Typically when homeowners talk about the characteristics that affect the value of their home, they are referring to the physical features of the home. Such features include counters, cabinets, flooring, total living area, etc. While all of these items do affect the value of a home, there are also external influences that can affect value.
There can be positive external influences as well as negative external influences, and both types can affect the value of a property. Favorable external influences can include a view of the mountains, river, ocean, bay, or skyline. Buyers in some markets are willing to pay more (sometimes much more) for favorable views. The view could also consist of unfavorable external influences such as a junkyard or commercial properties.
When the external influence is negative, it is called external obsolescence. External obsolescence (defined by Appraising Residential Properties Fourth Edition on pg. 279) “is an element of depreciation, a defect, usually, incurable caused by negative influences outside a site and generally incurable on the part of the owner, landlord, or tenant.” So, for example, a location on a busy road or having a view of commercial properties could actually have a negative impact on the value of a residential property.
EFFECTS ON VALUE
The question during an appraisal becomes how much do external influences affect the value of the property. The answer is it depends. Not every market is the same. A buyer looking for water frontage property in River Ranch, which is in the middle of Lafayette Parish, is probably willing to pay much more for a view of the river than someone in Vermilion Parish would be willing to pay. Therefore, the adjustment for a water view or location would be different in these areas. External features affect specific markets differently.
To determine how much an external factor has on the value of a property, the appraiser must study the market. An appraiser will report how buyers and sellers in a specific market are reacting to certain features. It is extremely important to know how the external factors influence the value of your property. If a property is overpriced when it goes up for sale, you run the risk of scaring potential buyers off. If you price your home too low, then you risk not making your maximum profit on your home.
CONSULT A PROFESSIONAL
External influences can significantly complex the valuation of your property. It is important that you find a qualified expert to help solve your valuation needs. At Duplechin Appraisals, we are trained to complete complex assignments in Lafayette Parish, as well as most of the Acadiana Parishes. If we can be of assistance in the future, please reach out to us at 337.254.2215 or firstname.lastname@example.org.