Home Devaluation: Four Things that Drive Down Property Value
The housing market is hotter than ever. Driven by high demand, US home sale prices surged at its fastest pace in more than 30 years. Homes are being sold in record time with multiple bids, including those from companies that buy houses for cash. Demand for property is likely to remain high even though there are some signs that the housing market is slowly cooling off.
With demand for houses on the rise, it is crucial to properly determine the value of a property for sale. If you are thinking of selling your house, here are some things to look out for that could devalue your home.
Foreclosures and Short Sales in the Neighborhood
Imagine that you have a 2,200 square foot home with 3 bedrooms and 2 baths. Two comparable houses in the neighborhood just sold for approximately $400,000, but a foreclosed house was sold for $280,000. Since buyers estimate home prices by looking at the comparable selling prices of other homes in the same neighborhood, foreclosed houses significantly impact the comparable prices and are likely to decrease the value of your home.
Neighborhood foreclosures and short sales can cause properties in the immediate neighborhood to depreciate in value even if the homes are not directly comparable. Prospective buyers may also shy away from purchasing a home in a neighborhood that has multiple foreclosures or short sales as they may be wary of the stability of the area and worry about the future value of their house.
Low Curb Appeal
First impressions are important. A house with an unsightly yard will immediately seem unattractive to prospective buyers as they pull up onto the sidewalk. If your yard is overrun by weeds or is not well maintained, you can expect the value of your home to be driven down. It may not be a good idea to go overboard on decorating your yard either, as homeowners may find it costly or a nuisance to handle extra maintenance. There are instead many simple and affordable ways to increase your home’s curb appeal. Adding some flower pots and outdoor lights, and tidying up your lawn will brighten up your yard and increase your home’s curb appeal.
Apart from the yard, the exterior paint quality of a house is also important in making a good first impression. Paint that is cracked, peeling or of an offbeat color looks unappealing and could cause the property value to suffer. The solution is to keep your home exterior well maintained by giving it a fresh coat of high quality paint in a nice neutral color, such as cream, white, or beige. While you are at it, do not forget to repaint your front door in an accompanying color that makes your home pop!
The exterior of a home can give off positive first impressions, but its value is not based solely on how it looks. Dated and damaged structures, such as wood rot or leaky plumbing, could chip away at your home’s value since nobody wants to buy a house that requires extension repairs. Regularly checking the structural components and systems of your home will help you spot issues before it necessitates major repairs that are often expensive.
Location is a key factor of consideration when people purchase a home. Proximity to facilities such as hospitals and reputable schools, the neighborhood community, and centrality all affect property value. Proximity to undesirable industrial facilities, such as power plants, waste treatment plants and landfills, give rise to environmental concerns and the impact on people’s health. High levels of air, water and noise pollution from these facilities are a serious turn off, which subsequently reduces the value of nearby properties.
The likelihood of encountering a natural disaster can also negatively impact property value. For example, any changes to flood zone maps that place your home within an active flood zone could lower your home’s value. Recent earthquakes, floods, wildfires, hurricanes, and any other natural disaster will drive down property prices. Prospective buyers would have to take on a risk of these events occurring again and causing massive damages. Furthermore, the local community and facilities may take years to recover from the event. More homeowners around the neighborhood might also be looking to sell their house due to the risk of natural disasters. The combination of these factors will cause property to depreciate in the neighborhood.
Home devaluation can be a result of multiple factors. Some can be easily resolved by giving your house a fresh coat of paint or tidying up your lawn. Other factors can be a little tricky to work around as it is not directly related to your home. It is thus crucial to keep abreast of what could chip away at your home’s value and negotiate around that.