SWOT analysis, which stands for Strengths // Weaknesses // Opportunities // Threats, is an analytical framework by which businesses and people plan for the future and make decisions. This strategic business practice is both applicable and adaptable to the process of buying a home, and allows buyers to identify key areas of concern or positive aspects of a potential home purchase. Using this method during your home shopping process can help you avoid pitfalls and maximize the potential of your home buying dollars, ensuring you’ll enjoy the benefits of your investment for years to come.
Factors like location, proximity to amenities and curb appeal are classic strengths to seek out in a potential home purchase. In addition, you should compile a short list of home features that matter most to you and prioritize this list as you shop for a home. Items to include on your short list of must haves could be location, number of bedrooms or bathrooms, layout (ranch, open floor plan), square footage, double or triple garage, yard size and school district. Your short list of must haves should contain no more than 5 items and will help you compare the viability of each home you see without being overwhelmed by every single feature of the home. The short list should not include items like paint color, granite counters or flooring, as these items are relatively easy to change.
Weaknesses in a property can be harder to spot at first glance, but even the most ideal home has a weak spot somewhere. This may include distance to neighbors (if you can touch the side of your house and your neighbor’s at the same time – you’re in pretty close quarters), a high HOA fee, a lengthy commute to work, being close to a major road, landscaping in tough shape, very little closet space or other interior concerns. Overall condition, although not a very specific criteria, can be a definite weakness. If the home is in need of repair on every level and every surface and you don’t have cash on hand or time to make the repairs, the home in question has major weaknesses – even if the price is right.
One person’s home weakness is another’s opportunity; if you are in a position to address the weaknesses of a home on your list, what is a detriment to someone else may offer loads of home equity potential for you. As an example, clients of ours, a husband and wife duo with two kids, sold their home with us and bought their next home out of state “as is.” In this case, in need of many surface repairs and updates. The house smelled like dogs upstairs, cats downstairs and needed flooring and paint from top to bottom: Killz on the floor and new paint on walls and even ceilings. The price reflected the work this home needed, and the couple took time off work and invested about $10,000 and plenty of sweat equity in bringing the house up to date by removing and replacing the flooring and painting nearly every flat surface in the place themselves.
Other examples of a great opportunity for home buyers include buying the ugliest house in a great neighborhood, buying a home in a neighborhood undergoing revitalization, buying a home with a great interior in need of a curb appeal update, or buying a cluttered/dated home with great bones. Buying a home with potential can offer excellent an excellent return on your investment if you’re willing to look past the “rough” to see the diamond this home could be.
Threats to your potential home purchase can be found in material defects in the home like asbestos, mold or radon, or they may be future concerns like a major thoroughfare being built a stone’s throw from your backyard, or unforeseen HOA expenditures resulting in homeowner assessments. While you can’t always head threats like these off at the pass, you can boost your knowledge level by doing your due diligence as a home shopper: review HOA documents and if anything sounds like a forthcoming assessment, ask questions of the HOA president or representatives; talk to the city to determine whether the rumors you may have heard about a new road or other construction project are true; if there are environmental concerns in the area you are planning to buy a home in, ask a lot of questions and seek expert opinions on the topic. If you buy a home on a floodplain, expect the possibility of a flood – and know the cost and coverage of the insurance your lender will require you to carry. Like any major investments, there are risks to homeownership; the best way to counteract these risks is to arm yourself with information so you are prepared for future challenges rather than surprised by them
One of the smartest things you can do as a homebuyer is to wring every dollar of home equity out of your purchase transaction that you possibly can. Commission free TRELORA works with buyers and sellers for one flat fee of $2500, leaving you with more to show for your home investment dollars. We’ve saved Denver area clients over $16,000,000 to date. If you are ready to tackle the Denver marketplace, call us to learn how the best technology and transaction specialists can benefit your deal.