Is my neighbor ruining my property value by listing her home at a low price?

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Question:

I live in a development where most of the houses have similar layouts and features. Our property values have taken some serious dips in the last few years, and some houses were even foreclosed on, but things have been coming back. Or at least I thought so. My neighbor across the street just listed her house at around $30,000 less than I thought most houses around here are worth. Isn’t this going to bring down the value of my house, which I might want to sell next year? Should I talk with her about this?

Answer:

There’s nothing to stop you from talking to your neighbor, but understand a few things first:

1) You’re not likely to influence her. The home seller probably arrived at a price after much discussion with her real estate agent and analysis of comparable properties and her personal situation. It’s in both of their interests to sell at as high a price as possible – the homeowner in order to make a profit, the real estate agent in order to earn a high commission on the sale.

2) If the price really is lower than most houses in your neighborhood would be listed at, there could be some issue with the house that you don’t know about, such as a structural defect or unusual problems with drainage on the site. While it’s true that future home sellers will look to the nearby comparables when deciding how much to bid on your house, there may be unseen differences between your house and the neighbor’s that make them less than truly comparable.

3) The list price is only the list price. You won’t know until the sale is over how much a buyer was actually willing to pay for the place. In fact, depending on how quickly the real estate market in your area is picking up, it’s possible that your neighbor put a bargain price on her house deliberately, in order to excite buyers into a bidding war. Even if the low pricing was unintentional, the market tends to correct for low pricing, as more than one buyer swoops in and they end up competing against one another.

In short, now is not the time to worry that your neighbor’s actions will lower your own property values. The best thing you can do to keep your home’s value high is to pay attention to maintenance issues and save up for some repainting and perhaps improving before you put the house on the market. Buyers like a house that’s move-in ready.

For more information on pricing your home and preparing it for sale, see the "Selling a House" section of Nolo's website.

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