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How Location Affects Price

Posted August 30th, 2010 under smart buying, smart selling, myths and truths.

(This is article #4 of 6 in a series about the factors that influence the selling price of your home. For the first three articles, see the 'Smart Selling' section of my site.)

The old saying that “location makes the property” is true, but there are also a number of myths about which aspects of location affect price.

Two factors that have a consistent relationship to price are city size and the quality of the neighborhood.

Properties in larger cities are generally more expensive, as you can easily see by comparing the price of a home in a small town with a similar home in a large urban area like Toronto, Montreal, or Vancouver.

The quality of the neighborhood can be harder for sellers to see clearly, because it's the buyer's perception that counts, not the seller's! No matter how much a seller extols the virtues of their street or their neighbors, the buyer will form their own opinion. What constitutes ‘quality’ is elusive. A good definition is the perceived beauty, safety, status, and upkeep of the surrounding area. (To get an unbiased perspective on the quality of a specific neighborhood, as your Realtor.)

Neighborhood quality can also vary over time due to deterioration and urban renewal.

Aside from city size and quality of neighborhood, most aspects of a location do not have a consistent effect on price. Rather, they should be seen as features which are desired by some buyers and not by others.

For example, a main street with heavy traffic might not be a desirable location for people with children, but could be ideal for a young working couple who want easy access to the main road.

A property backing onto a park or next to a school might be ideal for a young family, but a more mature buyer might reject it due to worries over break-ins or noise from children playing.

A property next to a plaza or place of worship is desired by some for ease of access, but undesired by others due to crowds.

Fads and fashion can also come into play. For example, about 25 years ago a corner lot was considered very desirable, whereas nowadays it is generally thought of as a negative.

Every location has many potential pros and cons that will impact each buyer differently. When determining the price of a home, the universal factors (city size and quality of neighborhood) set the general price range, while the other factors influence negotiations with individuals buyers. Your Realtor will take all of these factors into account when helping you price your home.

Check back for the next article in this series, where I'll discuss an often-misunderstood topic: quality of upgrades.

Want to know more about how location affects the price of your home? Just ask me, I'll be happy to help.

--Peter

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