What is a Defective Home and How to Sell It?

Living On Guam Realty TEAM
Published on May 6, 2021

What is a Defective Home and How to Sell It?

vandalized broken window on house or by bird in flight

When is a home considered defective?

It’s when any or all of these are present:

1. The home is in a bad location.

Why does location matter so much? For a start, you can’t move a home — at least not easily or inexpensively. When you buy a home in a good location, it’s usually a solid long-term investment.

Buyers might perceive some neighborhoods as bad even though more desirable areas might be as close as across the street. Whatever the reason for the perception, bad locations affect the values of homes. Owning a home near any of the following types of locations often is detrimental to market value:

  • Main thoroughfares with a lot of traffic
  • Commercial or industrial properties
  • Apartment buildings
  • Utility structures such as waste, electrical, and water
  • Cemeteries
  • Noise from nearby airport
  • Garbage, landfills, and recycling
  • Schools
  • Government housing or government buildings
  • Sports arenas
  • Odors from neighboring farms

Many of these are based on preference.

A bad location can be an incurable defect that will forever hold down the value of a property.

Overcoming bad locations

If you know your market…or if you have a great realtor who knows the Guam market…., you have a better chance of understanding what is a good deal in any particular neighborhood and will more likely have an idea if an area is improving or deteriorating. In purchasing a property, both numbers and location should make sense.

The right approach when selling a home in a less desirable location is often to price lower it than competing inventory. It’s not an approach designed to turn a profit from a sale, but it is better than leaving the home languishing on the market for too long without any interest.

2. The home has a bad layout.

These are the three main components in hunting for a property: price, condition and location. If your location is bad, price around the neighborhood would be lower so, the house condition has to be better.

A bad location is not the only defect a home on the market might always have. In fact, the home might be in a great location, but other factors, such as a bad layout, can turn off buyers. Not all bad layouts can be rectified easily and often are considered incurable defects. If the cost to fix exceeds the boost in expected selling price, it might be better to offer a remodeling credit to the buyer. Examples of bad layouts include:

  • Narrow doorways and halls
  • Interior stairs facing an entrance
  • Hallway facing an entrance
  • Adjoining bedrooms
  • Bedrooms located on separate levels
  • Dining room in the center of the home
  • Bedrooms accessed from living or family rooms
  • Guest bathroom in an unappealing location
  • Choppy placement of rooms without flow
  • Upper-floor bedrooms with stairs in the center

These types of homes sell for less than surrounding homes with more conforming layouts of similar square footage. Many homes of this nature in desirable neighborhoods land in the hands of house flippers, who have the vision and expertise to change the layout and resell the property at a high profit.

3. The home has damage and needs deferred maintenance.

Most deferred maintenance are quick and easy fixes that sellers might not notice often, but these are key things that potential buyers might look at when they visit the property. These are mostly small things that should be taken care of first. If these things are taken cared of prior to the visit, the likelihood of the potential buyer looking at the good potential are higher than focusing on the negative ones.

A potential buyer would always want to walk in a house imagining happily imagining themselves in there rather than thinking immediately of the list of things that needs to be repaired in house. Sellers should always keep in mind to fix those things prior to the home inspection.

Homes that require a lot of work will not sell for the same amount as comparable homes that do not require work. Buyers will refuse to pay top market value for homes with deferred maintenance. A contractor who plans to resell a home in fixed-up conditions will expect a reasonable profit and will factor in the costs of resale upon purchasing.

Most buyers of deferred-maintenance homes demand an added incentive as compensation for unforeseen problems. For example, a home that requires $50,000 of work among homes selling for $300,000 will not command a price of $250,000.

Sometimes a buyer will purchase a home to fix up because the buyer expects the renovation to be a labor of love. However, those homes typically sell for a bit more due to location.

If you need help in how to price your home correctly with the defects mentioned above, give us a call at 1-671-687-7520 and let’s schedule a FREE assessment.