What Is It With Real Estate Agents and Location?
Why Agents Repeat this Real Estate Mantra
You may have heard this mantra when talking to an agent about the value of real estate: Location, location, location. In a nutshell, it means homes can experience large increases or decreases in value due to only their location. The phrase emphasizes the importance of location when considering the value of a property.
A home's location is one of the most important influencers when an appraiser considers the value of the home. The home and land are compared to similar properties within the same geographical area, which is why location is emphasized as much as it is when determining property value.
Why Location Is Important
Much like a stock on an exchange, a home has a value that fluctuates—the price was originally the value of the land at the time of purchase, the cost of construction of the home and a percentage of markup for profit for the builder.
The land and home value then rises and falls with the value of the properties around it and the commercial or recreational activities that develop nearby. There are many factors that can influence the value of a home, but the surrounding area is the most influential.
Value is an elusive concept—something that is valuable to one person may not be valuable to another. Real estate value is built upon desirable characteristics that are generalized, location-specific, and average for a given population.
The Most Desirable Locations
The most desirable locations with the highest home values are those in prime spots. Some locations are considered to be prime because:
- 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.
- Homes abutting the ocean, rivers, lakes or parks hold their value, providing they are not in the path of a possible natural hazard.
- Some homes sell quickly and for top dollar because they provide sweeping panoramic views of the cityscapes. 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.
- In many cities, you will find that homes located within walking distance of entertainment or recreation such as movie theaters, parks, and golf courses are more expensive than properties located further away.
- People tend to gravitate toward others who share similar values reflected in their homes. Homebuyers mostly prefer to be surrounded by types of properties akin in age and construction, where similar people reside.
- Neighborhoods that stand the test of time and have weathered economic downfalls are more likely to attract buyers in search of stability in value.
- Some people do not want to endure long commutes to work, the doctor's office, or conveniences. Homes in locations that shorten travel time are often more desirable.
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.
- Unless you live downtown, commercial buildings close to residential property diminish those real estate values. Part of the reason is that homeowners cannot control noise, traffic, or other commercial activities. Another factor is that commercial property is itself valued differently than residential.
- Some city dwellers have homes close to tracks, overpasses, and busy intersections. These individuals endure rumbling and other noise 24-hours a day, reducing the value of the property.
- People want to feel safe. When cars come and go throughout the night, or the police are often in a neighborhood, that neighborhood is generally assumed to have a crime problem.
- If owners do not maintain their homes and property throughout a neighborhood, real estate values in those areas will be reduced.
- Hazardous appearing conditions surrounding an area can reduce the value of the property located there. While housing developments are initially located far away from any hazardous situations, problems can develop over time. Sinkholes have been appearing for a number of years in Florida, for instance. This is justifiably causing concerns for property owners in the area.
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 that may affect the property in the future. This could be any new or planned construction nearby 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. An example could be a buyer purchasing a home 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.
The apartment buildings changed the whole landscape, and the homeowner's formerly appealing nature views were now obstructed. The property value of the affected homes would go down.
Location, location, location. The word is repeated because it is the most important aspect when the value of a home and property is assessed. When you are looking at homes to buy, be sure to consider the mantra repeated by your real estate agent. The value of the home is dependent on the location, and the value today may not be the value of the home in the future.