Abstract
Property condition has a significant influence on property value, yet is not a widely used variable in pricing models. Using approximately 322,433 residential sales from over 1,300 different U.S. counties over 2012–2015, we find that price spreads for quality differences tend to be lower when market conditions are strong. However, when market conditions weaken, the price changes are relatively larger on the highest quality property condition segment. Lastly, we find that the marginal benefit of including property condition when age is known is worthwhile if the subject property is unusual for the neighborhood. Based on these results, valuation models might be improved slightly with additional information on property condition, especially if a property is in much better or worse condition than is typical for the comparable sales in the neighborhood.
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