It’s been said many times that real estate is about location, location, and location. This is basic stuff, and we all know where a home sits can be about as defining a feature for a property’s value than anything. This is why a home on “the other side of the tracks” can have a far different value than an identical home in a nearby subdivision. But sometimes it’s not even about crossing something obvious like train tracks, but simply crossing the street within the same neighborhood. Maybe the other side of the street is located in a different school district, has a different type of architecture, larger lot sizes, or there are more commercial properties. Whatever the case, let’s look at one particular street in the Curtis Park neighborhood of Sacramento to help show how real estate values are definitely about location.
Question: What is the first street or boundary you can think in your market that makes a huge difference in value if you cross the street? I’d love to hear about it.
A Neighborhood Example: This graph shows all Curtis Park neighborhood sales over the past 6+ years (not newer homes in Curtis Park Village).
Franklin Blvd: Now let’s separate values by Franklin Blvd. This street is a north/south “line of demarcation” so to speak for neighborhood values. Of course Sacramento locals know there is a different feel between the east and west side of Franklin Blvd, but it’s still interesting to see this difference on a graph. For non-locals, both the west and east side are within the neighborhood boundaries, but as you can see, there is a huge change in value once Franklin Blvd is crossed.
2-Bedrooms on the East & West: Even when we look at 2-bedroom units on the east and west side of Franklin Blvd, we see a big difference in value.
- Be a Student: Study neighborhoods so you know the boundaries where values change. This can only happen by talking with real estate professionals, reading articles, asking questions, studying trends, and working in a neighborhood over time. It takes time to become an expert.
- The Right Comps: Avoid “cherry picking” sales from across the street to boost value. Or if you do use higher-priced sales, be sure to make a value adjustment downward as needed. Remember that it’s okay for appraisers to use much older comps in the immediate neighborhood rather than finding newer ones in superior areas.
- Sales vs. Comps Distinction: If you are listing a home, price according to the market instead of borrower higher prices from the market across the street. Help the seller understand that nearby sales might not necessarily be “comps” either. In other words, just because it sold does not mean it’s a comp.
- No Little Black Book of Value: Remember there is no such thing as a book of value adjustments that can be applied to every neighborhood or property type. After all, buyers in one location may be willing to pay substantially higher premiums for certain features, but these same features might not command much of a premium at all in a different location.
- Let History Paint a Context: If you’re not sure if values are softer or higher in the immediate part of your neighborhood, look back at sales over the past few years to get a better idea about how the market has moved over time. The previous sales will help paint a picture of the market. What have buyers been willing to pay over time compared with other surrounding areas? This may be a clue into how value works in the neighborhood.
I hope this was interesting to you. I sure enjoyed putting it together.
Questions: What advice would you give others about the role location plays in real estate? What is the first street or boundary you can think in your market that makes a huge difference in value if you cross the street? I’d love to hear about it.