborhood. My bet is that if you are patient you will find a great home in a wonderful neighborhood and not have to be concerned with the surrounding properties. Hope this helps. 

Dave Kimbrough
The Kimbrough Team

Have a question? Ask Dave!

How do we know when it’s the right time to sell so we can get the highest value for our home?

Dave,

My wife and I have been discussing whether or not we should put our home on the market. We know the average home sale price is high right now. We’d like to take advantage of the rising prices and cash in on the equity we currently have in our home, but do you think the prices will continue to rise? If we wait another year could we get $5,000 or even $10,000 more on the sale? How do we know when it’s the right time to sell so we can get the highest value for our home?

Thanks for the advice!

John and Arielle, Grand Junction

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John and Arielle,

Knowing when the right/best time to sell anything is one of the hardest questions in the world to answer, but I will try! Ultimately, if I could predict the best time for selling anything I would be super wealthy and be writing this column from a white sandy beach on a tropical island with a drink in one hand and...Sorry, I was getting carried away there, back to reality...unfortunately I am writing this column from my office late on a Wednesday night to the not so relaxing hum of office lights and forced air heat! All kidding aside, the world is volatile and things can change quickly for the good and for the bad. Right now, things are quite good. We are currently in the best real estate market we have seen since 2008 and for that, I am very thankful!   

“With that being said, I anticipate the market to continue growing across the board and prices to continue rising. I do believe that we will see some price settling in the next 12 - 18 months, as the low inventory levels we are now seeing receive some relief from new construction.”

With that being said, I anticipate the market to continue growing across the board and prices to continue rising. I do believe that we will see some price settling in the next 12 - 18 months, as the low inventory levels we are now seeing receive some relief from new construction. There are many new subdivisions in process and that may help loosen up the supply and slow rising prices. Keep in mind that it will not stop rising prices, only slow them a bit! Like I recently wrote in an earlier column, the secret about Grand Junction is out and people are going to continue to come! Why not? It’s an amazing place to live.  

One last tidbit to consider. If you are selling at the top of the market, then it is highly likely that you are also buying at the top of the market. Buying and selling in the same market is somewhat relative. If one house goes up 10%, then it is likely the other one has gone up in a similar fashion! That is not always true, but something to consider, depending on the differences in what you are selling and what you are buying. I always recommend you try your best to maximize your price, but sometimes the “best” time is the “right” time for you and your family! Hope that helps!

Dave Kimbrough
The Kimbrough Team

Move the unpaid balance of one home loan over to the loan on a new home?

Dave,

When we moved here in 2007 and purchased our home for $243,000 and refinanced in 2008 for $276,000 and currently owe about $255,000. We think our home would sell in the neighborhood of $250,000, which leaves us with about a $20,000 short fall, when we factor in the costs to sell. We are not in financial distress, but would really like to move to a larger home that would better accommodate our family. 

We have saved up enough money for our down payment on the new home and were planning to have the amount we were short on the sale of our home transferred over to our new home. We have been told we can’t do that and must have the money to cover the amount we are short at the time of closing. We do not have the extra money available to cover the loss and would like to move that over to our new home, as we can afford the higher monthly payments. Is this possible? Or are we just stuck where we are? We do not want to wait to move into another home if there are any alternatives. 

Thanks.

Danny and Colleen, Grand Junction

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Danny and Colleen,

It does appear that you may be stuck. It is true that you can’t just move the unpaid balance of one home loan over to the loan on a new home. Your loan needs be settled at close, so the lien can be released to allow transfer of title over to the new owner. It does seem that it would make sense, since you can afford the monthly payments, to allow a reasonable amount to transfer over, but that is just not the case, your current mortgage must be paid off in full and released at close.

There may be other options. If you have any other tangible assets that can be used to collateralize the short fall, that may be an option. If you have any other property that has an equity position, you may be able to look at refinancing and pulling some of that equity out to cover the short fall on your home and get your short fall covered. Another option is looking into your retirement portfolio. If you have a 401k, you may be able to borrow from yourself and then pay yourself back with interest. In this case you can borrow the funds from your retirement account, look out to see if there are any penalties, and then pay yourself back over time and give yourself an option to get out of your existing home and make some money for retirement at the same time. 

“If you are stuck, then I make the suggestion to ride it out and work on paying down your principle debt and as the market continues to improve, meaning prices are moving up, you are working to reduce your debt basis down and hopefully speed up the time table for moving out.”

If you are stuck, then I make the suggestion to ride it out and work on paying down your principle debt and as the market continues to improve, meaning prices are moving up, you are working to reduce your debt basis down and hopefully speed up the time table for moving out. You can also spend that time making some improvements that are cost effective and will result in added value in an attempt to speed up your homes appreciation as compared to the general market. The biggest mistake I see in cases like this are people just loose hope and let their property start to slide in appearance and upkeep and it has the opposite effect of what I am pointing out. Making modest and cost effective improvements can help bolster your eventual selling price and if you work on reducing your principle debt, you may be able to move faster than you thought possible. You just need to be determined and don’t get side tracked with what you can’t do and focus on what you can do and create a plan to get out of your current undesired situation.

Don’t get discouraged, get determined and make a plan to get your debt down and bolster your value and you might get in that new home sooner than you thought possible. Hope this helps, but sorry I did not have a more immediate and timely solution. Best of luck.

Dave Kimbrough
The Kimbrough Team

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Should I add to my current garage or build a detached shop?

Dear Dave,

I have been throwing around the idea of building a shop at my house. I live on about an acre lot and have a fairly new home, built in 2007. I have room to build a detached shop and also room to add onto my current 2 car garage.

My question for you is, what do you think would make the most sense when I go to sell the house someday? Do people appreciate a detached shop or would they like it connected to the house?

Thanks for the help-
Robert, Grand Junction

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Robert,

I believe this is an idea that virtually every man throws around from time to time, where can I build a shop? Building a shop has almost become part of the American dream. Right behind the dream of a detached shop is a three car garage or three car garage with large storage shed! As you wander through life accumulating “things” that you probably no longer need, but can’t force yourself to part with the idea of more and more storage becomes increasingly important.

“A detached shop can be a man’s private kingdom and it is hard to put a price on that.”

In my opinion, build a detached shop. The nice thing about a detached shop, over one that is attached, is that what is in or what is happening at the detached shop is less likely to spill over to the main garage and house. This is a simple function of being “detached”. A detached shop can be a man’s private kingdom and it is hard to put a price on that. The fact that a garage or shop is detached from the rest of the house implies that not everyone is invited, there is limited access.  Having a shop that is detached also gives one the opportunity to separate his or herself from the chaos or activities of the main structure and provide a place of solace and privacy where anything goes and being clean are not words that need to be feared! Having a place that is a safe haven is valuable and for those who are used to having it, it is VERY valuable.  

Go detached and live longer and more prosperous and when you go to sell, enjoy the rewards of having a detached shop! I am kidding about the longer and more prosperous part, but the rewards will be no joke! It will, no doubt, be a big selling feature that will have you seeing more green! ($)

Dave Kimbrough
The Kimbrough Team

Value of New Construction vs. Older Homes

Dave,

My wife and I are moving this spring. She likes the charm of older homes, but I tend to like new construction homes. We’ve talked a lot about the pros and cons of each but when it comes down to it, we’ve decided that value is the “make it or break it” for us. From a value perspective is an older home as good as a new home?

Thank you!

Betty & Steve, Grand Junction

---

Betty & Steve,

Value, like beauty, is in the eye of the beholder and very subjective to “what” value means to you. What you value, another may not, and thus the reason true value is a very individual determination and really must be done on a case by case basis. Keep in mind that “value” to some people is measured in happiness, peace, comfort, or a myriad of other things and may only be minimally impacted by monetary considerations! For others, monetary value is the “bottom line”. How much will the value go up on one house vs. the other? For the purposes of this article we will simply look at the monetary perspective, as that is typically the main goal when people are seeking information about “value”.

I would say, in my experience, appreciation will be greater on newer homes than it will on ones that are older. This is of course a broad generalization and not an “absolute truth”. For example, if you have two homes in the same neighborhood and one is 4 years old and one is 15 years old, the newer home will gain value at a comparatively accelerated pace. This does not mean that the older home is not a good home, it simply means that the newer home is most likely more in tune with current buyer wants, finishes, and floor plans because it is only 4 years old. The house that is 4 years old most likely has oil rubbed bronze or brushed nickel finishes and the older one may have polished brass fixtures…it is simply not as up-to-date and thus will not gain value at the same pace. On the flip side, while we are on the topic of value, your best value in the long run can also be the older home!

If you can purchase the home that is 15 years old for a good price, change out some of the dated features and finishes and bring it up to a more current look and appeal then your best “value” may be the older home that just needs some cosmetic updating. Let’s add one more twist, the older home has an incredible view and the newer one does not. Which one will do better given that change in scenario? I would say, all things being equal and age being the only major difference, the home with the view will outperform the newer home! Homes with unique features or benefits tend to have exaggerated value gains. As you can see, there are so many things that go into measuring value that it gets very difficult to determine which houses will perform best over time from an appreciation perspective.

“You have to evaluate each one on a case by case basis and by using all the factors involved to make the best decision possible at that point in time.”

You have to evaluate each one on a case by case basis and by using all the factors involved to make the best decision possible at that point in time. Go with the one you love and the one that you will most enjoy living in and don’t focus only on monetary value, but lifestyle, peace and happiness value! Focus on your house being your home and don’t worry about what you can’t control, like the future of the real estate market! Live happier, live longer! Now that’s what I would call “real” value. Hope this helped a little! Best of luck.

Dave Kimbrough
The Kimbrough Team