How to Decrease the Value of Your Own House

How to Decrease the Value of Your Own HouseOwning a house is part of the American Dream. Depending on where you live in the US – home ownership can be around 70%. That means that 70% of people own their own home. That is very high compared to other countries. Owning a home is usually a nice piece of independence and also part of building a nest egg for retirement. Home ownership is considered an investment. But then it is surprising how many home owners treat their own home as if it would be something they don’t own.

Imagine the case of a lady in Highlands Ranch, Colorado. She bought a ranch-style home in late 2004 for $265,000.00 – mainly financed through a mortgage. She owes about 95% of the house value to a mortgage company. Highlands Ranch, Colorado is a covenant controlled neighborhood. Strict rules are in place of how to maintain a certain level of landscaping and to keep the property in shape (+ many more things). The covenant rules give a development a more standard appearance, and control some of the activities that take place within its boundaries. When enforced, covenants protect property values. When buying a house in Highlands Ranch the new owner agrees to obey the covenant rules by contract.

The lady from our example above decided to let maintenance of her landscaping slip. The grass was growing out of control. Then summer came along and as she did not have an automated sprinkler system for her yard no watering was done at all. This took care of the fast growing grass in a certain way. The grass started dying in the dry Colorado summer. The outside appearance of the former $265,000 home took a toll. Currently a real estate agent estimates the value of this house in question at $250,000.

The lady from our example took her home and did not treat it as an investment. If she would have to sell her home now she will have difficulties to receive her invested money back. If she would continue to treat her home not as an investment she will eventually turn the investment into a liability and risk her credit history. Especially as her home is in a covenant controlled area she faces extra cost associated with her house. The covenant community association can even put a lien on her home and enforce the covenant rules by sending in a landscaping company to fix the problem – at the owners expense.

In our example the Highlands Ranch Community Association has started the initial process of getting the property back on track. A dated notification has been send to the home owner to bring the property back into compliance with the rules.

Overall – if investing money and letting interest in maintaining the investment slip, means the person involved is throwing money out of the window. If you have enough cash this is not a problem but who has enough cash to do this? Buying a house means to take on the burden to maintain it. Failing to do basic maintenance means to lower the value of the property.