This is an older post that is still relevant today, so don't be put off by the date it was created.
I recently showed buyers a home they wanted to view that was located on a busy street. I told them that I would show it but I also gave them my feelings about making such a purchase. The Scottsdale home for sale was originally listed at $579,900 and was now priced at $509,000. That might sound like a bargain with such a high price drop, especially in the area.
But at $509,000, it still is not sold. I think it needs to go below $500,000, but even then I don't think this property is a real bargain because of its location. From articles I've read in the past and my own deductions, the value of a home on a busy street (or near a train track, apartment building, commercial buildings, etc.), can be around 15% less than the same home not located near these less desirable features.
New Construction Built on Busy Streets
In many established towns like the original areas of Scottsdale ( mid-Scottsdale and the south area), there is little or no land left to build new homes on. Most new construction in these areas is done on lots where the original home was razed. Some of these lots are on busy streets.
People purchase these homes and pay high new construction prices because the home is brand new and possibly built to their desires. In this market, a builder might even make changes on a spec home if a buyer asks.
Being brand new is the pull to get buyers to purchase on a busy street or in other areas that they wouldn't have otherwise chosen. But these buyers usually have a difficult time understanding this when they're ready to sell.
The home is no longer new and is no longer custom. It is now just another resale home and located on a busy street to boot. That will mean that if a similar home should be worth $450,000, for example, then around 15% needs to be deducted from that price as a starting point.
Another negative to Scottsdale homes in bad locations is the time on the market. Buying on a busy street is usually never a buyer's first choice. That means that having a property on a busy street will take longer to sell than the same property located in a better spot.
In today's market, with so much competing inventory, I don't know why anyone would even consider purchasing a property with a negative location. It's not a good investment as the property will not appreciate in value at the same rate as others. Even if you get a bargain today, you'll have to give some of that up later on when you try to sell. But for some reason, sellers don't understand this fact.
Some Calculate it at an Even Higher Loss
I can't find my source, but after I wrote this article I read either in Realtor® Magazine or the National Association of Realtors® (NAR) that gave a figure closer to 18-22% less value than if the same home were in a different location. Again, this doesn't necessarily mean just being on a busy street
I had a listing where my sellers knew an appraiser. He gave them an appraisal for their Scottsdale home for sale and they kept it on the kitchen table for prospective buyers to read. However, their home was right next door to an auto shop. They did not get what the appraised value was, but they were very understanding because I explained it to them in the beginning.
In Certain Areas this Doesn't Matter
This post is focusing more on suburban living. People that decide to live in a large city like Phoenix don't necessarily feel the same, and some areas in downtown Phoenix that are near commercial areas like restaurants could be desirable. There are condominium buildings built on busy streets in the Valley that people want because they're close to transportation and shopping. Not everyone drives.
Generally speaking, if you are thinking of purchasing a property with negative surroundings, it should be an outstanding value. And you need to understand that when you sell, you'll have to offer it at a good value, too.Posted by Judy Orr on