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Welcome to Virginia! As I was reading this post, it occurred to me that this situation is a good argument for the plus side of Home Owner Associations (HOA) ~ not that it would have applied here, but we are always looking for examples to understand the pros & cons! The added expense of an HOA fee seems burdensome at first glance, but knowing that your neighbors must abide by rule and regulations that would prevent this type of situation pays for itself in the long run. Sorry your sale was impacted so heavily!
Obviously the simplest and less costly measure is to clean up the yard next door. Buyer's always want to know about the neighbors and neighborhood. If a house or houses on the street, especially one next door is a wreck would cast a negative impression. Regarding your price reduction. That truly depends on what liketype homes have sold for in the area during the last few months. Sold comparisons which should be provided by your listing agent are the best measure to gage price reductions. GLad to discuss this further if you have questions. Best of luck for a quick sale.
Why would you want to discuss it further with someone who posted this question in January???
Obviously the less costly option would be to "help" your neighbor clean up or at least spruce up their backyard. Something as simple as mowing the lawn, pulling weeds and trimming the hedges would do wonders and would give the appearance of a tidy and house proud neighbor.However in this market the correct price trumps all else. If you are not priced correctly (at true market value) then nothing else matters. Buyers have the advantage in this market--plenty of homes, condos, townhomes, from which to choose. Today's buyers are more savvy and are not going to overpay for a house or settle. If you have been on the market for a couple of months with little or no traffic and more importantly no offers, then a price reduction may be in order. What you lose on the sell you gain on your next purchase. Glad to discuss further if you have additional questions or concerns.
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For Sale: $519,900
For Sale: $895,000
For Sale: $860,000