Defining Neighborhood Boundaries

[RustNeverSleeps]

It drives me absolutely nuts trying to define neighborhood boundaries in a rural or low density area when my search parameters extend out 20 - 30 miles from the subject.

Everything I've read / heard about defining boundaries in this type of area seems vague and subjective. To the point of, it is what you say it is as long as it is disclosed and reasonable. Man-made or natural boundaries are nice to have but sometimes they are not there.

Words of wisdom encouraged and appreciated

 

[Randy Pippin]

When necessary I will add the following definition to the report in the "neighood section"

Definition of Neighborhood
The Dictionary of Real Estate Appraisals , 4th edition defines a neighborhood as:
A group of complementary land uses; a contiguous grouping of inhabitants, building or business enterprises. The appraiser has established boundaries that encompass these facilities and land uses in the neighborhood section section of page one of the URAR. The neighborhood is NOT the same as the subject subdivision. In any case the the appraiser refers to the "subject's subdivision" the appraiser is referring to the legal description of homes belonging to the same development. Any other references to the "NEIGHBORHOOD" in this appraisal form includes the defined boundaries by the appraiser on page one of the URAR.

 

[Mztk1]

I basically do what Randy does but without the explanation. To me, a neighborhood is the area surrounding the property that the typical owner will frequent for basic needs. There are two basic ways. The first is by town. Most rural areas surround a downtown center that came into existence servicing the farming community around its perimeter. Each town's rural areas will have natural identities. Maybe it will be the southside of the down as one rural neighborhood and the northside as the other. In another town it may be the entire area surrounding a downtown east of a landmark. It just depends.

When that method fails, which is rare, I look at supermarkets. I go to the nearest supermarket and determine what area that store services. The area is services I consider my neighborhood.

Where I am, school districts are not that big of a deal. Depending on where you are though, they may mean everything. When I lived in the NE a neighborhood centered on which school system the kids went to. I'd consider that as my competitive neighborhood.

 

[Michigan CG]

It drives me absolutely nuts trying to define neighborhood boundaries in a rural or low density area when my search parameters extend out 20 - 30 miles from the subject.
.........

You are confusing the neighborhood and the market area. If you appraising a home in a golf course subdivision, most likely the neighborhood is the subdivision.

Neighborhood
A group of complementary land uses; a congruous grouping of inhabitants, buildings, or business enterprises.

However, if there is another golf course subdivision with comparable properties you will use they are not in the neighborhood, but rather the market area.

Market Area
The geographic or locational delineation of the market for a specific category of real estate, i.e., the area in which alternative, similar properties effectively compete with the subject property in the minds of probable, potential purchasers and users. See also trade area.

Or another example. Appraising a Walgreen's in a small town. The neighborhood is the area surrounding the Walgreen's. Your comparable sales could be regional, in many states. That is the market area.

 

[RustNeverSleeps]

Great feedback all.

Tim, I guess I am specifically looking for info on rural and low density areas, where there are no subdivisions or possibly small subdivisions with 10 -15 homes. I think Randy and Jim helped me on that one but can the market area be the neighborhood in the 1004?

And, lets say I had to use a comp from a competing area that falls outside my defined neighborhood value range and available listings/sales due to limited market activity (at any given time). How does one explain that? Would going back a few years give a better picture of value range and indication of over/under improvements?

What about when a property is in a rural area and is smack dab in the middle of a triangle of 3 similar rural towns?

 

[Michigan CG]

..... but can the market area be the neighborhood in the 1004?......

It can be...but I would think very seldom.

In a rural area many times I use the road the subject property is on as the neighborhood.

A couple months ago I did a SFR on 80 acres. The neighborhood was the two mile stretch of road (in my opinion) but I had sales all over the county (market area). There is no way I could use the whole area where I got my sales from as the neighborhood.

 

[Mike Boyd]

In rural areas, I define the boundaries based on the comps I have selected. Many times, it might be a different COUNTY and I will describe that portion of the county where that comp was found. If there is a value difference in the actual location, I will make a location adjustment. This is where geographical competence comes in. Lots of explanations are required why and where, etc.

 

[Lee Lansford]

Great feedback all.

Tim, I guess I am specifically looking for info on rural and low density areas, where there are no subdivisions or possibly small subdivisions with 10 -15 homes. I think Randy and Jim helped me on that one but can the market area be the neighborhood in the 1004?

And, lets say I had to use a comp from a competing area that falls outside my defined neighborhood value range and available listings/sales due to limited market activity (at any given time). How does one explain that? Would going back a few years give a better picture of value range and indication of over/under improvements?

What about when a property is in a rural area and is smack dab in the middle of a triangle of 3 similar rural towns?

The neighborhood may be one thing, and the market area another.

Think of it this way: Where else might the typical buyer look to fill a particular housing need if the need could not be met in 1 of the 3 towns? If you conclude that the other 2 towns are substitute locations, you have identified the market area. After that: "explain, explain, explain".

 

[stefan olafson]

Ditto Lee,

Your neighborhood is defined by where a typical buyer will look.... I appraise in very rural areas in MN. In Kittson County I include the entire county in the neighborhood because there are only two towns of any size but they are on opposite corners of the county and the county is losing population.

Some say to use a zoning map to illustrate the boundaries, I think including a neighborhood map, even if you have to use Google Earth to show it may be the way to go.

In ND right now there is an unfortunate appraiser forced to take a residential report writing course because his definitions of neighborhood don't coincide with what their current 'expert' thinks they should be. By the way, this expert is located in one of the thirteen original colonies, far removed from North Dakota and our appraisal practices......

 

[RustNeverSleeps]

Thanks again all. It seems judgment and competence are the crucial elements!