Four Corners Rule Versus Neighborhood Fiscal Analysis

As a Buyer – what do you want to know about the neighborhood?

As a Seller – what don’t you want buyers to know?

Are you Buying in a Financially Healthy Neighborhood?

Foreclosures and Short Sales impact home values in the neighborhood, especially when there are 3 of them, and those three are the ONLY sales in the neighborhood in a 6 month rolling basis period of time. In real estate valuation, the Rule of Three is that 3 sales equal a new valuation price point.

Keep in mind that the above story is written in the State of Washington, so there are some aspects that are not relevant to the Commonwealth of Virginia. But …

Some of the factors considered in evaluating a neighborhood’s financial health:

– # of foreclosures

– # of short sales

– # of original owners

– # of homes purchased in past two-three years

– # of homes purchased in past three-five years.

– Financial health of the HOA – how much cash do they have on hand? What are they responsible for? How are they managed? What capital expenses are coming up?

– What am I missing?

– Home prices. Duh.

The concept of evaluating a neighborhood goes against the “Four Corners” principle, whereby the Realtors and the sellers are responsible only for what is contained within the four corners of the subject property and this different perspective ok.

As a Buyer’s Agent, I can tell you about what is contained within the four corners of the property and can (and do with the appropriate caveats) speculate about what may happen outside those four corners.

When I advise my buyer clients that they are Buying Their Monday Mornings, they are also buying the location of their home – and what’s around it. My favorite phrase is “I don’t know” … but I’ll find out. or … this is where you can find out.

This economy dictates more due diligence than ever before. While I have not yet heard of any Charlottesville area homeowners’ associations going bankrupt or facing delinquencies, I won’t be surprised when I do.

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