Certain factors can reduce your home’s value. A home in poor condition, low sales prices in the area, or high crime rates are just a few reasons that homeowners often see lower home values. Some things that decrease a home’s value have nothing to do with the property itself. These factors are called external obsolescence issues.
The Problem With External Obsolescence Factors
One issue with external obsolescence factors is that there’s nothing you can do about them. They are external and have nothing to do with your home. A few common examples include:
- Major roads – Does your home back up to a busy road that creates a lot of road noise or makes it hard to get in and out of the home’s driveway? This can decrease the home’s value and there’s obviously nothing you can do about it. You can’t change the road or move the home.
- The location – Is your home located near unsightly factors, such as commercial buildings, power lines, or train tracks? This can decrease the home’s value. Again, there’s nothing you can do about the location or the things that surround it.
- Ugly neighbors – It happens in every neighborhood. There’s the one neighbor that thinks it’s a great idea to paint the house an obnoxious color or that refuses to take care of the exterior of the home. This can bring your home’s value down just because of the eyesore that your neighbor creates.
- Proximity to a gas station –The smell and the appearance of a gas station next to your home can quickly bring a home’s value down. People don’t like the smell and it could even cause potential health issues.
Can you Fix External Obsolescence?
Unfortunately, there’s typically nothing you can do to fix external obsolescence issues. The factors are typically locational, but some may be economical too. In rare cases, you may be able to ask your neighbor (nicely) to fix up his home or even offer to help him, but that rarely goes well.
If you live in a neighborhood with an association, you may be able to take up the issues with the board. If the board can enforce penalties or make your neighbor fix up the home, it could work to your benefit. But, if you don’t have an association or they can’t help, it won’t help the issue you have with your neighbor.
Why External Obsolescence Matters
External obsolesce can bring your home’s value down. This will matter to you in a variety of situations:
- Selling your home – When you sell your home, you want to make a profit. If the value fell because of circumstances outside of your control, you may find yourself losing money. It may even be more difficult to sell your home if it’s near a landfill, gas station, or power lines.
- Refinancing your home – When you refinance, you have to prove that your home is worth enough money to cover the loan amount plus give you equity in the home. If the value isn’t high enough because of factors outside of your control, you may not be able to refinance your loan.
External obsolescence can make it very difficult to sell or refinance your home. Because there’s nothing you can do about it, you may find yourself stuck with the home longer than you planned or taking a loss on its value. Before you buy a home, do your research. Are there any plans in the near future to improve the land around it and build any of the things that may make your home lose value? If so, you may want to look elsewhere to avoid serious financial issues in the future.