When you are looking into real estate properties for sale, you will come across some whose sale prices will seem like too good to be true. In such cases, you may be tempted to check it out and maybe even put it on your final list but is it a right choice?
Well, most of the times properties are inexpensive compared to their quality for real. But then there are reasons for that as well. So, when you are looking for giving in to your temptation, you must check the various reasons that make that property a non-conforming one in the first place.
However, before we delve into the topic, let us give you a clear idea of what a nonconforming property is. Well, it is the property that was legally allowed under zoning regulations when it was situated, however, with time and management changes it has no longer been permitted to use. However, it never means that such property is abandoned or discontinued for usage. If it is legal, then it can be put up for sale or refinancing.
NonConfirming- A Risky Move
Non-conforming is always too dangerous, and when you are making a major financial decision, it is better to avoid such risks. Here are the reasons that make such properties non-confirming.
The Size– Generally when the house is too big for the neighborhood, the size difference decreases its value. People will not be attracted to a house that is too big for the block and fits in oddly along with the rest of the neighborhood, so the seller needs to decrease the price of its sale for attracting potential buyers. Hence, in such a case the cost of per square foot is pretty less and so is the worth of the house.
The Looks of the Property– This is one of the most common reasons and happens with constructions that are new.
Firstly, the neighborhood matters. When a new house which is worth a lot is built in an area surrounded by homes that are 30 years old, it becomes lesser worthy. People cannot compare it with other new neighborhoods that re at a distance either.
Another reason is that the appearance is in some improvement. Like for example, if there s a swimming pool under the ground it potentially adds to the most negative value of the property. Hence, when a seller is looking for a house in a neighborhood where there are no swimming pools, if the particular room has one then no one will want it. They won’t want it for the maintenance hassle as well. Besides, they will expect a nice yard in the back yard so the seller would like to improve the house. Therefore, that is a case of over improvement. Similarly, for under development, the houses are sold at a discount.
The Use– one of the most important and shared reasons is this one. One of the main reasons that make a property non-confirming is that they do not allow city zoning. Like maybe, the property is zoned for a single family, yet it is a duplex, or it is a triplex where it is zoned for a duplex.
For more clarification about property construction contact C21 Elite Realty in Los Suenos.
Hence, in such cases even if the sellers do get buyers for rentals, they need to adjust a fair amount for each month.
Tips for Buyers of Non-conforming Properties
When you are buying a property as a nonconforming unit, there are some things you need to be careful about. It can be of great profit to you but only if you do things the right way.
In the case of a unit where the seller has a property where its use is the reason behind it being a non-conforming one, there are two ways you can deal with the various problems that may arise. So these following tips will help both the buyers and the sellers.
The Management– In cases of buildings that only have the water and electricity meters running, the tenants are often asked to pay the utilities, and they do not wish to pay more than their share of usage. Other management problems like mail getting mixed, water heaters with only a single thermostat for tenants can arise to be a problem.
Therefore, in such a case there needs to be an agreement between the tenants. Like in the event of a mail delivery, may be out of three residents one two can share a single mailbox. And other adjustments like that.
The Exit– As a buyer, when you invest in a non-confirming property, one of the most difficult challenges you will face is the exit. If you want to sell it or refinance it, you will face quite a hurdle. Also, your buyer needs to be able to finance it to buy it.
Hence, you can always reduce the size of the pool if there is any. Also, you need to use finances like cash or bank money for this. When you do wish to make an exit, analyze the right value for attracting potential buyers.
Hence, non-conforming buildings and properties can prove to be profitable if you know how to deal with the risks appropriately. As a seller, you should always check with the city, the adjustments you need to make, the financial justifications you need to give and conduct a proper research to make the best out of it. Also, you might want to check up on the time permit that you have with the city rules and regulations for your property. Mostly, the owner has nine months for a building permit in case they want to reconstruct it.
While as a buyer, always do your research as well. You may find it to be cheaper than it is worth but also without any cash for down payment or not being qualified for a loan; you will step in a risky move.