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Don’t Let Bad Neighbors Kill Your Home Sale

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The Appraisal Institute, a nationwide professional association of real estate appraisers, noted that living near a bad neighbor can lower home values by more than 5 to 10 percent (read the whole article here). This should be a staggering revelation for anyone looking to buy or sell a home. The average home sale in Colorado Springs is about $325,000, which means that a bad neighbor can cost you between $16,250 and $32,500!

External obsolescence…

In appraisal terms this phenomenon is called “external obsolescence,” or depreciation caused by external factors not on the property. Another example of external obsolescence would be a highway, landfill, or industrial buildings in close proximity to the home. Even something as simple as power lines ruining the view can cause external obsolescence.

The concept of external obsolescence reminds us that when we buy a home, we buy the neighborhood too. Owning property is not just about what is inside the parcel lines because there are innumerable exterior factors that impact usability and quality of life, and therefore value.

Nosy or negligent neighbors…

In the case of noisy or negligent neighbors, most states disclosure laws protect home buyers from sellers who choose not to inform the buyer about the pesky neighbors. California’s real estate disclosure form even has a specific field for “neighborhood noise problems or other nuisances.” Unfortunately, Colorado’s official seller’s property disclosure doesn’t have a field directly concerning noise or nuisance from adjacent residential properties, meaning buyers in Colorado should be especially careful when selecting a home.

Knowledge of adverse material facts…

The Colorado seller’s property disclosure does offer some protection for buyers when it states that “if Seller has knowledge of an adverse material fact affecting the Property or occupants, it must be disclosed whether there is a specific item on this Disclosure or not.” To avoid potential “miscommunication” of material facts, you cannot rely on the opposite agent or their clients. It is best to take it upon yourself to ask probing questions, in writing whenever possible, and in the presence of both agents when written answer are not possible.

The apriasal institute suggests…

For the seller, things can be a bit more complicated. How exactly do you communicate to your buyer that you have annoying neighbors without it reflecting negatively on the property? Well, you can’t really, but what you can do is try to rectify the situation before sale of the home. The Appraisal Institute has suggested the following steps to deal with neighbors who are dragging down property prices:

1. Speak with the other neighbors in the area and come to a consensus as to which issues need to be addressed and approach the problematic neighbor together.

2. If that does not work, try looking up the original and updated subdivision restrictions and see if the problematic neighbor’s behavior is in violation of those restrictions. If so, reporting the problematic neighbor to the code office of the municipality could spur an investigation into the nuisance. Depending on the nuisance, a call to the local health department may also be warranted.

3. If all else fails, hire an attorney. The cost of an attorney will likely be less than the home’s potential loss of value.

Find a knowledgeable and experienced agent…

Even though homeowners do have some recourse, though limited, it is important for prospective home buyers to carefully examine the neighborhood before committing to purchase a home, thereby avoiding potential problems in the first place. It is also beneficial to have a knowledgeable and experienced agent who can advise you on the best way to navigate bad neighbors. If you or your friends or family need help avoiding letting nasty neighbors taint your home sale please do not hesitate to contact the professionals at Sellstate Alliance Realty and Property Management.

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At Sellstate Alliance Realty & Property Managment, we are proud to serve Colorado Springs as a Real Estate Brokerage and management company. We put our clients FIRST, and serve our community with compassion & excellence.

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