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Here’s some context for the old adage that home values are based on location, location, location: We identify three ways in which your neighborhood affects your home’s value, and how you can turn those factors to your favor.
The Importance of Location
A study recently released by Nabewise.com, which quantifies neighborhood characteristics for house hunters, found that 54% of Gen X homeowners reported that the house and the neighborhood were equally important in their decision-making. House hunters trusted personal observation more than information from an agent, with 79% cruising neighborhoods to detect ‘fit’; 64% researching online; and 62% asking friends and family for input.
Takeaway: Putting your neighborhood on the map can support housing values. If your neighborhood doesn’t already have a community group and website, it might be worthwhile to establish one. Simple, straightforward information like maps that show schools, shopping, and parks—and/or a calendar of local events (e.g., block parties)—give house hunters a glimpse of what life is like in your area.
The same Nabewise study found that buyers are a pragmatic lot. Safety and the logistics of everyday living far outweigh aesthetics and style. The study reported that buyers ranked these neighborhood characteristics as their top five:
• Real estate prices
• Public transit
Takeaway: Help buyers get a glimpse of everyday life in your neighborhood—community activity can be a tip factor. A neighborhood watch conveys that neighbors truly look out for each other. Car pools from your block to the train station or to an office park could offset the need for a second car. Neighborly courtesies quickly become part of the fabric of everyday life, but buyers can’t value what they don’t know about. Take pains to list such amenities on a separate sheet for buyers to review.
Early Foreclosure Impact
A new working paper from the Federal Reserve Bank of Atlanta found that the value of nearby properties drops the most (and the fastest) right before foreclosure. That’s when your worried neighbors aren’t investing in their home, and the whole world can tell. Shaggy landscaping, peeling paint, broken gates—nobody wants to be next door to any of that. On the bright side, by the time the house down the block has been foreclosed, sold, and owner-occupied for a year, the negative effect on your home’s value will have evaporated.
Takeaway: If you are headed for a refinance or sale, research the exact ownership status of houses in question. Give your appraiser your analysis to support the case for your home’s value.
For more on buying and selling homes, consider: