Location, Location, Location

An old saying in the real estate business is that the value of a piece of property depends on three major factors: location, location and location.

While there are some cyclical influences such as economic conditions, tax policies and interest rates that impact property marketability, the physical location of the property is key for three reasons.

Macro

First, there is what I call the macro-geographic issue of the region, state and metropolitan area that determine buyer preferences. A job seeker may need to come to a high-tech, usually urban, area rather than a farm community; a retired person may be looking for desert or seaside climate which rules out many parts of the United States; and other persons may be interested in the cultural offerings usually associated with a city as opposed to a more rural area.

Human

Once the macro decision is settled, then the second location issue has to do with the human environment, such as neighborhood character, quality of schools, distance to work or transportation hubs, availability of medical services, etc. and is usually confined to a much smaller geographic area such as an area of a county / town / city.

Micro

Finally, there are what I call the micro-geographic issues, such as slope, elevation, soil type, vegetative cover and susceptibility to natural events such as fire, flood or earthquake. I used the word event, rather than hazard, because susceptibility to flooding can be a positive influence if you were a farmer in the Nile Valley in Egypt before the Aswan Dam who depended on annual topsoil replenishment from massive floods, or you are a grape grower in the Napa Valley who relies on alluvial (from the Latin - to wash against) soils brought down from the hills by flood conditions. However, for the built environment such as homes, businesses or roads and railroads, flood susceptibility is usually a negative factor. Also in the category of physical influences are human-induced hazards such as air pollution, noise pollution i.e. from airports or freeways, water pollution or contamination by hazardous materials.

Location influences value

Micro-geographic and human-caused environmental impacts can influence value in several ways. A site high on a ridge with a wonderful view (elevation) can have greater value than a site without such a view. However, soil stability and slope on that same site can have negative influences on value if the hill is subject to landslide. Flood susceptibility can enhance value if one is looking for floodplain soils to plant certain crops or if one wants to be near a body of water for recreational purposes. Flood susceptibility can lower value if the uses to which the property can be put are severely limited in terms of development. The positive or negative influences of natural or human-induced conditions can be enhanced or mitigated by human intervention:

  • A home or business can be built on stilts to improve the view or get out of the floodway
  • A flood control project can reduce the size of a floodplain, allowing greater development
  • Site-specific environmental contamination can be removed or more widespread air or water pollution can be cleaned up

A real property appraiser in our office must keep these factors in mind when deciding whether to adjust a reported purchase price or when establishing a fair market value if the property transferred by gift, inheritance or corporate stock where no purchase price is available.

More Information

Should you have any questions please contact Napa County Assessor-Recorder-County Clerk John Tuteur at 707-253-4459 or email John.