What kind of a discount should I get on a property on a busy street?

Asked by Reddingite, Massachusetts Fri Jun 20, 2008

I am thinking of making an offer on a property that is on a busier street. The comps I looked at support the listing price, but they are in quieter neighborhoods. What kind of a discount should I be looking for on this property? I know that houses on busier streets take longer to sell, and I want to be sure that I could sell this property in a few years if necessary and not lose my shirt.

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Territory.c…, Agent, MA,
Fri Jun 20, 2008
Great answer, Don. The reality is what puts a value on real estate is what buyers are willing to pay for the property. Sometimes you can pull comps/sold data until you are blue in the face but because of a particular variable (busy street) buyers may not even consider it (especially in a down market) and the final purchase price may not be anywhere near the data you pulled.
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Don Tepper, Agent, Burke, VA
Fri Jun 20, 2008
You're looking at two related but separate issues. The first is: How much does the proximity to the busy street reduce the value of the property? (I don't call it a "discount" because "discount" suggests that you're getting more value. You aren't. You're going to pay less because the property is less valued by potential buyers.

The second issue is that some people just won't buy such houses, regardless of the price. Let's say the comps in quieter neighborhoods are $500,000. You follow the procedure suggested by Mike and look at the variations between house prices in other somewhat nearby areas--busy street or not busy street. And you apply that same percentage reduction to the house you're asking about. Let's just say it's worth 10% less. (Just making that figure up.) So, the house you're interested in might be "worth" $450,000.

Problem is, if 20 people are interested in the house a few blocks away at $500,000, maybe only 15 would even consider your house, even at $450,000. Maybe they've got small children. Or pets. Maybe they're particularly sensitive to exhaust fumes. The point is: Your buyer pool will be smaller, too.

As TerritoryRE points out, those items will vary by town, city, and state. So there isn't a set number. Just recognize, though, that there's not only the lower value you're concerned about. There's also likely to be a smaller buyer pool.

Hope that helps.
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Territory.c…, Agent, MA,
Fri Jun 20, 2008
Your answer depends on a lot of different variables. While generally busier streets decreases the value, there are certain towns where it won't affect it as much as others. Basically what you are asking for is an answer that varies depending on other variables. I.e there is no set discount. The comp's you pulled should help determine value ... Try pulling sold data for properties on that (busy) street or others exactly like it and compare it to the others you have pulled and see if you can find a variation in price.

Busy streets are not going anywhere so realize this isn't something your can ever fix or upgrade, and therefore, yes, when it is time for resale you will face this same marketing/value problem.
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Michael Lefe…, Agent, Westborough, MA
Fri Jun 20, 2008
You have to look at comparable sales on similarly busy streets. Even if they are in different, but very comparable towns. Look for the most recent, ideally less than 90 days, SOLD homes (not active or pending sale) on street with similar noise and traffic influence to perform your analysis. That's what I do when I'm working as an Appraiser for the bank as well as when I'm working as a Realtor. These closed sales will give you the best indicator of current market value for homes on busy streets in that neighborhood.

If you buy properly now, chances are you will not lose your shirt if you need to sell in a few years. Yes, you are right, houses on busier streets usually tend to sell for less and take longer to sell than similar homes tucked away on quiet neighborhoods. Do the extra homework with the analysis NOW to ensure you BUY SMART.

If I can be of any help, please don't hesitate to reach out to me.
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