Imagine finding the absolutely perfect house for you and your family. You love everything from the paint color to the kitchen backsplash. It’s completely turnkey, and you wouldn’t change a thing. So what could possibly stop you from putting in an offer? External obsolescence. The term is strange, but it’s worth learning and considering as you hunt for a new home.
External Obsolescence Definition
External obsolescence refers to a factor aside from a home (an external factor) that can devalue it. While this might mean a good deal for you up front, you should also consider external obsolescence when it comes to resale. Oftentimes, homeowners of properties with external obsolescence can reasonably expect for the home to appraise for less money—and ultimately sell for less money—compared with comparable properties in the area.
When I purchased my home, I was unsure if its location was a boon or an example of exteral obsolescence.
Examples of External Obsolescence
Since external obsolescence refers to an external factor, we aren’t talking about other issues that could affect a home’s value, such as foundation problems or fixer-upper status. Instead, think about issues beyond the property line, such as:
• Busy roads
• Railroad tracks
• Construction sites
• High-voltage towers (because of unsightly views and risk of cancer)
• Gas station (because of gas fumes and constant traffic to the station)
• Commercial buildings (in suburban areas)
External Obsolescence Can Vary
If a home is in an urban area, a homebuyer could reasonably expect (and even hope) that it would be close to businesses, restaurants, and retail. A homebuyer could also reasonably expect that same property to be on a busy street. However, move that same home to a suburban area, and it could be an example of external obsolescence. If you’re looking at a property in a quiet neighborhood that just happens to be next to a restaurant or gas station, its property value might take a hit when you try to sell later on.
External Obsolescence Can Be Temporary
While common types of external obsolescence are unlikely to change—such as being situated next to a busy road or railroad tracks—other types can be temporary. Perhaps you’re looking at a property next to a construction site. Sure, this may be a headache now, but by the time you decide to sell years down the road, the construction will surely be complete.
Other examples of external obsolescence could also be a positive for the right buyer.
If it’s construction for another single-family home (as opposed to a business or retail site), the current external obsolescence could even be a benefit to you: You might be able to negotiate the price down now without having an impact on your future return on investment.
Another example would be if the neighbor’s property is unsightly or unkempt. Depending on the laws in your city or county, you may have recourse to help them clean up their act, boosting your home’s curb appeal and value for a future sale.
One Person’s External Obsolescence Can Be Another Person’s Selling Point
When I purchased my home, I was unsure if its location was a boon or an example of external obsolescence. Depending on the buyer, it’s both.
I live directly across the street from a sought-after school in my area. According to the listing agent, the previous would-be buyers had made an offer on the home but ultimately backed out due to the proximity to the school. The house was reduced in price, and I decided being close to a school was a good thing, not a bad thing: It meant more security on my street, and I personally love the life and energy the kids bring to the area (I even miss them during the summer!). What’s more, I did my research and learned that the school is one of the best in my city. This means when I decide to resell, I can cater to families—many parents would love the convenience of being a stone’s throw from their child’s school.
Other examples of external obsolescence could also be a positive for the right buyer. Take a property on a busy street, for example. While this might not be the right fit for buyers with children, a professional commuter couple might appreciate easy access to a main thoroughfare.
To buy or not to buy?
If you’re looking at a home that’s fallen victim to external obsolescence, consider all the factors above. Is it something you can live with? Is it something temporary? Is the house the right fit for you and your family otherwise? Just as with any home purchase, you’ll also want to think about the future: How long do you plan to stay in this property, and what are your expectations for when and if you decide to sell?
An experienced Realtor can ultimately help you decide whether an external obsolescence is a deal-breaker.
Depending on the type of external obsolescence, you’ll also want to imagine your daily life in the space. If you’ve found an amazing home next to railroad tracks, are you prepared to be woken up at 4 a.m. to the rumble and horn of a freight train? (And if you are, what about your significant other or any pets or children in the house?) If you’re a young professional who’s always zipping to and from work, you might love that a potential home is on a busy street—but are you planning on starting a family in a few years? How will common life changes impact what it’s like to live in this particular property?
As always, partnering with an experienced Realtor can ultimately help you decide whether or not a property with an external obsolescence is a deal-breaker.