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Many homeowners do their best to maintain or even increase their property value, but there are factors that can hurt property value, which are out of your control. The environment of the region you live in, the benefits and disadvantages of your particular neighborhood, land values and the state of the current economy can all increase property value or send it crashing. Here are four key factors you should keep an eye on when it's time to sell your home.

1. Perceived Risk

Buying in a state or county with high environmental risks is something buyers from out of the area consider. Regions of the country which are subject to earthquakes, wildfires, flooding, tornadoes, heavy winter storms and more often carry higher insurance costs associated with owning a home. For instance, Kentucky encounters 21 annual tornadoes, on average. Flood risk is a much more serious concern. In Northern Kentucky, the Federal Emergency Management Agency (FEMA) classifies the flood risk as either "high" or "severe," depending on the specific location. However, this risk varies based on your proximity to a floodplain, the grading of your property and the construction of your home. Fortunately, flood insurance is fairly easy and inexpensive to obtain. Flood-proofing for your home is also reasonable.
While you cannot control nature and the impact it has on your home value, you can prepare to the best of your ability. Check out How to Prepare Your Home for Natural Disasters at Expertise to see what you can do to make sure you are protecting your family and your home.

2. Location, Location, Location

You have heard it 100 times before: when you want to buy a home, you need location, location, location. This idiom is repetitive not just because it is important, but also because it is complicated. The location you select for a home you own will affect:

  • current property value
  • ability to retain value over the years
  • appreciation in future

The zoning of your property, its proximity to positive or negative features nearby, property taxes and the neighborhood you live in can all prompt property value depreciation. This underscores the importance of selecting a property that is proximal to the most beneficial aspects of the area.

Proximity

Homebuyers prefer certain conditions for a home. They often differ between buyers, but most like easy, quick access to shopping, entertainment, nearby highways, public transit and more. For example, homes that are close to good public transit fared 42 percent better in the housing market downturn than those that were not. Proximity to highways has a variable effect. Some studies note that you increase property value by $2.29 for every meter your home is closer to a highway entrance. However, if you are right next to the highway and it is very noisy with a great deal of pollution, you will not reap that benefit.

Gentrification/Historic Districts

Trends and public designation for your neighborhood also alter your property value. Urban neighborhoods that encounter gentrification may experience a dramatic increase in property value (and property taxes as a result). Gentrification of areas with lower home values has more than doubled since the 1990s, to about 20 percent. On the reverse, older neighborhoods that are labeled historic face a number of limitations in building. For example, if you live in a district that is preserved, you may be restricted from building certain types of outbuildings, or making certain improvements to your home because they would detract from or remove key elements of the historic architecture and style.

Zoning and Taxes

Zoning and taxes may also affect the way your property is valued. When you bought your home, you learned about the zoning regulations for your property and the area in which you live. Some people live in homes on lots that are actually zoned commercial, a situation that poses a complication leading many banks to refuse to grant a mortgage to a new buyer of the property. If you have a homeowners association, you may also deal with a number of neighborhood restrictions that buyers would find restricting, such as limitations on the type of siding you can have, exterior paint colors or bans on the keeping of certain kinds of animals. Similarly, if your property taxes are particularly high for your state or community, it may make your home less appealing than homes of a similar value with a lower yearly tax burden.
It's important to understand the specific costs and commitments associated with owning your home. These factors can play a role in depreciating the value of your home and turning away some prospective buyers.

3. Land Appreciation

In order to see what your land can do for you and to your property value, you should take a look at your property through the eyes of a developer. The minute someone builds a structure on a particular piece of property, that structure begins to depreciate. The only thing on the property that actually appreciates is the land, because it is the only thing that cannot be replaced and it is in higher demand. This fact justifies a greater expense for new construction over existing homes. The average price for new homes in the U.S. is $379,800, compared to $232,500 for existing homes. The fact that new homes are often larger with more amenities and current systems only accounts for a portion of this large difference.
With this view in mind, you can start to examine the structures on your land with a more critical eye. When someone values your property, they look at your outbuildings to determine if they improve your property or if the land would be more valuable with those buildings removed. Zoning regulations can affect an appraiser’s decision. As such, you should confirm that you do not face any zoning limitations should you want to add on to your garage or build that mother-in-law apartment.

4. Economic Concerns

Once you have purchased a home, there are factors in play that may affect your property value entirely independent of your property. The robustness of the local, state and national economies is generally regarded as the factor carrying the most weight. If you owned a home during the housing market correction of 2007-2009, you may have lost some value in your property during that time. On a national level, individual properties lost an average of $67,000 from their 2007 valuation. Local averages could be much higher or lower, depending on your location and the rate at which your market had been overvalued.

Hot vs Cold Real Estate Markets

Many markets have recouped what was lost during the correction, while some are still struggling to regain their former numbers. The country as a whole has a healthy real estate economy, with average home values at $187,000, 5 percent higher than last year. The hottest markets, notably the San Francisco Bay Area in California, may have year-over-year increases as much as twice the national average or even more. Just as there are hot real estate markets, there are cold ones. Cities such as Birmingham, Alabama and Memphis, Tennessee are currently seeing small drops in property value from quarter to quarter. These markets also have double-digit rates of distressed homes for sale.

Effects on Individual Home Values

The impact for you and your home value is that economic forces at all levels can increase or decrease your property value. The closing of a major employer in a small town near you may drive people to move elsewhere, flooding your neighborhood with homes for sale by motivated sellers. Although the national market is currently strong, it is difficult to predict how long the current trend will last. Experts suggest that the best way to avoid a housing market downturn ruining your financial future is to open or refinance a mortgage loan to the best terms possible, and pay down as much principal as you can. The people with the least equity in their homes are the most vulnerable, should their homes lose significant value due to an economic recession.

Minimize the Effects of Depreciation

Property value depreciation relies on a number of key factors that influence your property, the area you live in and the nation as a whole. By watching your local market, researching rules and regulations for your property, and taking steps to mitigate homebuyer concerns for the area, you can minimize the effect depreciation has on your property.