How Your Neighbors Can Lower Your Property Value

Believe it or not, the people living next door can play a significant role in determining your home's value. From aggressive pets to neglected maintenance, neighbors can impact your property in ways you might not have considered.

Let's explore some common ways your neighbors could be affecting your property value and what you can do about it.

Poor Property Maintenance

Imagine you've kept your yard pristine and your home in tip-top shape, but next door, it's a different story. The lawn is overgrown, the paint is peeling and it looks like no one has cleaned in years.

This isn't just an eyesore; it can hurt your property's value. When potential buyers see neglected homes nearby, they begin to worry about the neighborhood's overall upkeep. This may lead them to offer less money for your home or lose interest altogether.

Alarming or Bothersome Behavior

Noisy gatherings, poorly-behaved pets or aggressive behavior from your neighbors can create a stressful environment in your home or neighborhood. These issues not only disrupt your daily life but can also make prospective buyers think twice when considering your community. This can lead to lower offers on your home or may deter buyers completely.

Overdevelopment

Sometimes, the problem isn't with your existing neighbors but with what they plan to build. Overdevelopment, such as adding large additions that don't fit the neighborhood's character or constructing multiple rental units on a single property, can negatively impact your home's appeal. These projects can lead to increased traffic, privacy loss and a change in the area's overall community, making your neighborhood less attractive to potential buyers.

How does a foreclosure affect your neighborhood?

ATTOM’s U.S. Foreclosure Market Report showed a total of over 100,000 foreclosure filings in the third quarter of 2023, up 9% from the previous year. With foreclosure rates increasing throughout the real estate market, it’s important to know how a foreclosure in your neighborhood can affect the value of your home.

A report by The Alliance for a Just Society found an increase in property tax rates in areas with foreclosures, as well as significant declines in the value of surrounding properties. In fact, neighboring home values are proven to drop an average of 1% for every 7% the foreclosed home value drops according to RealtyTrac data.

The average decline in property value of a foreclosed home is anywhere from 22 to 28%, conservatively. With a 28% decline on a foreclosed home comes an expected 4% decline on neighboring homes. This means a nearby home with an initial property value of $250,000 could see almost a $10,000 decline just by being in a quarter-mile radius of a foreclosed home.

Why Nearby Foreclosures Lower Property Value

The decline in neighboring property values after foreclosure is largely due to the appraisal procedure. There is a wide range of factors that go into determining a home's value, so appraisers often turn to similar nearby houses, known as "comparables," for base values.

Bob Hunt, former director of the National Association of Realtors, suggests using a foreclosure as a comparable is not ideal, but may be necessary in some situations.

Outside of the appraisal process, foreclosures also tend to have an effect on a potential buyer's perception of the area. From their perceived association with higher crime rates to deteriorated curb appeals, one foreclosure can hurt the reputation of the entire neighborhood.

Can you sue your neighbor for lowering your property value?

Your ability to sue your neighbor for lowering your property value depends on your specific circumstances and laws in your state. If your state allows for it, you may be able to take your neighbor to court over certain types of property use that negatively affect your property's worth:

• Nuisance: Your neighbor's actions (excessive noise, unsightly conditions, noxious odors, etc.) substantially and unreasonably interfere with your ability to enjoy your property.
• Negligence: Your neighbor's actions or lack of action caused damage to your property.
• Easement and property rights: Your neighbor has unlawfully restricted you from accessing shared spaces like driveways or has violated property boundaries.
• Environmental hazards: Your neighbor is engaging in activities that release hazardous materials or contaminants onto your property.
• Zoning and land use: If your neighbor is violating zoning or land use regulations, you can report the violations to your local government or zoning authority.

To determine whether you have a valid legal claim against your neighbor, consult with an attorney who specializes in real estate or property law in your area. They can provide you with guidance tailored to your specific situation and advise you on the best course of action.

Alternative Solutions

Suing your neighbor for lowering your property value can be extremely challenging and often requires you to prove several incidents of their misdeeds. These lawsuits can be time-consuming and costly, and there is no guarantee of success.

To save both parties time and money, you may consider other ways to resolve disputes before pursuing legal action:

1. Communicate With Your Neighbors

Starting a conversation with your neighbor about the issues you're experiencing can sometimes be the fastest and simplest solution. It's possible they're unaware of the problem they're causing, so be sure to approach them in a friendly and understanding manner.

A direct but polite discussion can lead to a mutual agreement that benefits both parties. Remember, the goal is to maintain a peaceful relationship while protecting your home's value.

2. Report to Your HOA

If you live in a community with a homeowners' association (HOA), you have a valuable resource at your disposal. HOAs have rules that all residents must follow, including those about property maintenance and noise levels.

If talking to your neighbor doesn't work, reporting the issue to your HOA can be an effective next step. They can enforce community standards and take action if necessary, which may help resolve your problem.

3. Contact Authorities

In cases where your neighbor’s behavior is illegal or dangerously aggressive, contacting the local authorities may be your best option. This could include situations involving illegal activities or threats to your safety. In these scenarios, law enforcement may intervene and provide a resolution that might not be achievable through neighborly talks or HOA involvement.

4. Improve Your Own Property

While you can't control everything your neighbors do, you can take steps to minimize the impact on your property. Investing in landscaping, soundproofing or even fencing can help shield your home from the negative aspects of neighboring properties. Enhancing your property's appeal and functionality not only makes it a more enjoyable place to live but can also increase your home’s value, offsetting potential negative impacts from your surroundings.