Using A 20 Mile Radius As The Neighborhood

[Eli]

I personally don't use a mile radius except in search of comparables. I rarely if ever use it then. I never would use it to define neighborhood boundaries. I would strongly discourage anyone from using a mile radius to define neighborhood boundaries. It leads to including properties not in the subject neighborhood, which is ok from a macro standpoint, but not good enough for professional appraisal. It's like a decent starting point.

Using a city or a county or a more homogeneous area from a macro level is much better as a starting point. In rural areas that may coincide with your neighborhood boundaries. Much less of a chance of that happening in metropolitan areas. In rural areas, market segmentation is still real and needs to be addressed. That is where they are going with this. The CU score is a different animal.

 

[J Grant]

Fannie never instructed to make a neighborhood fit within a one mile boundary. All they ever asked for is that appraisers explain why when comps over a mile away are used.

The mile barrier for explanation is an artificial cut off point, but I suppose they felt they needed some cut off point to get appraisers to explain why further off comps were chosen ( especially if closer, just as similar comp sales were available)

A physical neighborhood description and identifying it and describing it is one step in a report. Then identifying whether the market area to find comps exceeds physical boundaries of the defined and described neighborhood would be is another.

 

[Eli]

I personally don't use a mile radius except in search of comparables. I never would use it to define neighborhood boundaries.

Fannie never instructed to make a neighborhood fit within a one mile boundary. All they ever asked for is that appraisers explain why when comps over a mile away are used.

The mile barrier for explanation is an artificial cut off point, but I suppose they felt they needed some cut off point to get appraisers to explain why further off comps were chosen ( especially if closer, just as similar comp sales were available)

A physical neighborhood description and identifying it and describing it is one step in a report. Then identifying whether the market area to find comps exceeds physical boundaries of the defined and described neighborhood would be is another.

That's good. The CU score is a different animal. That's what Crawford is preaching about on his voice of appraisal show. It's not Fannie he is crying about.

 

[J Grant]

We have no control over CU, that is a review program conducted after our appraisal.

 

[Eli]

We have no control over CU, that is a review program conducted after our appraisal.

It's people asking for comps that manipulate the CU score. You have control over that on whether or not you include them.

 

[Eli]

I would assume neighborhood boundaries enter into a CU score.

 

[Terrel L. Shields]

My experience has told me a lender saying, "you can't do that" is code for, "we can't sell the loan with this appraisal".

Exactly

I do, however, agree that a neighborhood would be hard to argue is a 20 mile radius.

Maybe in Boise City, Oklahoma or Wink, Texas

 

[Fnbpos]

I have reviewed far too many appraisals where in the appraiser defined the neighborhood based on where the comps were located. I've seen an appraiser use two different neighborhood boundaries on side by side properties appraised 6 months apart because one report required comparables that were more distant. I find urban locations with 5 square mile neighborhood boundaries; I find neighborhood price ranges just guessed at.....and so on. Actually I find most neighborhood sections of reports worthless, incorrect or both.....poor training, or being lazy.... the reader generally does not care about this section anyway......and so goes our industry

 

[residentialguy]

I have used a 20 mile radius from the subject as my neighborhood. Bank is telling me that I can't do that and that I have to use a Township or partial area of the County as my designated neighborhood. Any thoughts?

Above from OP post, sounds like the client is telling him where to search (by saying he can't "do that".)..but if all bank is saying is he must use a townshop or county as designated neighborhood...can the client dictate what the designated neighborhood should be in his description? NO, so I see your point!

"I have used a 20 mile radius from the subject as my neighborhood."
This says nothing about comps. Absolutely nothing! You act like we aren't allowed to pull comps from outside the neighborhood. In regards to the borders of the neighborhood, I don't know for sure. If he's going out 20 miles and crossing into other Townships, then OP is probably expanding past the true neighborhood and still calling it "neighborhood". That is a no-no. If the neighborhood produces low sales, then you can go out of the neighborhood to get comps for the SCA, but the neighborhood boundaries do not change. It is misleading to portray comps as a neighborhood sales when they are not. They are sales outside of the neighborhood, therefore, the appraiser must have due diligence in making sure that they are on equal demand areas or adjust if they are not.

 

[Eli]

"I have used a 20 mile radius from the subject as my neighborhood."
This says nothing about comps. Absolutely nothing! You act like we aren't allowed to pull comps from outside the neighborhood. In regards to the borders of the neighborhood, I don't know for sure. If he's going out 20 miles and crossing into other Townships, then OP is probably expanding past the true neighborhood and still calling it "neighborhood". That is a no-no. If the neighborhood produces low sales, then you can go out of the neighborhood to get comps for the SCA, but the neighborhood boundaries do not change. It is misleading to portray comps as a neighborhood sales when they are not. They are sales outside of the neighborhood, therefore, the appraiser must have due diligence in making sure that they are on equal demand areas or adjust if they are not.

I agree but neighborhood boundaries do change for many reasons. Remember how dynamic the real estate market is.

Competing properties and market segmentation are different than neighborhood boundaries. I am not worried about you by any means.