Can Bad Neighbors Affect Your Property Value?
Bad neighbors and good neighbors, yes, we’ve all got them in our lives! But can our bad neighbors actually have a negative effect on our property value? Yes, bad neighbors can and do affect your property value.
But to what degree? Can a bad neighbor with an unsightly yard decrease your property value by 10%, 20% or more? Can a bad neighbor change into a good neighbor? Well, it depends. Here are a few points to ponder before determining if your neighbor has decreased your property value.
First, What Really Is a Bad Neighbor in Real Estate Terms?
A bad neighbor can often be categorized as a neighbor who doesn’t maintain the exterior of their property in a way that matches that of the surrounding properties. A bad neighbor can also be a neighbor who may have built a much lower quality home that looks dissimilar to the surrounding properties. Or a bad neighbor simply may be a property such as a cemetery/graveyard.
All of the preceding bad neighbor examples can contribute to a decrease in your property value, but the amount of decrease often depends on the buyer.
How a Bad Neighbor Affects Your Property Value
The decrease of your property value due to any detrimental external factors is called external obsolescence. To determine the amount of the external obsolescence caused by a bad neighbor you should compare the value of the property with and without a bad neighbor.
Here is a really simplified way of looking at it.
Picture yourself as a potential buyer for your home. How much would you be willing to pay for your home knowing that there were no bad neighbors within a close proximity? Next, how much would you be willing to pay for your home fully knowing that there really exists a bad neighbor property nearby?
What are the differences in your two potential purchase offers? Did you automatically deduct 10 percent, more or less from the bad neighbor property offer price? Or was the amount you deducted based on the type of bad neighbor? For example, would an unmaintained property nearby cause you to offer a much lower price than a lower quality home nearby? Or would you offer a lower price for the property due to a nearby cemetery?
In reality, I found that some people will absolutely not consider living near a cemetery, whereas others said they preferred the peace and quiet of having a cemetery nearby.
My husband recently made a good point regarding cemeteries. He stated that a quiet, small, older cemetery would be a peaceful neighbor, whereas a busy, large, crowded cemetery could create noise and a nuisance to nearby properties.
You see how the decrease in property value can vary? The decrease, if any, oftentimes depends on the potential buyer and their actual taste.
Bad Neighbors Are Not Fixed in Stone
So many questions, but the point that I want to make and share is that not everyone will arrive at the same decrease in value based on everyone’s likes, dislikes and tolerance to bad neighbors. To compare, an unsightly unmaintained property may simply bother some home buyers more than others and is typically curable (fixable) if the neighbor decides to fix up their place.
On the other hand, the lower quality home and the cemetery bad neighbor examples may result in a larger decrease of property value due to the fact that they are less curable (in other words, less likely to cure or fix).
An appraiser will use historical data that he or she has obtained from past appraisals, closed sales and listings to determine decreases in property values based on bad neighbors. In addition, the curability or lack of curability also contributes and is considered when arriving at the amount of external obsolescence (decrease in value) taken on a property.
An appraisal report will typically contain and identify any external obsolescence taken from a property’s value and state why it was taken.
On a positive note, having a good neighbor can actually enhance or increase your property value in much the same way as the bad neighbor example. A good neighbor example might be a neighbor who exhibits great pride of ownership in their home simply by keeping it well maintained inside and out when compared with neighboring properties.
Let’s Have a Conversation:
Have you had a bad neighbor situation that you think has affected your property’s value? What has made your neighbor a bad neighbor? How much do you think the bad neighbor has decreased your property value? Have you had a bad neighbor property that turned into a good neighbor property?
Tags Downsizing Your Life
Run down exteriors were the least of my problems. I sold up and moved twice because of constant dog barking issues. The first time we had a family move in with a springer spaniel that was never walked, because they were originally bred as working dogs they need exercise 3 or 4 times a day. When the owners left for work in the morning this dog would start to howl and bark and it would be like that all day. They’d come home around 5 and let the dog into the back garden where it would bark some more. Their 3 young boys screamed and fought all the time as well. After 5 years it drove us nuts so we decided to move. When we initially spoke to them about the dog barking their attitude was dogs bark, get over it. Part of the problem was the dog was allowed to roam the house so the constant barking went room to room.
The second house was left to us by my dad. 2 ladies liven next door with a dog and it was fine. However they decided to get a puppy but because of work didn’t have time to train it. Both dogs became aggressive to the point the address was blacklisted by delivery drivers and the post. When they were out at work the dogs barked all day and threw themselves against the back door trying to get out. When they were out the garden was their toilet and it never got cleared up so the stench was appalling (I couldn’t sit in my own garden). The last year we were there was terrible, because the house was the family house where we were all brought up I was upset at leaving.
I’m in Switzerland now. Here the size of the dog you can have depends on the size of apartment or house. Needless to say there are a lot of small breeds around. Dogs also have to attend training classes run by the police. I have dogs in my building and only ever hear them bark in the hall when they’re being taken for a walk. The law here is dogs can only be left for 4 hours at a time.
Hi! Very helpful and concise explanation. I’ve never heard this term before but I’m looking for info & options for selling my condo. The unit above me installed prohibited laminate flooring, then rented it to people who make unimaginable levels of noise continuously. Worse, they retaliate if i complain and I’ve suffered extreme distress & financial damage from it. I have to leave to salvage my health and sanity, which is already outrageous. Now I fear losing all of my equity too.
The HOA refuses to enforce the flooring OR egregious behavior, and I can’t afford an attorney. I obviously have to disclose the extent of the problem, which I consider virtually uninhabitable now.
Roughly, how much do you think this might affect the value if comps are around $400k? Is there anything I can do without hiring a lawyer, to at least mitigate further loss? Thanks!
Have you tried your area’s pro bono legal aid service for advice? I feel your pain as I suffered from an inept board of directors in a condo more than 25 years ago and it makes me reluctant to buy into a condo again.
Sorry to hear this. Why won’t the HOA enforce their rules?
They tend to enforce tules on “good” homeowners; they stay away from bullies, and others that may give them an argument. So frustrating.
Here in Switzerland every Canton has an association you can pay a small fee to join, they investigate and sort out problems like this.
Most apartments and houses here have wooden floors, but things are so well built and insulated you don’t really here your neighbours much. The lady next door to us had a loud party one Saturday night and we only knew when we opened our apartment door to go out!