What effect do negative externalities have on a property's value?

Negative externalities refer to adverse effects that occur outside of a property but can impact its value, such as increased traffic, pollution, noise, or undesirable economic conditions in the surrounding area. When negative externalities are present, they typically create an unpleasant or less desirable living or working environment, thereby discouraging potential buyers or tenants. This diminished demand often translates to a decrease in property value, as buyers price in the costs or inconveniences associated with those negative external factors.

In contrast, other options would not align with the realities of how property values are influenced by external conditions. For example, negative externalities would not increase a property's appeal or stabilize market conditions. Understanding this principle is fundamental for appraisers and real estate professionals, as it plays a critical role in property valuation and market analysis.