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Does Your Neighbor's Home Sale Affect Yours?
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A couple weeks ago, I sent out an email asking if anyone had any questions I could answer on my video blog. One loyal viewer, Linda, sent an appropriate question for the spring market:
If a home sells below market value in your neighborhood, does it affect the appreciation of your home?
There's no easy answer to this question; it depends on various factors. If a home sells below market value, the first thing an appraiser will want to know is whether it was a distressed property. They will also want to know if it was an "arm's length transaction," a transaction between family or friends. If that's the case, the low price of the home sale won't affect your home's value.
When appraisers compare value, they're really focused on the size, condition, and amenities, among other things, in order to come up with a true market value. Also, if the home that sold at a lower value was in really bad condition compared with your house and most of the houses in the neighborhood, you probably don't have much to worry about.
Another thing to remember about appraisals is that appraisers use three comparable properties when determining a value. They prefer to use homes that have sold relatively recently, looking for homes as similar to the property they're appraising as possible. If there is one house that's sold for a low value, you don't need to worry - the appraiser will likely find other homes to compare yours to, so that one bad home sale doesn't ruin yours. In other words, one sale doesn't make the market!
If you have questions about this topic or need real estate assistance of any kind, give us a call! We would love to give you a hand!