It’s the real estate agents‘ mantra: Location, location, location. You’ve probably heard the phrase often and may wonder what inspires agents to say the word three times. In a nutshell, location, location, location means homes can experience large increases or decreases in value due to nothing other than their location. The saying’s repeated three times for emphasis, and it is the number one rule in real estate, while also often the most overlooked.
The Epitome of Location, Location, Location
You can buy the right home in the wrong location. You can change the structure, remodel it or alter the home’s layout but, typically, you cannot move it, as it’s attached to the land.
The most desirable locations with the highest home values are those in prime spots, such as the following:
- Areas with Top-rated school districts: Homebuyers with children are concerned about their children’s education and often will pay more for a home that is located in a highly desirable school district.
- Recreation and nature: Homes abutting the ocean, rivers, lakes or parks hold their value because of the location, providing they are not in the path of a possible natural hazard. People want to be near water or visually appealing settings.
- Scenic views: Some homes sell quickly and for top dollar because they provide sweeping panoramic views of the cityscapes, but even a glimpse of the ocean from one window is enough to substantiate a good location. Other sought-after views include mountains, greenbelts or golf courses.
- Entertainment and shopping: In many cities, you will find homes that are located within walking distance of movie theaters, restaurants and boutiques are more expensive than those located further outside of town. Many people would rather not drive if they can walk to nightlife.
- Conforming areas: People tend to gravitate toward others who share similar values and their homes reflect it. Homebuyers mostly prefer to be surrounded by similar types of properties in age and construction, where people just like them reside.
- Economically stable neighborhoods: Neighborhoods that stood the test of time and weathered economic downfalls are more likely to attract buyers who want to maintain value in their homes. These are people who expect pride of ownership to be evident.
- Public transportation, health care and jobs: Most people do not want to endure long commutes to work, the doctor’s office nor the airport. They prefer to be located close to emergency services and conveniences, so naturally homes in locations that shorten travel time are more desirable.
- In the center of the street: Some buyers refer corner locations, but most homebuyers want to be in the middle of the street, which makes them feel less vulnerable.
It’s almost easier to talk about what constitutes a bad location than to discuss good locations. That’s because the qualities that make a good location desirable can vary, depending on whether you’re looking in the city, the country or the mountains. Bad locations, by their general nature, are easier to pinpoint.
- Commercial/industrial areas
Unless you live downtown, commercial buildings on your block diminish residential real estate values. Part of the reason is because homeowners cannot control loitering. Homes next to gas stations or shopping centers are undesirable because of the noise factor, and nobody really wants to listen to truck engines idling at night or during early morning hours.
- Railroad tracks, freeways or under flight paths
Some city dwellers have homes close to railroad tracks and endure rumbling and other noise 24-hours a day. Excessive noise often makes buyers sell quickly, even when such homes are located in otherwise desirable areas.
- High crime areas
People want to feel safe. When cars come and go throughout the night, and the police often visit a neighborhood, the assumption is that the area may have a crime problem. This makes buyers wary of buying homes in that location.
- Economically depressed areas
If owners show no pride of ownership in maintaining their homes, evidenced by lack of maintenance, poor landscaping and junk in the yard, you might think twice about moving into such an area. On the other hand, some areas like this are at the center of proposed rehabilitation projects. But, rehabilitation is never a guarantee.
- Close to hazards
The bottom line: People don’t want to live next door to nuclear power plants. Few homebuyers want a transformer in their yard, either. If the neighborhood was built on a landfill or was recently swampland, pass and move on to the next. Always order a natural hazard report when buying a home.
When Circumstances Change
Even when you do find a home in a desirable location at what seems like the right price, it never hurts to look at additional factors such as any new construction close by, or vacant land that could be developed in the future into something that impacts the value of your potential new home.
Sometimes, in new home developments, zoning and building plans change. For example, a buyer purchased a home in Elk Grove, California, in early March just as new construction broke ground in a vacant field behind the home. Instead of putting up single-family homes as originally planned, the developer instead built apartment buildings, with walls within 3 feet of the existing homes.
The apartment buildings changed the whole landscape, and the homeowner’s formerly appealing nature views were now obstructed. Later in the year, a seller a few doors down tried to sell an identical square-footage home and found that he couldn’t get nearly the price he would have gotten if he had sold before the apartments were built. The presence of the apartment buildings significantly affected his home’s value.