NEW YORK (MONEY Magazine) -- You can choose your friends, you can choose to be friends with your neighbors, but for the most part, you cannot choose your neighbors.

Maria Ly, 34, was reminded of this every time she looked out her dining room window and saw her downstairs neighbors' laundry flapping in the wind and whenever she woke up to their loud late-night chatter.

These were just a few of the many nuisances that wafted up from the condominium below.

Turns out, the couple didn't like her either. They called the police on her three times. "They said I deliberately walked too loudly," the Bay Area architectural designer recalls with exasperation. "That's when I decided it wasn't worth it."

Less than a year after her neighbors moved in, Ly moved out.

A drastic response, granted. But disputes between neighbors have a tendency to drive people to desperate measures. After all, it's hard to ignore the eyesore next door or the nightmare neighbors who live there.

Your sanity isn't the only thing that suffers. Knee-high grass, a botched addition or a hideous paint job can reduce the value of your home as well - and keep your property on the market longer when it's time to sell, according to Diane Saatchi, senior vice president with the Corcoran Group.

"People know that if there's something wrong with the house they're buying, they can fix it," she says. "If it's the neighbor's house, it's not so easy."

All the more reason to solve the problem before pulling up stakes. Follow these steps and you just might be able to preserve your property value and your peace of mind.

Of course you're not going to be happy when your neighbors have a hundred of their closest friends over for a late-night barbecue (and don't even have the decency to invite you).

But try to give them the benefit of the doubt on a first offense. "Just because they have one loud party doesn't mean it will happen again," says Cora Jordan, an attorney and author of Neighbor Law.

That's not to say that you should sit by idly while the party blares on. Jordan suggests jotting down notes about any nuisance, whether it's a raging party or a failure to rake the leaves.

Then do a little research to see whether your neighbor is breaking any local laws. You'll often find that information posted on your hometown's Web site.

If you live in a community governed by a homeowners association, page through your covenants, conditions and restrictions (CC&Rs) for the rules. File all this information away; if your neighbors make a habit of their bad behavior, these details might bolster your case down the road.

If the transgression is more grievous than a one-off party (their sprinklers are doing damage to your house) or if it's become a regular event (they leave up holiday decorations till July every year), you need to say something.

"Don't assume that they know there's a problem or that it's intentional," says Andrew Kidde, programs co-manager at the Bellevue Neighborhood Mediation Program in Bellevue, Wash.

Start off by being friendly. Kidde recommends phrasing your complaint as a question rather than a statement. "That way your neighbor is less likely to be defensive," he says.

For example, imagine that his oak tree is grossly overgrown and therefore is blocking your million-dollar view. You could bang on the door and demand that he trim it, though he's apt to think you're a total jerk and may be less inclined than ever to clip those branches.

Now consider Kidde's approach: You see your neighbor outside raking leaves, so you strike up a friendly conversation, then say, "I've been meaning to ask you about this tree...." You needn't be an expert in psychology to see that most people will react more favorably to this approach.

It certainly worked well for John Schwarz, 61, a retired ophthalmologist who lived next door to a boisterous Bichon in Boca Raton, Fla.

"I wrote a card that, in the nicest way possible, asked my neighbors if they could please do something about the dog," he says. "Now we rarely hear the barking."

The moral of the story: It's more effective to be nice. At least until you're sure nice won't work....

If your neighbors are annoying you but not breaking any rules, proceed directly to the next step. But if they're violating local laws or association codes, now's the time to pull out your research.

Depending on how things stand, you can either write your neighbors a formal letter spelling out their obligations or take your complaint to the proper authorities.

"If you're not sure who to call, start with city hall," suggests Jordan. Some cities are vigilant about enforcing ordinances. "They'll cut the neighbor's grass if it's too long and send them a bill," she says.

Others are less eager to get involved in personal disputes. Frequently, homeowners associations have more power when it comes to enforcing neighborhood protocol, as residents who break the rules are breaking contract.

The association can issue fines for code violations (as much as $100 each) and ultimately sue the residents at their expense.

Too often a problem doesn't end even when an official party gets involved. Instead, bad feelings spread like noxious weeds and everything becomes a nuisance. If unchecked, this kind of dispute can go on for years. In these situations, mediation can be surprisingly effective.

"In one case, neighbors who'd been friends started fighting over a tree house that was 13 inches over the other person's property," says Martin Eichner, mediation director for Project Sentinel, which runs dispute-resolution programs in Northern California.

They feuded for years, called the city, hired lawyers and still couldn't solve the problem. Finally, they turned to mediation, and "in three hours they resolved the matter on their own terms."

The solution: The tree house builders gave their neighbors an extra 13 inches elsewhere on the property.

There are more than 500 community mediation centers in the U.S., and for the most part, they provide services at low or no cost. The mediator contacts your neighbor on your behalf, arranges a meeting in a neutral location, and helps you hash out your problems.

"It's not the mediator's job to say who's right or wrong," says Irvin Foster, co-chairman of the National Association for Community Mediation. "They're there to help you come to an agreement you both can live with."

Think twice before hiring an attorney (unless you have a boundary dispute, for which court may be a necessity). In most cases, a lawsuit isn't worth the time and expense.

There's one exception, however. If your problem can be solved with money (your neighbor murdered your prizewinning rose bush or deliberately broke your fence), you might try small-claims court.

The amount you can collect is usually less than $10,000, but the process is inexpensive - all you pay is a filing fee of $100 or less - and doesn't require a lawyer.

One hopes that going through these steps will lead to a resolution. But unfortunately, neighbor dramas can sometimes drag on in spite of one's best efforts. When all else fails, you ultimately have only two options: Live with the problem or leave.

Maria Ly obviously chose the latter. She put her condo up for sale and was up front with potential buyers about the noise from below. (In some states, you must disclose certain neighbor nuisances, according to Saatchi.)

After four long months on the market, the condo sold, but for 5% less than similar properties. Whether or not the neighbors are to blame, Ly isn't certain.

And at this point, she really doesn't care. "I'm just happy not to have that stress anymore."

When should I use a mediator? It's almost always worth a try, especially if your complaint isn't backed up by any law or homeowners association rule. Most mediation centers report that 75% of clients come to an agreement.

How does it work? With most programs, you call the center and speak with an adviser about whether this approach makes sense. If it does, he or she will contact your neighbor to set up a meeting, usually within a week. Most cases are dealt with in a single two- to three-hour session.

Will the mediator decide who's right and who's wrong? No. The mediator simply helps you and your neighbor come to your own agreement. If you choose, you can put it in writing, making it legally binding.

What happens if my neighbor doesn't follow through? If you decide to make your agreement legally enforceable, you can use it to support your case in court (though the mediator can't testify on your behalf). If you don't document it, you might have to return to mediation.

How do I find a mediator? Search the National Association for Community Mediation website (nafcm.org) or contact your city hall. If your community doesn't have a program, you may be able to find a private mediator in the Yellow Pages.

How much will it cost? Most community programs are free, though some charge a small fee ($10 to $50 a session, depending on your income). Private mediators typically charge $150 an hour.

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