Your house is not an island.
You’ve heard that a bad neighborhood can affect your house’s value. But, what does it take to pull down the numbers? The recession has caused foreclosures to rise and that means more houses are vacant – prone to deterioration if no buyer moves in immediately. You can easily notice growing bushes in the yard, wall cracks, failing roofs, broken windows and even graffiti. These eyesores can reduce other home’s value significantly.
High-rise units are also experiencing the same thing. Take the case of the Big Apple. The New York Times ran a report last month that described the increasing unfinished building construction in the city. Jonathan Miller, an appraiser, explained, “… It’s the same idea as a suburban house with a boarded-up house next door. The problem is when you have a large-scale deteriorating of property in an area or neighborhood or street. That’s where you’re more likely to see an impact on property values.”
There’s a pending bill in the Congress that would allow developers to extend their building permits to ensure the public safety of their stalled structures. But, that’s the quick way to patch the hole. As long as homeowners nearby don’t see construction workers continuing to build these projects, they will not expect their home’s appraisal to show any signs of improvement.
Unknown to many, the appraisal method commonly uses the market value approach where similar properties in the same market are taken into account to determine your home’s value. Aside from physical characteristics, appraisers include other details such as the date of sale and conditions of sale in their calculation. Take note that many of these sales may not be foreclosures and it is up to the appraiser to include some distressed properties in their valuation. If in your neighborhood, most properties were foreclosed, then it can definitely reduce your house’s value and put more financial strain on you.
We suggest that local officials enforce mandatory rehabilitation for properties that have fallen into disrepair even if this means changing some provisions in the local enforcement code. Brokers should also encourage sellers to take steps in improving their properties. If the house is a For Sale By Owner (FSBO) type, neighbors should express their concerns to the owner.