How the Principle of Progression can Help You Get a Great Deal

So you’ve narrowed your search down to a few homes in neighborhoods you like. They have comparable amenities and the features you want. How do you select the right house? Now it’s time to make use of the principle of progression to find the home that’s going to provide the best deal for you.  

What is the principle of progression?

Basically, the principle of progression states that your property values are improved by being located near other homes with higher property values. For example, if your home is $50,000 less than the median prices of your neighboring homes, your home’s value is worth more. The inverse is also true; if you buy an expensive home next to a home that’s significantly lower priced, your home value could go down. The obvious choice, then, is to go for the home with a lower price tag because the homes around it improve its value.

How to decide whether the home is worth buying.

There’s a Catch 22 to the principle of progression: if a home is priced significantly lower than the homes around it, there’s probably a reason. That reason is likely a defect of some sort. Some defects are relatively minor, while others can cause a major drain on your wallet and ultimately make it more difficult to sell the home. When is a home worth buying?

Cosmetic defects are obviously the easiest to correct. If the home would benefit from a new landscaping job or a new paintjob, it’s an easy and relatively inexpensive fix that makes the lower price tag a great deal. Even some larger-scale improvements, such as upgrading a bathroom or an electrical system, can still provide a great deal if the price tag is right.

Be careful about when a minor defect turns into a major defect, though. Before you get into the cosmetic changes, have an inspection and find out what’s under that ugly paint job. Check out the plumbing, foundation and wiring. Underlying problems can become serious issues, so balance the desire for a deal with a professional inspection that can give you an idea of the real picture.

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Steve SchraderBachar is a local mortgage planning expert who resides in Iowa and provides service to the clients of his mortgage planning practice across the Midwest.  You can reach Steve at 1-515-289-4381 or 515-360-5197.