Loading ...The old saying in real estate is location, location, location. Certainly this is true on macro level. An average home in Manhattan is certainly worth more than an average home in Jackson, Mississippi. But as the Pleasanton/Dublin/San Ramon market slows, the location of a property takes on more significance in terms of how quickly the home will sell, and at what price. The reason is simple. As the market slows, there are more houses for sale, and less pressure on the buyer to compromise over homes.
In today’s market, buyers have become very deliberate, and are far more sensitive to “intrinsic value” factors such as location, condition, age, view, lot size, amenities, and floor plan. So what is a desirable location, and an undesirable location? I am not talking about comparing neighborhoods within a city, but rather homes within a neighborhood. Here are some characteristics of homes that have challenging locations:
Busy Streets. If a home is located on a busy street, it is not as desirable in the marketplace. A busy street, by the way, is considered by most buyers as a street where young children can’t play in the street because there is too much traffic. Because many of the buyers today have young children, or are planning on having young children, they will typically shy away from homes on busy streets. In effect, you are losing a fairly large percentage of potential home buyers. Whether rational or not, the fear that a busy street instills on parents is very real. Typically, buyers who buy homes on busy streets have older kids, where this is not as much of a concern, or no kids at home. And savvy buyers know that even if they do not have kids, it will likely be more difficult to sell the home when the time comes, so they are more conservative in what they are willing to pay. If it is a corner lot, and the busy street is on the side of the property, it also becomes problematic.
Close to major roads or freeways that generate noise. If there is a major road or freeway close to the subject property, this will also likely impact your home in the market today. Buyers typically want peace and quiet, not the constant sound of traffic. And if your home backs up to a major road or freeway, it will definitely impact your home. It is not very often that home buyers come to my office and ask “do you have any homes that back up to a freeway?” or “Can you find me something with a major road behind it? I love the sound of traffic!”.
Homes that abut commercial or other non-residential properties. Homes that abut shopping centers, commercial buildings, water treatment facilities, storage yards, industrial buildings, and other types of non-residential properties will often have a tougher time selling. They are usually not very appealing to look at, and can generate noise, odors, loitering, and other factors most buyers consider negative. This can also go for schools, although this is more of a hit and miss proposition. Some do not like the noise associated with a school, while others consider it “happy noise” and are not bothered by it. It depends on the buyer.
Homes that abut higher density condos or apartments. Single family homes that back up to apartments or high density condos will typically have a tougher time selling because there is a perceived lack of privacy and more potential for noise from neighbors.
So does this mean that homes with location issues won’t sell? Of course not. Any home will sell if it is priced correctly. It does mean, however, that it will sell for less than a similar home in a better location, all things being equal. All things being equal, buyers will overwhelmingly opt for better locations if there are 2 similar homes to choose from. Because of this, there is always a discount for homes in less than desirable locations. The amount of the discount will vary, however, depending on market conditions. When the market is hot or overheated, and there are multiple offers and intense competition from buyers, the discount for inferior locations is much less, as buyers are forced to compromise and be more accepting of homes that are not perfect. Even if they don’t start out that way, after losing 2 or 3 homes in multiple offer situations, buyers tend to get discouraged, and tend to settle for homes that are not perfect. Conversely, when the market is stable or slow, and buyers have the luxury of choice, location becomes a much bigger issue. In effect, homes with inferior locations need to be discounted more heavily to attract interest from buyers, and they will typically take longer to sell, as you must go through more buyers to find one willing to overlook the location.
There are also offsets that can help to mitigate location issues. For example, many homes that back to busy streets or freeways have over-sized lots. This can help to offset the location issue, but the home will likely still be discounted by the market.
Location is unfortunately one of the intrinsic value items that you can not change. You can only adjust the price to make it more attractive to potential buyers.
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The Ins & Outs of Location