Is a Neighborhood defined by subdivisions, planned unit developments, a development within a subdivision, market segment...?

[MMing5000]

Even though i am not a VA approved appraiser. i am currently reviewing a VA appraisal on a property in a newer subdivision less than 10 years old developed by a well known major developer. The OA has a reputable designation with over 20 years of appraisal experience.

i normally use the MLS to define the neighborhood but has never nick picked an OA on the neighborhood boundaries in the appraisal report as sometimes there are overlapped gray areas subject to appraiser's opinions based on their knowledge or appraisal experience in the area.

However, this is the first time i have come across where the OA's neighborhood boundary covers the entire city encompassing subdivisions over 90 years old as well brand new subdivisions less than a year old.

Had this been a very unique one of a kind subject property where there are no similar comps within the subdivision, i would probably not question using the entire city as subject neighborhood.

There is no clear definition of "neighborhood" in the real estate dictionary.

So my question is, is it acceptable to use the entire city as a neighborhood for a tract home built by a major developer? I also have a side question on whether a subdivision can be used to define the neighborhood, or is a subdivision always smaller or a subset of a neighborhood?

 

[alebrewer]

Per The Appraisal of Real Estate, Neighborhood: "A group of complimentary land uses; a congruous grouping of inhabitants, buildings, or business enterprises." A neighborhood is typically larger than a subdivision or builder’s development; because, neighborhoods normally include supporting businesses like neighborhood grocery stores. I suspect residential appraisers will see 'neighborhood' exchanged for 'market area' once the new forms are promulaged.

 

[ramrcdk]

That's certainly unique. But I guess it could & has happened...now.

Rev Guide to the URAR

 

[MMing5000]

Per The Appraisal of Real Estate, Neighborhood: "A group of complimentary land uses; a congruous grouping of inhabitants, buildings, or business enterprises." A neighborhood is typically larger than a subdivision or builder’s development; because, neighborhoods normally include supporting businesses like neighborhood grocery stores. I suspect residential appraisers will see 'neighborhood' exchanged for 'market area' once the new forms are promulaged.

Broad and vague, and that is the problem. According to FNMA guidelines : An appraiser must perform a neighborhood analysis in order to identify the area that is subject to the same influences as the property being appraised, based on the actions of typical buyers. The results of a neighborhood analysis enable the appraiser not only to identify the factors that influence the value of properties in the neighborhood, but also to define the area from which to select the market data needed to perform a sales comparison analysis. In performing a neighborhood analysis, the appraiser: 1) collects pertinent data, 2) conducts a visual inspection of the neighborhood to observe its physical characteristics and determine its boundaries, and 3) identifies land uses and any signs that the land uses are changing. IN OTHER WORDS, in my opinion, the neighborhood is more well defined such as a subdivision rather than broadly defined such as an entire city.

 

[alebrewer]

IN OTHER WORDS, in my opinion, the neighborhood is more well defined such as a subdivision rather than broadly defined such as an entire city.

I would disagree. The 'market area' might be better defined as a subdivision (depending on the market), but the 'neighborhood' consists of a group of complimentary land uses - a subdivision typically consists of only one, or a very limited set, of land uses (SF, school, and greenspace for example).

 

[ramrcdk]

Broad and vague, and that is the problem. According to FNMA guidelines : An appraiser must perform a neighborhood analysis in order to identify the area that is subject to the same influences as the property being appraised, based on the actions of typical buyers. The results of a neighborhood analysis enable the appraiser not only to identify the factors that influence the value of properties in the neighborhood, but also to define the area from which to select the market data needed to perform a sales comparison analysis. In performing a neighborhood analysis, the appraiser: 1) collects pertinent data, 2) conducts a visual inspection of the neighborhood to observe its physical characteristics and determine its boundaries, and 3) identifies land uses and any signs that the land uses are changing. IN OTHER WORDS, in my opinion, the neighborhood is more well defined such as a subdivision rather than broadly defined such as an entire city.

OFF POINT but you point out that: Hybrid Part B: the desk toppy appraiser will never visually inspect "any of that criteria".
POINT: Spot On & via post #3 from Harrison's URAR Guide. Certainly: Highest & Best use.
Exception: where the appraiser would need to use sales beyond & outside the Subject's Neighborhood Descriptions. AND whereby I would report while not in the subject's direct (BA) boundary area, use was necessary for the following reasons +- : __similar locational area_, __similar price ranges__, __ sale use brackets grid lines ___, ___, ___.
For me: I would not include an entire city. I have never.
However, one may need to include a very small town or community whereby the entirety would be influenced by __ the same___ ...

 

[MMing5000]

I would disagree. The 'market area' might be better defined as a subdivision (depending on the market), but the 'neighborhood' consists of a group of complimentary land uses - a subdivision typically consists of only one, or a very limited set, of land uses (SF, school, and greenspace for example).

If that is the case, an appraiser can't go wrong with using the entire city as subject's neighborhood?

 

[sputnam]

Neighborhood is defined by the properties that experience the same market forces. A neighborhood could encompass an entire town.... or not. A neighborhood could consists of one subdivision... or not (usually not). The purpose of defining and researching the neighborhood is to inform you where to look for comparables.

 

[alebrewer]

If that is the case, an appraiser can't go wrong with using the entire city as subject's neighborhood?

depends on the market... in my market, the entire city is the neighborhood - but I live in a relatively small town (~ 20k folks). That is not the case for all markets, though...

 

[MMing5000]

Neighborhood is defined by the properties that experience the same market forces. A neighborhood could encompass an entire town.... or not. A neighborhood could consists of one subdivision... or not (usually not). The purpose of defining and researching the neighborhood is to inform you where to look for comparables.

Thank you - i think "town" would be the best descriptor for a neighborhood for most cases.