Although appraisers are uniquely qualified to generate reliable opinions of a property’s value, real estate agents can share insights with their clients regarding issues that could potentially — and negatively — impact value.
In fact, agents and consumers might be surprised to know the following unlikely culprits can adversely affect a property’s appraised value.
1. Odors
Cigarette smoking is more than a health hazard; its odor can have a negative impact on a property’s value and its ability to sell. A 2015 survey of 200 Realtors in British Columbia, Canada, which was reported in the Clean Air Coalition of British Columbia, found that 76 percent of Realtors believed smoking would decrease a home’s value.
Of those surveyed, 70 percent said prospective buyers are unwilling or less likely to purchase a home where the owner smoked; 77 percent said it’s more difficult to sell the home of a smoker.
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Agreeing, 26 percent said cigarette smoke “significantly” lowered a property’s value. Alvin “Chip” Wagner said there’s no exact formula for calculating this loss in value, but it can certainly affect a sale price.
Wagner also said smells such as dampness, pets or strong cooking spices can result in a lower sale price. They might be a deal-breaker to a potential buyer because they can be difficult to eliminate.
Agents might recommend repainting and replacing carpeting to eliminate odors, but such upgrades can be a significant expense to the homeowner.
2. Neighbors
They’re not just an annoyance. Bad neighboring properties — including those with unruly pets, unkempt yards, noisy inhabitants or poorly maintained property — could drive down property values of nearby homes as well.
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Appraiser Rick Borges said he has seen situations where living near a bad neighboring home can lower home values by 5 percent to 10 percent.
In some cases, neighboring infrastructure, including power lines, highways and commuter railways, might also cause an appraiser to adjust his or her opinion of value. The proximity to these external factors determines just how much the value is affected.
3. Landscaping
Real estate agents know that curb appeal is vital when selling a home because it’s a potential buyer’s first impression of the property. Landscaping can also significantly impact property values.
Frank Lucco said that landscaping accounts for 85 percent of what buyers first see when looking at a home. When valuing a home, the appraiser must look at the subject property’s landscaping compared to other properties in the area.
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If the subject property’s landscaping is outdated, sparse or inappropriate for the geographic location, this all will be factored in to the appraiser’s opinion of value.
Landscaping projects can have a positive impact on home values, but agents should urge homeowners not to exceed neighborhood norms when upgrading.
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4. Death and disaster
Sites of notorious events such as hauntings, suicides and killings are called “psychologically stigmatized” by Randall Bell, who specializes in valuing such properties. Among his most notable cases are appraisals of the homes where Nicole Brown-Simpson, JonBenet Ramsey and Sharon Tate were murdered.
Bell told curbed.com that although he hesitates to overgeneralize, property owners who want to sell soon after a tragic event will almost assuredly get below market value. He said there’s usually a 15 percent to 25 percent decrease in a property’s value for a few years after the event.
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The stigma might go away, but there are exceptions. Bell said the site of the now-demolished Milwaukee apartment building where Jeffrey Dahmer murdered many of his victims sold for a premium. Other properties never lose their notoriety, and owners can’t give them away, Bell said.
Owners of stigmatized properties, frustrated by the inability to sell, might want to raze buildings, but real estate agents should advise them against it. Bell said demolition is a waste of money because the stigma is associated with the land — not just the building. These properties often sell at deep discounts whether or not the building has been demolished.
Appraisers consider numerous factors when generating opinions of value. Being aware of ones that could have a negative impact on value should help real estate agents and their clients better understand appraisals, and it offers them the opportunity to make possible changes to properties.
M. Lance Coyle, MAI, SRA, is the 2015 president of the Appraisal Institute.