If you're in the appraisal industry, you've undoubtedly heard the term "external obsolescence." The definition is "depreciation caused by external factors not on the property." Most people don't realize, especially if you're not in the real estate business, that this could include your neighbors. According to the Appraisal Institute, "bad neighbors" means "homeowners with annoying pets, unkempt yards, unpleasant odors, loud music, dangerous trees and limbs or poorly maintained exteriors." In some cases, living near a bad neighbor can lower home values by 5 to 10 percent.
If you find yourself the victim of one of these scenarios, the Appraisal Institute offers homeowners some helpful steps you can take:
1. Get the opinions of your other neighbors and then speak with those offending neighbors together.
2. See if the neighbor is violating any subdivision restrictions or municipality restrictions. Depending on the offense, calling the health department may also be helpful.
3. If speaking to your neighbor does not work, you may need to hire an attorney, depending on the severity of the issue.
It's good to know that homeowners have some recourse, but if you are a prospective homebuyer, you should really look at a neighborhood that you are considering before buying. It is also helpful to make note of a potential property's location; if it is located near a commercial facility or power plant these can also negatively affect the value of a home. It is good to be aware of these facts before buying, not after.