Nothing lasts forever. That saying is easily applied to hairstyle trends, popular music styles and doughnuts left in the break room. But you can also apply it to housing and the wants and needs of people who buy those houses.
The houses being built today will almost certainly not meet the exact wants and needs of people 50 years from now. Family size, personal activities, habits, trends, financial conditions, technological change–all of these and more will determine what builders put into homes and what the occupants do inside their homes and what spaces and functionalities they will need.
Houses Have Changed
Looking back 50 years, homes were significantly smaller. Family sizes were larger. Each person had less square footage they could call their own versus today. Families made do with less. It was not uncommon for two or more children to share a bedroom, and an entire household might share a single bathroom. Today, most people would find it unthinkable to have a single bathroom for a house.
This trend in square footage per person and the trend toward individual bedrooms and bathrooms illustrates the concept of functional obsolescence. Many homes that were built decades ago are now considered obsolete. They no longer meet requirements that today’s homebuyer is looking for. For example, a four bedroom house with a single bathroom would be rejected by the majority of buyers looking for a home. Another example: older homes that have “boxy” designs are no longer in favor, while open floor plans are in demand.
Functional obsolescence is defined as “the reduction of a property’s usefulness, desirability and value due to outdated design or other characteristics, not easily corrected or brought in line with current standards and requirements.” Fixing this type of obsolescence isn’t as simple as changing out countertops or replacing old shag carpet. Rather, correcting functional obsolescence often requires spending more to fix a problem than the finished product is worth. For example, if it takes $50,000 to bring a house up to today’s standards, yet the increased value of the house would only be $20,000, that’s probably functional obsolescence.
While a house may be obsolete because of something it is lacking, it can also be functionally obsolete if it is larger or has more rooms or other features that surpass the other homes in the area or neighborhood. For example, if a neighborhood contains homes with 3 bedrooms and 2 baths, but your home is 6 bedrooms and 5 baths, it could also be called functionally obsolete. A house like this will not be able to sell for a proportionally larger amount than a 3 bed, 2 bath house. Each additional bedroom and bathroom above the area norm will be worth less to a buyer. However, a 6 bed, 5 bath house in a neighborhood with similarly sized homes will sell for more, based on the fact that buyers in those areas are willing and able to pay for the larger size house.
Searching But Not Finding
Homebuyers and their agents search for homes online based on the criteria they need and want in a house. Continuing our bedroom/bathroom example, let’s say a buyer is searching for a 4 bedroom, 2.5 bath house. If your house is 4 bedrooms, 1 bath, your house won’t even appear in the search results for that buyer. They won’t even know your house exists. If, by some luck, your house does show in the search results, that buyer will almost certainly fly right by your listing without a second thought. Few people want to spend the time and money to fix an obsolete house. Buyers just want to buy it, move in, and go about their life.
Obsolete homes are not wanted. They will be skipped over as most people have other options that are easier, more affordable and ready now.
How to Fix Functional Obsolescence
Just because a home is functionally obsolete, it does not mean the house is worthless. There are cases of incurable functional obsolescence, where some factor, often external to a home like a bad neighborhood, causes the house to essentially become impossible to sell at any price. No amount of money could be spent to correct the problem and make the house worth something. This type of obsolescence is rare.
Fixing functional obsolescence typically takes time and money. Making repairs and renovations to a house can bring it in line with the neighborhood and in line with the desires of home buyers. The big question to ask: is the renovation worth doing? If you have a house that you plan to live in for many years, doing major renovations may be worth the money and the hassle because you will get to enjoy the fruits of the expense. Only you can decide if it makes sense to do this.
You may need to talk with an architect or a home renovation company to get their suggestions for reconfiguring a house so that it meets today’s standards. They can create plans and provide you with an estimate of the costs.
When a house is appraised by a professional appraiser, they will look at the house and its features, as compared to those nearby. If the house is better than nearby houses, it will be worth more. If it has fewer features than nearby houses, it will be worth less. If it has features that are not current and even difficult to overcome, it will detract from the value and be worth less.
You can “fix” functional obsolescence by reducing your asking price and selling the house at a lower price than nearby houses. This does not actually correct the problem, but if you are stuck with a house that no one is interested in, you can lower your price and hope to attract buyers by price alone. The biggest problem will be finding interested parties.
Sell Your Functionally Obsolete House, Guaranteed
If you have an obsolete house that you are unable to sell to traditional homebuyers, you do have the option of selling to a professional homebuyer like Resideum. We buy houses in any condition, including those that are functionally obsolete. We are able to do this because we have the expertise and capabilities to correct problems with houses. Our team will create a plan and make the necessary renovations to make an obsolete house desirable in today’s marketplace. We often spend tens or hundreds of thousands of dollars renovating properties.
If you don’t want to take on this type of project, consider selling your house to Resideum. Send us a few details about the house and we can make you a free, no-obligation offer in about 24 hours. And we can close and get you paid as fast as 7 days.
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Okay, Brent, why are we here?
We’re here standing in this spot because this is the access to the two bedrooms of this house. It’s a 2/1 [two bedrooms, one bathroom]. Two bedrooms are right here.
Wait a minute. There’s only two bedrooms in this house?
There’s only two bedrooms and there’s only one bathroom. That’s right behind you.
Wow. Okay, so what does that mean? Well, that basically means this house is functionally obsolete. So that term in real estate means that in today’s standards, 2021 standards, a home that only has two bedrooms and only has one bath is not what home buyers want. And so it becomes functionally obsolete. So if you are a homeowner living in a home that is a functionally obsolete home and you want to sell it, what do you do? Because the home buyer is not going to want to buy it. So if you have the money and you have the time and the expertise, you can come in and spend all that money and time and make it somehow or another a three bedroom minimum and a two bedroom, two bath minimum home. But that may be not as easy as just sort of, oh, let’s just do this here. You might have to add square footage, you might have to get permits, you might have to completely change the structure of the home. And if that’s not in your wheelhouse or financially able to be done, then you’re kind of stuck because you cannot sell that home to a home buyer.
And that’s why we bought this home. It’s a two bedroom, one bath. But, wow. I mean, it’s on the belt line. It’s right next to Piedmont Hospital, but it won’t appeal to a Buckhead buyer. We need that bedroom and a bath.
So that’s what a homeowner can do is look to Residium as maybe a bridge when they have a functionally obsolete home and they can’t afford or don’t want to bring it to functionality, we can do that for them. They can get a sale. They can get good market value for their home as it is, and we can add the value and make it a new home for a new home buyer that can move in and have a home in 2021 standards. Now, the thing is, this home is functionally obsolete. But are there a lot of these homes out there? Is this something that is around a lot, or is this kind of an apple and in orange grove?
Actually, it’s very common. I see it several times, if not a couple of times a day, a couple of times a week, of homes built in the 1940s era where they’re either a 2/1 or 3/1. I’ve even had some 4/1s, but four bedrooms, one bath. What are you going to do?
That’s crazy. I can’t even imagine four bedroom, four people trying to get in the bathroom at the same time.
So it’s around? It’s prevalent?
Okay, so that being said, maybe you’re out there in one of these homes and you’ve been thinking about moving and you’re figuring out what am I going to be able to do? Because my real estate agent says, gosh you can’t sell a 4/1. You can. Resideum can buy it. We can figure out how to make it a 4/3 or 4/2.5, and you can feel comfortable that you’ll get a sale and you’ll be able to move on to the next chapter of your life and we can come in and bring the love to that house and make it 2021, standards for the next home buyer to enjoy. So if you’ve got a house like that, we’d love to talk with you about it and see if we might be a good fit to help you buy it — help you sell it?
Yeah, we’ll be happy to buy it.
Yeah, we buy it. You sell it.
Okay, so I’m Greg.
And we’re with Resideum. Stay tuned for the next video and if you want to reach out to us, just hit the link below and we’ll be happy to talk with you about whatever your questions are as far as real estate, functional obsolescence or selling us your house, stay tuned.
Complete this form and we’ll be in touch.