7 neighborhood threats to your home's value
Who — or what — is next door can affect how much people will pay for your home.
© Gail Mooney/Masterfile
Bad neighbors can be a serious problem, according to the Appraisal Institute. An unkempt yard, proximity to a sex offender or having certain commercial facilities nearby, such as a power plant or funeral home, can reduce the value of surrounding homes by as much as 15%.
“The impact can vary tremendously, depending on a few factors: how ‘bad’ the bad neighbor is, the kind of neighborhood you’re located in and the type of market that exists,” says Carlos Gobel, director of residential services at Integra Realty Resources in Miami.
But what exactly is a “bad” neighbor? Definitions vary, but real-estate professionals say it boils down to any home or business that turns people off.
“A bad neighbor is one that has no consideration for the rest of the community,” says Mindy Pordes, co-founder of Pordes Residential Sales & Marketing in Aventura, Fla. “For example, someone who doesn't take care of the outside appearance of the home, such as the gardening, painting of the outside of the home, roof, garbage and general upkeep. In addition, a bad neighbor may have constant visitors taking up parking spaces, perhaps on the street, loud house parties, dogs that bark all night or stray cats lingering around.”
A “bad” neighbor can also be a business or government enterprise whose very existence drives down the value of your property. Here are seven surprising neighbors that can reduce your home’s value:
Power plants. The data are fairly clear on the impact of a power plant on nearby home values — it usually hurts them. A study (PDF) from the University of California at Berkeley shows that home values within two miles of a power plant can be decreased between 4% and 7%.
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Landfills. A study (PDF) from the Pima County, Ariz., assessor’s office shows that a subdivision near a landfill loses 6% to 10% in value compared with a subdivision that isn’t near a landfill — all other residential factors being equal, including house size, school quality and residential incomes.
Robert A. Simons, an urban planning professor at Cleveland State University, says that if you live within two miles of a Superfund site — a landfill that the government designates as a hazardous-waste site — your home’s value could decline by up to 15%.
Sex offenders. Living near a registered sex offender is one of the biggest downward drivers of home values. Researchers at Longwood University in Farmville, Va., concluded that the closer you live to a sex offender, the more your home will depreciate. In the paper, "Estimating the Effect of Crime Risk on Property Values and Time on Market: Evidence from Megan's Law in Virginia," Longwood researchers say, “The presence of a registered sex offender living within one-tenth of a mile reduces home values by about 9%, and these same homes take as much as 10% longer to sell than homes not located near registered sex offenders.”
Delinquent bill payers. One surprising way neighbors can bring down the value of surrounding homes, especially in town home or condo communities, is by not paying their maintenance fees or mortgages. “Bad neighbors bring values down by not paying their maintenance fees, in some cases their mortgage payments, and not maintaining the home's appearance,” Pordes says. “These homeowners usually do not care about real-estate values.”
Foreclosed homes. Perhaps the biggest single factor that drives nearby home values down is a foreclosure. A recent study by the Massachusetts Institute of Technology concludes that the value of homes within 250 feet of a foreclosed property will decrease by 1% per foreclosure, on average. Federal Reserve Governor Joseph Tracy said recently in his economic outlook for 2011: “The growing inventory of defaulted mortgages continues to weigh down any recovery in the housing market … Problems in housing markets can impact economic growth.”
Lackluster landscaping. Studies show that lawn care has a big impact on surrounding home values. Virginia Tech University released a report stating that pristine landscaping can jack up the value of a home by 5% to 11%.
Closed schools. Sometimes, neighborhood problems can stem from local government action. For example, if a cash-strapped city or town closes a neighborhood school, that can easily steer home values south. The National Association of Realtors says 75% of home shoppers say the quality and availability of schools in the neighborhood is either “somewhat important” or “very important.”
So can you fight back against problem neighbors? In the case of a landfill, power plant or sex offender, your options are severely limited. As long as your neighbors are following the letter of the law, you’ll just have to grin and bear it — or move. If not, you have every right to petition your local government authorities for a grievance and at least get the matter reviewed.
If it’s a residential property causing the problem, however, you might have better options.
For starters, you can leave a polite letter in the offending homeowner’s mailbox to get his attention. In addition, Pordes says that if the home is within a homeowners association or condo association, the association can send letters to the homeowner and deny him community privileges to encourage him to comply with the community rules and maintain home values.
Most cities and towns have ordinances against messy yards and junk-laden driveways, so check your community’s rules and regulations to see what applies.
Unfortunately, many cities and towns also have landfills, power plants and other less-than-desirable commercial-sized neighbors.
Most likely, you’re just going to have to live with them.
Buy the biggest parcel of land that you can afford and have a house built or purchase a modular home, avoid buying a home in a HOA community.
I bought my new home 6 yrs ago in a new community in Houston, TX that had an HOA and about 100 homes completed at the time I purchased my home. I assumed that living in a community with an HOA would be my best option and that the HOA would enforce deed restrictions, that assumption was a big mistake on my part.
The only two home builders in the community when I bought my home went bankrupt, the last home builder stopped building new homes in the spring of 2009 and that builder was pouring thousands into the HOA account due to over half of the homeowners not paying their yearly HOA dues to maintain the community.
The last builder had to pour thousands into the HOA account to maintain the community in order to sell their remaining inventory of homes during the bankruptcy and winding down of the company.
The two builders that quit building in the community left the developer with 28 remaining lots in phase one of the community and over 350 lots in the undeveloped future planned phase two of the community.
The community went into decline with foreclosures and the HOA didn't have the funds to maintain the community due to not having a builder to pump thousands into the HOA account due to deadbeat homeowners not paying their $300.00 yearly dues. This also caused my yearly dues to increase to $375.00.
Suddenly in the fall of 2010 the developer cleaned up the community prior to selling the remaing lotsto a nationwide home builder. The new builder came in to build out the remaining 350+ lots and since they had the majority rule in the HOA, they also lowered the building standards.
At the yearly HOA meeting last week, I found out that this builder has continued the tradition of pumping around $25,000 a year into the HOA to maintain the community. There is still over $33,000 owed to the HOA from deadbeat homeowners that have never paid their yearly HOA dues.
The HOA president stated that there is nothing that the HOA can do about homeowners not paying there yearly dues except send out letters and add penalties & fees to the delinquent accounts.
The HOA can't even enforce deed restrictions, all they do is send out letters and once in a great while they will cut the tall grass for homeowners that don't maintain their property and bill them. A few homeowners will pay this fee for the HOA having to cut their grass but the majority of the homeowners that have to have the HOA landscaping contractor cut their grass never pay the fee.
The current builder will continue to pump thousands into the HOA account to protect their interest in selling their homes until they build out the community in about four years and then the HOA account and the community will rapidly decline. I plan on selling my home right before the current builder closes out the community.
My advice is to look at the yearly HOA financial statements to verify solvency. If there is a current builder or developer putting money into the HOA account to make up for homeowner delinquencies, turn around and walk away without looking back.
I've always advocated waiting to buy. If you move to an entirely new area or state, rent for a year or two. In that time you'll get a better feel for neighborhoods and for the amenities / activities you enjoy which are close by as well as those you'd prefer to avoid. You can attune to the "gossip" about areas that have problems or are in a state of flux. See if the realtor will give you a listing of ALL the homes that have sold the past year or two within all the areas you're considering. If one neighborhood is having a much higher turnover and / or flat or reduced prices, know you are taking a risk buying there.
The one time I didn't practice this advice was the one time I lost money when I had to sell - and that was years before the housing bust.
I guess the worse case would be living in a neighbor hood when theUSA hells angels call it their turf.
The USA hells angels have a mystic for harming raping molesting and murdering women and children all over the USA for decades.
Now hells angels are on the child porn support wagon since their big shot leader was convicted for collecting and transporting a huge possible record amount of child porn for the USA