There are so many ways to increase property value, but at the same time there are certain things outside a homeowner’s control that will plain and simply be a negative for value.
What is external obsolescence and why does it matter for property value? External obsolescence is a factor that reduces the value of an improvement because of something external to the property itself. It’s not about whether the house is outdated or not, but rather something outside of the home that is causing a lower value. It’s usually something that cannot be cured.
Five Examples of External Obsolescence
- Busy Road: This is a very common example of external obsolescence because we can see it in virtually every community to some extent. Homes on busy corners, on main streets or near freeways suffer from extra noise and traffic, both of which are not friendly to higher values.
- Commercial buildings: Residential and commercial uses tend to not mix well in suburban areas. It’s usually a negative factor when houses are located next to restaurants, retail, gas stations, etc…
- Construction of a landfill next to a neighborhood: This can impact the entire neighborhood (not just one house) due to the smell or even the noise of large garbage trucks moving in and out.
- Apartments: Being located next to an apartment building is almost always less desirable for buyers. Or construction of low-income apartments can be a touchy subject for a higher-income neighborhood, and something that can impact property value too.
- High-Voltage Towers: A view of nearby power towers usually results in a hit to property value. Check out some pictures in a previous post, “High voltage towers and property value.”
I shot this 30-second clip about two years ago on an appraisal inspection. Do you hear any external obsolescence? Watch here or below.
External obsolescence reminds us when we buy a home, we buy the neighborhood too. Owning property is not just about what is inside a set of parcel lines because so many factors outside of a property can impact value (and quality of life).
Questions: Can you think of any other examples of external obsolescence? How has external obsolescence impacted your real estate decisions? What other factors outside of property can influence value? I’d love to hear from you in the comments below.
If you have any questions or Sacramento home appraisal or property tax appeal needs, let’s connect by phone 916-595-3735, email, Twitter, subscribe to posts by email (or RSS) or “like” my page on Facebook