Ever go into a neighborhood and notice one or two homes that stuck out like sore thumbs?
One might be whole a lot fancier than the houses surrounding it while the other might be a "dump" in comparison to neighboring properties.
This scenario illustrates the real estate principle of "conformity." The primary idea behind this principle is that a house is more likely to appreciate in value if age, size, condition and style are similar to, or conform to, other houses in the neighborhood.
But this principle also extends to buyers. By that I mean that if you make your property a lot "fancier" than others in your neighborhood, you end up limiting potential buyers.
Of course, the opposite is also true. Don't take care of your property, and you'll definitely have fewer buyers looking at it.
Conformity is closely related to two other principles - progression and regression.
In plain English, regression means that high-valued properties often tend to suffer when located close to lower-valued homes.
Progression, on the other, means that lower-valued homes will often see increased value when found amongst higher-valued properties.
This formal principle leads the informal maxim, "Buy the cheapest property on the block!” The higher value of the homes around it will, in turn, make it more valuable.
As A Buyer, How Can I Use the Principle of Conformity to My Advantage?
One might be whole a lot fancier than the houses surrounding it while the other might be a "dump" in comparison to neighboring properties.
This scenario illustrates the real estate principle of "conformity." The primary idea behind this principle is that a house is more likely to appreciate in value if age, size, condition and style are similar to, or conform to, other houses in the neighborhood.
But this principle also extends to buyers. By that I mean that if you make your property a lot "fancier" than others in your neighborhood, you end up limiting potential buyers.
Of course, the opposite is also true. Don't take care of your property, and you'll definitely have fewer buyers looking at it.
Conformity is closely related to two other principles - progression and regression.
In plain English, regression means that high-valued properties often tend to suffer when located close to lower-valued homes.
Progression, on the other, means that lower-valued homes will often see increased value when found amongst higher-valued properties.
This formal principle leads the informal maxim, "Buy the cheapest property on the block!” The higher value of the homes around it will, in turn, make it more valuable.
As A Buyer, How Can I Use the Principle of Conformity to My Advantage?
Of course, look at such a property carefully first (often called "due diligence"). Spend the money on a real estate appraiser so you get an objective evaluation.
Of course, avoid any homes that need major fixes such as roofs, foundations, siding, plumbing, electrical work etc. The last thing you need is a "money pit" into which you keep throwing dollars and get little or nothing in return.
Be sure to seek out sound properties, ones needing only minor fixes such as painting, cleaning, landscaping, carpets, new appliances, etc.
If you're a buyer interested in real estate investment, purchase a home in a neighborhood that's just beginning a revitalization cycle. That way you can be sure values will appreciate.
You can also look for under-improved properties such as single family homes which can be converted to residential income or commercial use, especially if such properties lie in the "path of progress;" that is, areas experiencing good growth.
As A Seller, How Can I Use the Principle of Conformity to My Advantage?
Of course, if you've already done that, then invest in low-cost improvements such as new paint inside and out, landscaping, a professional cleaning job, etc.
If they're in bad shape, you might also want to add new carpets and/or new appliances.
All these actions will improve the value of the home in the eyes of buyers.
If you're an experienced do-it-yourselfer, you may want to tackle some improvement projects since they can cost less than half of what professional contractors charge.
However, notice that I emphasized experienced! An amateurish job on, say, cabinets or roofs can actually reduce the value of your home. So, unless you're really, really good at it, leave major home remodeling projects to the professionals.
Want to learn more about buying a home at best value or selling it at maximum value? Then, call me at insert link right now or email me at insert link!
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