Neighborhood Boundries

[cheftso]

I need to know what is the correct answer to this puzzling question?
Is there a Definition of what the neighhood boundry is. Does your comps need to fall within the boundries.
I also have my comps within my boundries. I am reviewing a report and all the comps are outside of the boundries with No explanation. Can that be done
Thanks

 

[Artemis Fowl]

http://www.appraisalinstitute.org/store/p-117-appraisal-of-real-estate.aspx

 

[Mary Tiernan]

When I see this, I usually state:

Although the subject property is within the neighborhood boundaries as defined in original appraisal, the comparable properties are not within the defined neighborhood. The market area as described does not encompass the comparables as provided.

 

[Howard Klahr]

Is there a definition of neighborhood ... try this description on for size:

"A property is an integral part of its surroundings and must not be treated as an entity separate and apart from its environment. The value of a property is not found exclusively in its physical characteristics. Physical, economic, political, and sociological forces found in the area interact to give value to a property. In order to estimate the value of a property, an analysis of the degree of influence extended by these forces upon a property must be made of the area. This area is commonly referred to as a market area or neighborhood. A neighborhood or market area can be a portion of a city, a community, or an entire town. Usually considered to be an area within which a high degree of similarity of use or a grouping of complementary uses. A neighborhood or market area is, therefore, a more or less unified area with somewhat definite boundaries."

To answer your question about the location of comparables being outside of the subject neighborhood ... it depends. There is not a specific rule or requirement, but common sense should dictate.

- Are there sufficient transactions within the neighborhood to adequately perform the analysis? Were there specific transactions within the neighborhood that appear to have been specifically ignored?

- Is there a specific feature or characteristic that would necessitate expanding the "market area"?

- How comparable is the area from which the appraiser chose to go for data?

Your issue is not cut and dry, there is no single answer which is why appraisal review is not just checking off boxes either.

 

[tyfsu]

I need to know what is the correct answer to this puzzling question?
Is there a Definition of what the neighhood boundry is. Does your comps need to fall within the boundries.
I also have my comps within my boundries. I am reviewing a report and all the comps are outside of the boundries with No explanation. Can that be done
Thanks

ha ha you city appraisers are funny. “Must have comps within .50 mile or its not a good comp.” Sorry, I use to work with an appraiser who moved to my area after working in a big city and he had a hard time adjusting to using comparables over 1 mile from the subject. In some of the rural areas here is good old North Florida if you have one comparable from the immediate neighborhood than you consider yourself pretty darn lucky. Having comparables 10-20 miles from the subject wouldn’t be uncommon in these parts.

Did you look to see if the original appraiser "overlooked" any comparables that were within the neighborhood boundaries? It may be just a case of laziness on the original appraisers part by not fully explaining why he/she went outside of the immediate neighborhood. If you feel the value is in line and he/se utilized the best comparables available than I wouldn’t beat them up for the lack of explanation.

Before I get bashed, I’m not condoning lack luster work but I don’t think its worth my time to tell someone their work product is need further explanation when I agree with their overall value and comparable selection.

 

[Mike Garrett RAA]

A reviewer should not have to ask that question.

 

[CANative]

I have to use a comp or two from about 60 miles away in the report I'm working on now.

 

[Metamorphic]

I usually approach this problem with a hybrid neighborhood definition. An immediate, contiguous neighborhood, and a neighborhood that is based on the idea of nearby non-contiguous areas that compete in the same market for the same buyers as the subject. I usually refer to it as the "extended marketing area".

"The subjects immediate neighborhood is the 5 acre horse properties on the north side of town. However, properties with similar utility, price, and appeal also exist on the south side of town. Properties in both these areas compete on a equal basis. Comparabies are drawn from both the subject's immediate neighborhood, and the extended marketing area of properties on the south side of town. "

For a review I'd mention that they were fishing off a different dock and didn't provide their basis for doing so. If that was a reasonable choice, I'd leave it at that. If it was a bad choice, I'd hang them out to dry.

 

[jay trotta]

tysfu

heh,heh - therein lies the problem with those who have not a clue as to what it requires to complete the assignment in some area's of the country. although I myself live in a small state, in most instances (good or bad market) distance actually has nothing to do with comps. - you always need to search outside the box (FNMA/Lender guidelines). their problem, they get hung up on "guidlines" and cannot see the light of day.

biggest laugh I have ever got in this business; My/Our "Investor" needs - whoa, if your Investor needs.....they are not much of an investor (not having a clue of your market area) and not knowing your basic State economy. We are sandwhiched between Boston & NYC, a more prefect scenerio I couldn't imagine, money is always available for buying property.....it's just comes down to, if they want to spend or need to spend.

 

[c w d]

A reviewer should not have to ask that question.

I don't know Mike. Asking questions is a good practice. It allows one to determine the right and wrong ways of doing things. Since most of us are not born with all the knowledge we'll ever need we need to ask questions. Perhaps this guy just wants a broader perspective than his own. I've seen arguments for having comps within and outside of boundaries. Additional commentary is required for the latter. And since I've seen the state penalize an appraiser for having comparables outside his defined neighborhood boundaries I believe it is as very important question to ask. We know what we do and why we do it. We don't necessarily know why others do what they do. In situations when they have not described what they did it may be warranted to get other's perspectives before we construct an opinion of their actions which may affect the outcome of the rest of the review. So, don't beat up someone for asking a question, Mike. Not everyone is experienced or knowledgeable as you.

Neighborhood boundaries should define an area in such a way as to describe to the reader various characteristics with which the subject and comparables would be similarly affected. Whether or not comparables are located within those boundaries is a decision left to the individual appraiser. However, rational reasoning should be explained in the report describing why it was necessary to use comparables outside of the subject's neighborhood boundaries and what effect, if any, it would have on the opinion of value.