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Externalities are things happening outside a property's boundaries that can either help or hurt its value. They're not directly part of the property but can make it more or less attractive to potential buyers.
Suppose there's a park built near a house. The park is clean, well-maintained, and has a playground for kids. This makes the neighborhood more desirable, increasing the house's value. On the other hand, if a landfill is built nearby, the unpleasant smell and pollution could decrease the value of the house. Both the park and landfill are externalities affecting the property's value.
"Wit & Whimsy with the Dumb Ox: Unlocking Knowledge with Rhyme:"
Externalities, my friend, can be good or quite bad,
They're things outside your home that make you happy or sad.
They affect your home's value, but they're not part of the plot,
Instead, they're nearby happenings, affecting what you've got.
A lovely park with swings and slides makes your home shine bright,
But a stinky landfill nearby might bring your home's value a plight.
So remember, dear friend, in the world of real estate,
Externalities are important, for your home's value they'll create.