Home Buying: Sacrifice Anything but Location

You’ve probably heard the old cliche that the three major determinants of a home’s market value are location, location and location. Like many cliches, it’s basically true.

When an agent rushes into the office with news of a hot new listing, the first question colleagues ask is not “How much?” or “How big?” but “Where is it?”

No single factor affects the value of a home as much as location. If you can’t afford what you want where you want it, sacrifice something inside the house rather than sacrifice the location. You can add a second bathroom or install hardwood floors to bring a house up to your standards, but you can’t improve the neighborhood single-handedly.

Better to take a house that needs work in a good neighborhood than to take one at the same price (or even a bit lower) that’s all dolled up but in a marginal location.

Price doesn’t guarantee a fine location either. Just because a builder puts a $175,000 house on a particular site doesn’t mean the market will justify that price. Some builders can’t resist gambling on a cheap piece of land, often to their later regret.

Obviously, everyone can’t live on the seventh fairway--nor would many buyers want to. A good location, like many other features of a home, is relative. Confirmed city dwellers won’t be put off by a restaurant or corner deli on the block. But suburbanites might find the same establishments intrusive.

What is ‘location’ anyhow? Depending on the market, “location” can be a city, a town or a county. Location also is a neighborhood. It may be a home on a particular plot of land. Consider all three in choosing your home. Pick a town or community with a character and style that match your own. Then scout out the town’s best neighborhood--within your price range. Finally, zero in on the best home on the best lot within that neighborhood.

Much of the value of a home rests in its surrounding economic and social environment--its neighborhood. In general, the more defined a neighborhood, the more likely that homes located there will maintain their value.

You are looking for more than just a cluster of homogeneous properties. A few blocks of carefully tended homes otherwise surrounded by blight isn’t a viable neighborhood.

Typically, it takes at least a dozen blocks, marked off by recognizable boundaries, for a neighborhood to sustain its character. The boundary might be a park, a highway, a campus, a river, a county line, a string of stores--anything that interrupts the pattern. One highly visible boundary gives residents a sense of belonging within it. Several make the neighborhood identification even stronger.

Besides being located in the right neighborhood, a home must not clash with its surroundings. A poor fit imposes a harsh penalty on any home’s value. Pick any $1-million home in the poshest neighborhood of our city. Mentally move it to the worst area you can imagine and guess what it would be worth.

Next, pick a setting in between--say a nice middle-class community. What’s true for a transplanted mansion is just as true for a $250,000 house in a $70,000 neighborhood. Be especially wary of the overimproved house in a neighborhood of lesser houses; even if you love it, it may be hard to find others who feel just as you do when the time comes to sell.

Some homes command premium prices because of the special cachet of their neighborhoods. Even the plainest, smallest homes on Beacon Hill in Boston, Nob Hill in San Francisco, Beverly Hills and Georgetown in Washington, command high prices on a per-square-foot basis.

In any city, there will be neighborhoods that enjoy inflated values. By comparison, other neighborhoods with strong schools or other desirable features may be undervalued because they aren’t “in.” A buyer who is indifferent to fashion can find good values in neighborhoods that offer desirable amenities and services--and end up with a lot more house for the money.

Choosing to buy in a toney neighborhood can be a sound investment, if social prestige is very important to you. If you want to buy a home with a socially desirable address, make sure the high price is in line with the market. Get a professional appraisal. Properties in prestige areas sometimes attract speculators who hope to make exorbitant profits off unwary buyers, especially wealthy newcomers from out of town. And some residents of such neighborhoods might be doing a little “fishing” for gullible buyers.

If you’re looking for a new home in an area where you already live, you’ll have a good sense of the strengths and weaknesses of various parts of town, and you can do your neighborhood scouting on your own, without an agent.

If you’re coming from out of town, however, you’ll need help, especially if you’re relocating on short notice. Try to find acquaintances or friends of friends in the area you’re moving to, and get their opinions of neighborhoods.

If you’re being relocated to a branch office of your current employer, talk to your new colleagues and obtain the services (at your employer’s cost) of a relocation firm that works with real estate agents in your new area. Long-distance house hunting is very difficult, and it can be smoothed by the services of professionals.

Try to schedule several lengthy house-hunting trips. Allow enough time to drive around the whole area and get a feel for neighborhoods. Don’t overlook the obvious. Make sure you choose a place you’ll enjoy living in six months after moving in. If you like it, others will in the future when you’re ready to sell.

The look and feel of a community as you walk and drive around its neighborhoods can’t be quantified, but it’s important. Trees, shrubs, cul-de-sacs, curved streets and landscaping around small retail stores are good signs. But unless you already live there, you need to probe deeper.

Read up on the local politics and history. It will offer clues to the future. The chamber of commerce, the town hall and the local library are other good sources for background. They also may have information on population and income trends. County and city governments also can provide critical tax information and zoning regulations.

Start your research by getting a detailed map. It should indicate schools, fire departments, parks, lakes and shopping areas. Ask the local real estate board or title company for prices of homes in the desired neighborhoods and jot them down to give you a base for comparison shopping. Use the map to familiarize yourself with the area, and to get a general feel for the proximity of individual homes to schools, stores and the like, once you begin house hunting.

If time permits, attend a community meeting. A political fund-raiser, a PTA meeting, a zoning hearing or church or synagogue service will enable you to meet some of the residents.

Visit the schools. Schools affect the taxes you pay on your property, and good schools increase property values. Even if you aren’t a parent, be sure to inquire about the quality of neighborhood schools. What schools are nearby? What is the average class size in grades one through six? How do most children get to school? How do students in the town or county rate on standardized tests? What enrichment courses are offered? Parents may want to meet the neighborhood school principal.

Shop the stores. Is parking adequate during hours of peak demand? Can you buy aspirin and sodas nearby, or will you have to hop in the car to meet unexpected family requests? Note the kind of stores and the quality of the merchandise. Merchants have to be responsive to subtle changes in the socioeconomic level of their patrons. They buy what they perceive their customers want.

Do at least one rush-hour practice commute. Make it on a weekday at the time you normally would be commuting. Use the public transportation system. How often do buses run during morning and evening rush-hours? What is the weekend and off-peak schedule? If you are depending on buses or trains to get to work, try to determine whether there are proposals to reroute or drop the line you would be using.

Consider your travel patterns. Figure what roads you might travel to deliver children to day-care centers or school. Will it be convenient to stop after work to pick up groceries or will buying bread and milk entail a lengthy side trip? Does the surrounding community offer recreation and entertainment that suits your interests, or will you find yourself facing frequent lengthy drives for movies, concerts or sporting events?

Weigh the negatives. A town or neighborhood can decline, or take off toward renewal before home sales prices reflect it. Before you take a fancy to a home, rule out locations where negative factors outweigh positives.

Crime. Pass up casual conversations here and go to the local police station for information on robberies, burglaries, vandalism, assaults and drug-related problems. Is crime increasing, decreasing or staying about the same? Parents with young children will want to know how safe their children will be going to and from school and playing in the neighborhood.

Traffic. Heavy traffic is a major drawback in any residential area. It generates noise and pollution. Of course, being on a busy street is less a problem for high-rise condominium dwellers than for families in detached one- and two-story homes. Even so, a unit on the quiet side of the building certainly is more desirable than one where you can hear the steady roar of automobiles.

Visual pollution. Look for public utility substations and transformers, radio or television broadcasting towers, gas stations, auto dealerships, salvage yards, overnight parking for commercial auto fleets, bus stops, ball fields where night games are played.

Smells and sounds. Does the commuting pattern create air pollution or smog in the area? What about food-processing or chemical plants Even something as delightful in small doses as the smell of bread wafting from a bakery is a nuisance when you never can escape it.

Visit the area during the day and at night, and on weekdays as well as weekends. Does it lie in the flight pattern for airplanes? Is it too close to a busy stop, fire station or school?

Overcrowding. Are roads, parks, stores and pools too crowded? Are there too many cars parked on streets and in driveways? Is there any sign that homes are being used as rooming houses or broken into multiple housekeeping units?

Full-blown blight is easy to spot. What you need to be alert to are the earliest signs of neglect or decay. A neighborhood that appears slightly down-at-the-heels may not reveal any other signs of decline--yet. Perhaps nothing is broken, littered or really shabby.

You still should try to find out why the level of maintenance has slipped. Is the ratio of owners to renters shifting? Are such municipal services as sidewalk and road repairs being postponed or reduced?

Adapted from “Kiplinger’s Buying and Selling a Home” by the staff of Kiplinger’s Personal Finance magazine. Copyright 1990. Kiplinger Books, $12.95. (800) 544-0155.