The Impact of Location on Property Appraisals in New Jersey
You’ve heard the old saying from realtors “location, location, location.” It is simply the most important factor in the valuation process for the NJ real estate housing market.
Take for example the average sale price of a house in Plainfield, NJ vs. Westfield, NJ. Both are in Union County, and they are only 4 miles apart from each other.
The average price in Plainfield is $432,000 and the average price in Westfield is $1,176,000 (per GSMLS 01/2024).
Hypothetically, moving an average 2,000 sq ft colonial style dwelling in different locations will have a vastly different value. Another reason why realtors have the “location” saying is the fact that it is the only thing you can’t change when you purchase a house. Homeowners often renovate the house, expand it or add landscaping and a pool however they can never change the location.
There are many factors considered when viewing the location as an appraiser. One thing I look at immediately is the street. How often are cars traveling by? Is it a side street, a moderately traveled road, a busy road, or even a highway? Are there any lines in the middle of the road – dotted, double yellow line, or a median divider. If the road has a double yellow line, I will typically make a location adjustment on the appraisal as this is an indicator of a moderately to heavily traveled road.
Living in walking distance to a downtown area can be viewed as a positive attribute.
Neighborhood boundaries are also a factor. Within towns there are more desirable neighborhoods and conversely less desirable neighborhoods. Sometimes realtors will state that a home is in a desirable neighborhood even when the home is close but not in the neighborhood. It is up to the appraiser to know the difference and where the neighborhood boundary lines are to consider the appropriate location for the property.
Positive location factors in the NJ real estate housing market
The general factors of location that people often look at for a property are convenience to employment, shopping centers, school systems, houses of worship, low crime rates and privacy.
Regarding privacy, side streets that are less traveled and backyards with a perimeter that is heavily wooded are seen as desirable. Homeowners also typically want to be in a quiet location which means being a decent distance away from major highways, loud commercial or industrial areas and railroad tracks.
The neutralizing factor of being close to railroad tracks is if the house is also in walking distance to the train station on a commuter line. Then it can even potentially be seen as a beneficial factor.
One of the highest premiums for location in NJ is beachfront property.
If you compared the exact same house and placed one on the beach and one a mile inland, the difference could be millions of dollars. Especially in a higher end beach area like Sea Girt or Loveladies on Long Beach Island.
View can play a role in the location. For example a home that is situated at the edge of a golf course may cause people to pay a premium. The factor of a view on an appraisal is the most subjective factor. What may be a million-dollar view to one person may not be so special to another.
In some communities being within walking distance to houses of worship can be a factor that drives prices up. Over the past two years in Linden, NJ there has been a movement of people coming from the New York area and migrating over due to multiple houses of worship. This has caused property values to increase as demand has increased in this specific location – mainly the Sunnyside section of Linden.
Negative location factors in the NJ real estate housing market
There are several types of locations where the home could be situated in a location causing a negative impact on value.
Close proximity to major powerlines definitely impacts value in a negative way. Other factors can be noise related like train tracks and highways or industrial sites. Farther distance to desirable areas is another factor. The farther away from the train station, local downtown area or commute to the city can negatively affect the value as well.
The attributes of the lot can be a factor and where the house is situated can also negatively affect the value. A house that is located on a heavily sloped lot where there is no area for kids to run around and play in a yard could affect the marketability and therefore the value as well. I have also seen scenarios where the yard is to the side of the house and the kitchen is at the back of the house where it is hard to see the kids playing from inside and that was an issue for many family buyers.
Location adjustments on the appraisal form
Location adjustments are typically made in factors of 2.5%, 5%, 7.5% etc, to help determine the fair market value. In an ideal world, a paired sales analysis is performed to determine the location adjustment. If there were sales of two identical homes and sale A was a beachfront property and sold for $3,000,000 and the sale B was 1 mile inland and sold for $1,000,000 then you can equate the location adjustment to be $2,000,000. Unfortunately, finding paired sales old established neighborhoods in NJ is very difficult and appraisers must use our best judgment based on market research, as well as speaking with local realtors, builders and peer appraisers.
If you are thinking about selling or purchasing a home, considering the location should be a primary factor in your analysis. If you need any assistance in the valuation process and want to make informed decisions, don’t hesitate to contact us. We are happy to help you navigate the NJ real estate housing market. Call us at 908-233-1337 to get started.