5 Ways to Spot a Home with Hidden Potential

5 Ways to Spot a Home with Hidden Potential

 

Remember metal
detectors? When I was a kid, they were all the rage, holding the emotional rush
of a game with the a potential real-life treasure chest at the end. Fast
forward a couple of decades, and what seems to be our constant craving for a
treasure hunt has shifted to a different medium, fed most prominently by PBS’
Antiques Roadshow. Loyal viewers like myself watched “The Roadshow” with
anxious anticipation for
those twin appraisers to
come out, before they got their own show. When those guys showed up, it was
usually a sign that someone’s auntie’s hideous chest was about to be deemed
worth six figures.

But there’s a real estate version of this treasure hunting
phenomenon, too – and it’s not recreational. Rather, the search for a home with
hidden potential is most often undertaken in the very serious effort to stretch
every ounce of home-buying power out of a savvy buyer’s real estate dollar.
Some buyers’ lifestyles require them to focus on home they can move right into,
with no work to be done – and their budgets allow them to do so. But others
know that the gap between the home they eventually want and the home they can
afford right now is so wide that the only way they’ll get their dream home is
to buy it while it’s still a diamond in the rough. (Very rough, in some cases.)

So, what’s the real estate equivalent of the metal detector
or
the Keno twins? You are!
With your team (agent and mortgage pro), your tools (Trulia among them) and a
touch of good timing (your wants must ultimately align with what’s on the
market), you can become a hidden-home-treasure-finding machine. Here to help
are a handful of clues that there might be hidden potential lurking in a home.

1. Significant discount compared to other homes in the neighborhood.
By definition, hidden potential is all about unrecognized and as-yet-untapped
value – the gap between what you pay for a home in its current state and what
it can be, monetarily and otherwise, with your investment of time and energy.
If the discount is not significant, the potential is not hidden – it’s already
being realized by the current owner (i.e., not you)!

Don’t
expect the homes with the most hidden potential to announce themselves
and –  their discounts – as such. The discount you must ultimately be
concerned with is the discount that is reflected in the ultimate sale
price (not the list price) vis-a-vis the comps (recently sold homes in
the neighborhood).  So, one way to manifest hidden potential is to look
for homes that are listed at only a slight discount (or no discount at
all!) and have lagged on the market a very long time compared with the
average in their area, then negotiate a meaty discount from the seller.

The
other critical discount to look for is a significant discount between
what you can secure the home for and what it will cost you, in total,
after you put in the work necessary to manifest the property’s
potential. Anyone can turn any old hovel into a palatial estate if
they’re willing and able to spend and spend and spend.  True hidden
potential is about latent possibilities that can be unveiled, not
created from scratch and at great expense. The only way to truly know
what this discount will be is to educate yourself about what the various
needed improvements will actually cost, by obtaining estimates from
contractors and/or pricing DIY projects out.

2. Really,
really bad cosmetics.
 First, let’s be clear – many homes with bad
cosmetics don’t have great potential, or are insufficiently discounted
for the home to truly reflect much potential at all. However, there are
two flavors of bad cosmetics that can signal great hidden potential. The
first are homes that were almost overly loved by their previous owners –
they are in excellent shape inside and out, but they have been so
heavily customized with terrible cosmetic choices and unattractive
finish materials that other buyers are completely turned off. I speak
from experience: when I bought it, my first home had wallpaper featuring
kittens (no joke) on more than one wall – and it turned out to be a
fantastic home and investment.

These
otherwise-lovely homes with taxidermy covering every single surface –
even the bedroom walls?  Same deal: there’s gold in them thar homes. Bad
cosmetics like these are very easy to unwind, but these types of homes
often be had at a discount, because they are such a huge turnoff to
other, less potential-focused buyers.

The
other flavor of bad cosmetics that can hide a home’s true potential are
now-outdated “upgrades” that were awesome and cutting edge in their
era. It’s sort of like my Dad’s clothes when I was growing up. As a
Tween (we were called pre-teens back then) I thought my Dad was SO
fashion backwards. (He had many other strengths, though,
including real estate.
Can’t be perfect at everything.)  Anyhoo, as a young adult, I realized
that I’d been totally wrong: my Dad’s ‘look,’ if you will, was not
horrific for the 80’s – it was FANTASTIC for the 70’s. He simply hadn’t
moved on yet!

When
a home’s previous owner made a major investment in upgrading the home
20 or 30 years ago, chances are good that the outdated cosmetics can be
replaced over the home’s still-sound innards, without extreme expense.
Hidden potential alert!


3. An
unfortunate backstory.
Often, homes with hidden potential are those
that have fundamental, structural integrity and well-functioning systems
(plumbing, heating, etc.), but have been less well-cared for on the
surface. And in some cases, what caused the surface neglect is an
unfortunate set of circumstances affecting the previous owners/sellers.
By no means is spotting homes with this sign of hidden potential
unethical or taking advantage of another’s misfortune, as some might
suggest. In fact, if that’s even a concern, rethink it: there’s not a
single thing wrong with recognizing and activating the potential the
previous owners were unable to nurture due to their divorce, family
dispute, age or budget limitations.

4. No
photos.
To be completely fair, this one is more about finding hidden
opportunity than hidden potential, per se. The vast majority of home
buyers start house hunting online and simply refuse to go homes whose
listings lack photos.  Sometimes homes are listed without photos because
of bad cosmetics or deeper condition issues; other times, because of
technical difficulties that have zero to do with the house, its look or
its condition.

If
your dream home has been elusive, consider taking the time to go check
out a listing with the ‘just right’ specs, in terms of square footage,
beds, baths and neighborhood – even if it doesn’t have photos. If you’re
house hunting in an area or at a price point where there will
undoubtedly be multiple offers on a great home, a home with no or only
one listing might offer you an opportunity for low or no competition on a
great property – or one with great potential.


5. Great
neighborhood, square footage and floor plan.
 It can be relatively
simple and inexpensive to manifest a home’s potential when it can be
converted into your ‘dream’ home without having to move or add any
walls. It’s also much more likely that you’ll hang in there through the
discomforts and uncertainty of the seemingly endless process of
remodeling (rather than selling it in despair, before you’re done) if
the home is of ample size and optimal layout to house your family and
your activities as they evolve over time.

Also,
many folks find that a fantastic home in a not-so-great neighborhood is
less desirable than a not-so-great home in an fantastic neighborhood;
the latter can be easier to live in and stay committed to during the
course of the remodel as well. Accordingly, homes with the ‘just-right’
square footage and floor plan that also happen to be located in the
‘just right’ neighborhood are the ultimate hidden potential triple
threat.

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