As a full time real estate professional I have been asked this question more than once. The true value of the home must be defined by the purpose. The town assessor will take notice, real estate profesionals who know the local market will definately know the intricacies you are describing, and good local appraisers will be aware of the neighborhood conditions vs this property.
Once the blighted property has been renovated, if it is resold, that will help the values. If it is held, the new condition will help values. If it is refinanced, that will also help values, although not as visibly as a sale.
(Please note: when you choose an answer as a Best Answer, or at least give a thumbs up, it helps those who answer questions here.)