Q & A from the November issue of the Mammoth Real Estate Times.
Q: In one of your recent columns you discussed the concept of “curable and incurable defects”, and how important it is to understand this concept, especially when purchasing real estate. I’m not sure I’m understanding the whole point and what this really specifically refers to, can you explain further?
A: As I said in that column, this is a critical distinction to make when purchasing a piece of real estate–one that is often ignored in a buyer’s (and their agent’s) analysis. I love the analogy real estate author Dian Hymer, whose books are geared towards buyers, uses when discussing incurable defects during the home purchasing process. She calls it a “prenuptial for homes–focusing on resale potential before you buy a property is a little like considering the terms of the divorce settlement before consummating a marriage.” (I’m sure glad a known female author said it and not this bachelor.)
The simple definition of incurable defect is; a defect in a property that cannot be fixed or is too expensive to repair. That seems simple enough, but there is more than meets the eye. Sometimes people can be staring right at a gross incurable defect and they can’t recognize it, or don’t have the experience to recognize it. And once you own the property, there isn’t anything you can do about it. And once you go to sell the property, the subsequent (potential) buyer will expect a compromise on price (that is unless you are lucky enough to find a buyer who is just as unaware.) And while an incurable defect can have great effect on the resale-ability of a property, it can radically affect things like rent-ability, short-term and long-term maintenance costs, and overall enjoyment by the owner/occupant.
Every real estate market has subtleties. And Mammoth is no different. In fact, Mammoth probably has more subtleties than most. In many of the subtleties are the potential for incurable defects. I often tell people that at property can look great on a summer day, but how does it work after 400 inches of snow? Many of our clients are proverbial fish-out-of-water, they are from southern California and have little experience with freezing temperatures, snow (and snow management), thaw, ice, etc.
One of the most common things I see in our local market; buyers (and agents) getting excited about a property that is in decorator finished condition. The property is immaculate and looks like it belongs in a magazine. The problem is they don’t look past the décor and can’t see the defects–especially the ones that can’t be fixed. While I believe in bringing a property to market in its best possible condition (and in this second home market this is very appealing to buyers), sometimes the sellers who have lived with the defects try to distract buyers by making the place really zing.
In California today we transact properties with a large stack of disclosures that prompt both the sellers and buyers through a thought process to think about these existing or potential defects. But there are still limitations to what these documents can reveal. For instance, things like wind and solar exposure, topography, poor design for this particular environment, and a whole host of other things aren’t necessarily “defects” but certainly impact the enjoyment and efficiency of the property. And the micro-trends in the community, planned or not, can greatly impact a property in the near and distant future.
One of my personal rules, even though some of my clients have overruled it with other factors, is; never buy a home that looks at condos, but it is okay to buy a condo that looks at homes. That is a perfect example of the progression/regression principle of real estate. Another “buyer beware”–buying something next to a vacant piece of land, especially a large piece of vacant land. Developers are so aggressive, and the Town fathers so lenient, God knows what you might end up with next door.
There is another reason some Mammoth buyers tend to ignore these incurable defects. Many want to take the path of least resistance–they don’t want to repair, remodel or fix up a property, so they are attracted to one that is ready to enjoy. For others they have “more money than time”, they just want a place in Mammoth and don’t have the time to spend to scrutinize their purchase to any great extent, and if it is already furnished and outfitted, even better. And some are just ignorant of the value of the sun, certain locations, views, the virtues of newer construction, and snow and ice deposition, etc. And their agents don’t take the time to educate them (or maybe they just don’t know themselves.)
In the past I have often used the Mammoth area, as a resort itself, as a classic example of curable and incurable defects. Mammoth is far from a perfect resort. But we all know that the things we have no control over curing–the climate and snowfall, the terrain and scenic beauty, the proximity in one of the world’s great economies and demographic bases, are all great attributes. Where Mammoth, as a resort, falls down are all things that we can control or cure. Greater accessibility (especially via the airport) and transit, better accommodations and services, and the other refinements of the resort experience for our visitors and local residents alike, are all things we can improve (if we want.) Hopefully, that is the opportunity the new investors in our community see. And likely they “considered the divorce settlement before consummating the marriage.” I can only hope it is a marriage made in heaven, or at least close. Happy Thanksgiving!