External Obsolescence: A Huge Impact On A Property’s Value


External Obsolescence

One day you decide it’s time for you to move from your current home to a new beautiful place you found which meets all your needs and desires.

You put your house up for sale and set a price, which is a reasonable one as far as you’re concerned.

A couple of weeks go by, and still, there are no offers. You don’t get it; you’ve renovated the roof recently, painted the whole house, and made your garden as pretty as it can be.

The reason why no one is offering you the money you think your house is worth is probably external obsolescence.

If you’re wondering: what is external obsolescence? What are some examples of external obsolescence? How to use external obsolescence to your advantage? Are there other types of obsolescence? 

To find out about this and much more, read on and find out!


What Is External Obsolescence?

Also called economic obsolescence, this fancy term refers to factors aside from the property itself, which influence the price of that real estate property. These factors cannot be affected by the property owner in any way, hence the “external” part.

External obsolescence is one of the most important factors to have in mind when buying or selling a property. It has a significant impact on the immediate buying price and selling price later on if you decide to move out.

Depending on the nature of the external obsolescence, they can be temporary or permanent.


What Are Examples Of External Obsolescence?

Since we’re not talking about the house or apartment’s value, you should look at the property’s surroundings in question when you think about external obsolescence.

Here are some examples of external obsolescence:

Busy Roads And Intersections

  • This is probably the most common example of external obsolescence with which people can identify with.
  • Many homes and apartment buildings are located near freeways, busy roads, and intersections. 
  • People who want to buy a house in these locations will surely suffer from constant loud noises, car fumes, and dust.
  • All of these are reasons why someone may not be willing to pay the price you’re looking for or why your home may get appraised for far less than you expect.

Railway Tracks

  • Another common reason for the loss of value on a property is railroad proximity to the house. 
  • Sure, some laws and regulations prohibit the sounding of train horns in quiet zones in populated areas. But some people could still have issues with the added noise of trains passing nearby.
  • I live 100 feet from a railway track, and even after all these years living here, it’s still not pleasant to hear a train go by almost every night. I can only imagine what it would be like for someone who hasn’t gotten used to it as I have.
  • Also, there is always the danger of a train carrying dangerous materials derailing and causing havoc. 
  • There were situations where a train would derail and spill toxic material near a residential area, causing potential health issues for the people living there.

Nearby Gas Stations

  • Having a gas station near your home can be a big deal-breaker for many buyers. 
  • This scientific study from Harvard University suggests that living near environmental hazards, including gas stations, can negatively affect human health. 
  • These negative effects include: 
    • adverse pregnancy outcomes 
    • childhood cancer 
    • cardiovascular, respiratory, and other diseases. 
  • People living in a home next to a gas station would have to get used to gasoline’s typical smell and be wary of strangers getting near their house every day.
  • On top of all that, imagine if there was a leak in an underground storage tank. 
  • Because of all of these reasons, it’s obvious why you won’t be getting a very high price for your house if you have a gas station on the corner next to it.

Proximity To High-voltage Towers

  • Apart from not being a pleasant sight, living near high-voltage towers can also have some adverse effects on human health.
  • This is because high-voltage towers produce electromagnetic fields because they’re moving a lot of electricity around. The harm can come precisely from these electromagnetic fields or EMFs. 
  • Some of these health hazards of EMF’s include:
    • Headaches
    • Fatigue
    • Insomnia
    • Muscle pain
  • You can install an EMF adapter on your house to minimize the effects these high-voltage towers have on residents. Still, some people just don’t want to take a chance and live near one of these towers.
Rdl External Obsolescence

Restaurants

  • Restaurants are another typical example of external obsolescence. 
  • Sure, it can seem a great thing to have a place to grab a bite from right next to your home. But, there are bad sides to this commodity as well.
  • First of all, it’s bound to be crowded, and crowds make a lot of noise. Also, the air-conditioning will produce a lot of noise as well, so it’s bound to be hard to get some peace and quiet in your own home.
  • Second, restaurants produce a lot of smells from the food they make. Also, if there is a garbage bin under your window, the stench of rotting food they dispose of is bound to cause tenants discomfort.
  • Another problem is that rotting food attracts various bugs and insects. Garbage bins are often infested with cockroaches and worms. At night, they are a favorite raiding target for dogs, cats, and raccoons.
  • All of these factors will vastly decrease the value of the property you want to sell if it’s located near a restaurant.

Graveyards

  • You can expect a lot of people to be wary of buying a home near a cemetery. 
  • Most of the time, the reason is superstition. Let’s face it, even if you’re not superstitious, you don’t feel comfortable being next to a graveyard in the dead of night.
  • Superstition aside, there are also some scientific reasons why living next to a cemetery can be a bad idea.
  • Cemeteries can cause groundwater pollution in the surrounding soil. Because of the decomposing bodies, many bacteria and viruses can get into the ground and infest the groundwater.
  • Also, the metal coffins deteriorate over time and let off metal into the water. This can be a potential health risk to people and animals living in the area.

Construction Site

  • This is one example of temporary external obsolescence. 
  • As we all know, construction sites are very noisy places to be near to. Some people may not be willing to buy a house next to a construction site far from being finished and will try to lower the price.
  • However, if the site is near completion, and the finished building is not one of the causes for external obsolescence mentioned above, some people may be willing to pay the price you’re asking for.

Are There Any Other Types Of Obsolescences?

Apart from the economic or external obsolescence, there are two more that you should know about:

Functional Obsolescence

  • This obsolescence reduces an object’s value due to outdated design or features that are hard to change. 
  • For example, suppose you’re selling a one-bedroom house in a neighborhood where all places are newly built with three bedrooms. In that case, your home will lose value because it will be regarded as outdated.
  • It can also be caused by over-improving your home with features deemed unnecessary for the house’s normal use.

Physical Obsolescence

  • This reason for the loss of value on a real property occurs because of the real property’s mismanagement in question.
  • Houses deteriorate over time, but the owner can mitigate the deterioration. Physical obsolescence occurs because of leaking of the roof, old energy-non-efficient windows, and HVAC units.

How To Use External Obsolescence To Your Advantage?

There are ways you can use external obsolescence to get some gain on the real estate market.

For example, if you find a house you really like near a construction site, it can be a good idea to negotiate for it and buy it.

It’s bound to be appraised to a lower price than the seller wants because it’s near a construction site.

You can buy it for cheaper, and once the building next to it is constructed, you can sell the house for more, because there is no more construction site to lower its price.

You should be careful, though – make sure you know what type of building is being constructed before you go and buy the house next to the site.

Suppose it’s a type of building we mentioned in this article, which causes external obsolescence. In that case, you could easily lose money when trying to sell, so be careful.


Conclusion

Whenever trying to buy or sell a real estate property, you should always consider any possible external obsolescences.

Apart from external (economic) obsolescence, you should also be wary of physical and functional obsolescence.

It matters whether the real object in question is near places such as restaurants, railway tracks, busy roads, and even cemeteries.

If you’re informed enough, with some luck and skill, you can even use external obsolescence to your advantage. So get all the info you can before you make any decisions regarding the real estate market.

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