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

[MMing5000]

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...

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

 

[alebrewer]

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

I like to think of it as that geographic area, surrounding the subject property, that drives folks to want to be in that particular area. There is an area in northeast Dallas encompassed by a particularly highly rated school district - for that area, the school district is the neighborhood.

 

[NC Appraising]

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?

I have been seeing a trend with staff AMC appraisers and Skippy appraisers doing this. I was asked to do a final on a new home and the appraiser was out of town (one is a member of this forum...one of the worst appraisals I have ever seen..and yes, they have been sent to the board before).

This appraiser expanded the neighborhood boundaries to include superior sales to meet the contract price. I guess they were taught to do this. I guess their thinking is that they cannot be blamed for using comparable sales outside of the defined neighborhood boundaries. I think AMC staff does this for the same reason and to make the computer review system happy.

As for what is a neighborhood, that is Fannies fault. Trying to fit a round neighborhood description into a square peg. A neighborhood is different for a urban, rural or suburban area.

Just check out the language in the UAD (talking out two side of the mouth):
The appraiser should enter a neighborhood name. It may be a name recognized by the municipality in which the property is sited, such as a subdivision name. If there is not a neighborhood name recognized by the municipality, enter the common name by which residents refer to the location.

Then you have this:
Neighborhood characteristics. These can be addressed by the types of structures (detached, attached) and architectural styles in the neighborhood (such as row or townhouse, colonial, ranch, or Victorian); current land use (such as single-family residential, commercial, or industrial); typical site size (such as 10000 sf, or 2.00 ac); or street patterns or design (such as one-way street, cul-de-sac, or court).


If you read the above, most older appraisers take the subdivision to be the neighborhood. Fannie should have broken this up and included cases for rural, suburban and urban markets. To make things even worse, we had the one mile, city block and 5 mile radius guideline which further taught us that the neighborhood is the subdivision. I think they did this to make the appraiser to comment when sales outside of the subdivision were used and not to expand the neighborhood to use sales to juice the report. DON'T get me started with the predominant!!! The predominant can only be if the neighborhood is the subdivision.

The issue with me is that when I use the subdivision name as the neighborhood (per UAD), then I define my boundaries to the definition per the Appraisal Institute which usually includes several subdivisions, a shopping center, schools, etc. It is misleading in my opinion, but that is the way I do it.

The best example I give is a 1 street subdivision in a suburban area. Some appraisers say that the neighborhood is the subdivision and the boundaries should only include data from within the subdivision...100% 0, commercial, 0 multi, etc. What if there is a factory or a commercial area that adjoins the subjects subdivision? What, leave that out? Per what I posted above, the answer per Fannie would be yes.

I think the new forms should have a PUD/subdivision section and a market area section. If you only have a market area section, it is going to be the same problem with the neighborhood. Appraisers can easily hide the fact if the subject is a over or under improvement. If you have two sections, subdivision and a market area, it would be hard for the appraiser to lie and it would be easily read by the client.

 

[Vermonter]

The issue with me is that when I use the subdivision name as the neighborhood (per UAD), then I define my boundaries to the definition per the Appraisal Institute which usually includes several subdivisions, a shopping center, schools, etc. It is misleading in my opinion, but that is the way I do it.

Not sure I'm reading that right, but if you use the subdivision as the "neighborhood" then define that neighborhood to include surrounding subdivisions....that's actually INTENTIONALLY misleading.

The neighborhood is a defined physical area around your subject. It may have hundreds of comparable sales in it or none at all. The best comparable sales may be outside the subject neighborhood, that doesn't mean you expand the neighborhood to fit those comps or restrict your search to those within it.

What is important about the neighborhood in an appraisal report is CONSISTENCY. You describe the neighborhood, the boundaries and market influences on it....the SAME neighborhood.

I may have a skewed view on this since I'm rural and rarely have all comps within my subject neighborhood. I have boilerplate comments on it and go into more detail in my market analysis and reconciliation, but nobody ever questions it.

 

[GWISC]

Neighborhoods reflect the surrounding uses and affects on the subject property. Your boundaries should reflect this. The property may be in a newer subdivision with 0-10 year old houses. Would you then not include an adjacent subdivision which has 5-15 year old houses? What commercial uses serve the neighborhood? What industrial or major employment nodes draw on the neighborhood? Those are items I look for.

I have newly built houses in well-established enclaves. There are more than a few new houses built on scrap lots surrounded by 100 year old housing in the city I live in. Using your metric, my neighborhood would end at the property line as the adjacent properties are all much older. In this case, the new house and older houses all likely have the same neighborhood influences, ie... distance to interstate access, employment nodes, shopping centers and schools. I always indicate why the neighborhood boundaries were choses ie... school district, proximity to a central commercial area which serves a surrounding residential area, etc..

Your submarket of the subject is reflected in the age range and price range regardless of the surrounding other properties. For example, if your house is 10 years old, you may have an age range for your submarket of 0-20 years rather than 0 to 100 years. Those older homes, while within your neighborhood description, are not part of your submarket.

I think you are overthinking the OA's neighborhood description. As long as it adequately describes the surrounding uses accurately I don't hassle with it. The rules for determining the neighborhood descriptions are up to the appraiser.

We all have our own way of doing things, I keep my own pet peeves out of reviews.

 

[NC Appraising]

Not sure I'm reading that right, but if you use the subdivision as the "neighborhood" then define that neighborhood to include surrounding subdivisions....that's actually INTENTIONALLY misleading.

The neighborhood is a defined physical area around your subject. It may have hundreds of comparable sales in it or none at all. The best comparable sales may be outside the subject neighborhood, that doesn't mean you expand the neighborhood to fit those comps or restrict your search to those within it.

What is important about the neighborhood in an appraisal report is CONSISTENCY. You describe the neighborhood, the boundaries and market influences on it....the SAME neighborhood.

I may have a skewed view on this since I'm rural and rarely have all comps within my subject neighborhood. I have boilerplate comments on it and go into more detail in my market analysis and reconciliation, but nobody ever questions it.

It is mis-leading, but that is what I have to work with. (most suburban appraisers in my area do it the same way).

Keep in mind:
1. I am only speaking to Fannie Forms.
2. Using UAD and Fannie Mae guidelines.

That being said, how can one use the appraisal institutes definition of a neighborhood when adhering to Fannie Mae guidelines and UAD requirements? Please read what the UAD and Fannie Mae says about there take on what is a neighborhood. It is much different than the "According to the Dictionary of Real Estate Appraisal, a neighborhood is, “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."

HERE IS WHAT I DEAL WITH. I MOSTLY APPRAISE IN A SUBURBAN AREA: ****CLICK TO EXPAND****

1. The below map has about 5 different PUD's and subdivisions of varying market appeal, ages, quality, GLA and price points.
2. The below is the defined neighborhood boundaries.

So for the "neighborhood" on the URAR, I put in the subdivision name in which the subject is located in.
The neighborhood below has a school, shopping centers, retail, and a golf course.

So what do I do? There is not a so called "neighborhood name". It is either this or none:
1. Use the subdivision name and draw the neighborhood boundaries as the subdivision boundaries (platted). **To narrow**
2. Use the town name as the neighborhood which expands for 4 miles and across major though fares. **To wide..market area.**
3. Use the subdivision name and draw my neighborhood boundaries to include other PUD's and retail centers. ***I do this**

The issue with 2 and 3 above, is that it is easy for the appraiser to hide or mis-lead when the subject is a over improvement. What about the subjects "predominate"? If you use all of the subdivisions, it will not accurately describe the subjects predominate for the subdivision. Within the defined boundaries, there is a $200K project, $350k project and a $350-$500k project. The predominant is $350. So if you are appraising a home in the $200k subdivision, there would never be a over-improvement in the subjects subdivision. On the other hand, if I draw my boundaries to include only the subdivision, it would never include any commercial land uses. (we do have some mixed use developments, but lets keep it the example simple)

That is why the new forms needs to have a "subdivision and a separate market area section to fill out.

If you ask the neighbors what "neighborhood" they live in, they would name their subdivision. Urban and rural areas are different.

https://icapweb.org/uploads/Reporting_Market_Conditions_Final_V1.0_1418844119.pdf

Getting Neighborhood Description Right

Which one is worthy of a professional-level fee? The first one clearly says too little; the second one probably says too much.

www.workingre.com

 

[MMing5000]

I have been seeing a trend with staff AMC appraisers and Skippy appraisers doing this. I was asked to do a final on a new home and the appraiser was out of town (one is a member of this forum...one of the worst appraisals I have ever seen..and yes, they have been sent to the board before).

This appraiser expanded the neighborhood boundaries to include superior sales to meet the contract price. I guess they were taught to do this. I guess their thinking is that they cannot be blamed for using comparable sales outside of the defined neighborhood boundaries. I think AMC staff does this for the same reason and to make the computer review system happy.

As for what is a neighborhood, that is Fannies fault. Trying to fit a round neighborhood description into a square peg. A neighborhood is different for a urban, rural or suburban area.

Just check out the language in the UAD (talking out two side of the mouth):
The appraiser should enter a neighborhood name. It may be a name recognized by the municipality in which the property is sited, such as a subdivision name. If there is not a neighborhood name recognized by the municipality, enter the common name by which residents refer to the location.

Then you have this:
Neighborhood characteristics. These can be addressed by the types of structures (detached, attached) and architectural styles in the neighborhood (such as row or townhouse, colonial, ranch, or Victorian); current land use (such as single-family residential, commercial, or industrial); typical site size (such as 10000 sf, or 2.00 ac); or street patterns or design (such as one-way street, cul-de-sac, or court).


If you read the above, most older appraisers take the subdivision to be the neighborhood. Fannie should have broken this up and included cases for rural, suburban and urban markets. To make things even worse, we had the one mile, city block and 5 mile radius guideline which further taught us that the neighborhood is the subdivision. I think they did this to make the appraiser to comment when sales outside of the subdivision were used and not to expand the neighborhood to use sales to juice the report. DON'T get me started with the predominant!!! The predominant can only be if the neighborhood is the subdivision.

The issue with me is that when I use the subdivision name as the neighborhood (per UAD), then I define my boundaries to the definition per the Appraisal Institute which usually includes several subdivisions, a shopping center, schools, etc. It is misleading in my opinion, but that is the way I do it.

The best example I give is a 1 street subdivision in a suburban area. Some appraisers say that the neighborhood is the subdivision and the boundaries should only include data from within the subdivision...100% 0, commercial, 0 multi, etc. What if there is a factory or a commercial area that adjoins the subjects subdivision? What, leave that out? Per what I posted above, the answer per Fannie would be yes.

I think the new forms should have a PUD/subdivision section and a market area section. If you only have a market area section, it is going to be the same problem with the neighborhood. Appraisers can easily hide the fact if the subject is a over or under improvement. If you have two sections, subdivision and a market area, it would be hard for the appraiser to lie and it would be easily read by the client.

Thank you NC Appraising for the very thorough discussion on what defines a neighborhood. I have come across where the neighborhood is defined as the entire city or even the entire county when it is appropriate to do so for unique or one of a kind very upscale custom beachfront properties, but i have never come across where an entire city is used as a neighborhood for a tract home build by a major developer within similar competing projects just a few blocks away. And yes, i disagreed with the OA's neighborhood boundaries as well as the Low, High, and predominant values in the neighborhood as well as the age range. But using the entire city as the neighborhood sure helps to crank out 10-minute appraisal reports on the fly that leads to many other errors.

 

[MMing5000]

Neighborhoods reflect the surrounding uses and affects on the subject property. Your boundaries should reflect this. The property may be in a newer subdivision with 0-10 year old houses. Would you then not include an adjacent subdivision which has 5-15 year old houses? What commercial uses serve the neighborhood? What industrial or major employment nodes draw on the neighborhood? Those are items I look for.

I have newly built houses in well-established enclaves. There are more than a few new houses built on scrap lots surrounded by 100 year old housing in the city I live in. Using your metric, my neighborhood would end at the property line as the adjacent properties are all much older. In this case, the new house and older houses all likely have the same neighborhood influences, ie... distance to interstate access, employment nodes, shopping centers and schools. I always indicate why the neighborhood boundaries were choses ie... school district, proximity to a central commercial area which serves a surrounding residential area, etc..

Your submarket of the subject is reflected in the age range and price range regardless of the surrounding other properties. For example, if your house is 10 years old, you may have an age range for your submarket of 0-20 years rather than 0 to 100 years. Those older homes, while within your neighborhood description, are not part of your submarket.

I think you are overthinking the OA's neighborhood description. As long as it adequately describes the surrounding uses accurately I don't hassle with it. The rules for determining the neighborhood descriptions are up to the appraiser.

We all have our own way of doing things, I keep my own pet peeves out of reviews.

GWISC - "the neighborhood descriptions are up to the appraiser"... basically what you are implying is, the broader and more encompassing the better... so whnot just use the whole county or who state since your subject is located within that state.

 

[Fernando]

I use the neighborhoods as defined by MLS.
Few times when I couldn't define a neighborhood, I use the census area.
Never had a problem. Keep it simple.

 

[MMing5000]

It is mis-leading, but that is what I have to work with. (most suburban appraisers in my area do it the same way).

Keep in mind:
1. I am only speaking to Fannie Forms.
2. Using UAD and Fannie Mae guidelines.

That being said, how can one use the appraisal institutes definition of a neighborhood when adhering to Fannie Mae guidelines and UAD requirements? Please read what the UAD and Fannie Mae says about there take on what is a neighborhood. It is much different than the "According to the Dictionary of Real Estate Appraisal, a neighborhood is, “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."

HERE IS WHAT I DEAL WITH. I MOSTLY APPRAISE IN A SUBURBAN AREA: ****CLICK TO EXPAND****

1. The below map has about 5 different PUD's and subdivisions of varying market appeal, ages, quality, GLA and price points.
2. The below is the defined neighborhood boundaries.

So for the "neighborhood" on the URAR, I put in the subdivision name in which the subject is located in.
The neighborhood below has a school, shopping centers, retail, and a golf course.

So what do I do? There is not a so called "neighborhood name". It is either this or none:
1. Use the subdivision name and draw the neighborhood boundaries as the subdivision boundaries (platted). **To narrow**
2. Use the town name as the neighborhood which expands for 4 miles and across major though fares. **To wide..market area.**
3. Use the subdivision name and draw my neighborhood boundaries to include other PUD's and retail centers. ***I do this**

The issue with 2 and 3 above, is that it is easy for the appraiser to hide or mis-lead when the subject is a over improvement. What about the subjects "predominate"? If you use all of the subdivisions, it will not accurately describe the subjects predominate for the subdivision. Within the defined boundaries, there is a $200K project, $350k project and a $350-$500k project. The predominant is $350. So if you are appraising a home in the $200k subdivision, there would never be a over-improvement in the subjects subdivision. On the other hand, if I draw my boundaries to include only the subdivision, it would never include any commercial land uses. (we do have some mixed use developments, but lets keep it the example simple)

That is why the new forms needs to have a "subdivision and a separate market area section to fill out.

If you ask the neighbors what "neighborhood" they live in, they would name their subdivision. Urban and rural areas are different.


View attachment 49192

https://icapweb.org/uploads/Reporting_Market_Conditions_Final_V1.0_1418844119.pdf

Getting Neighborhood Description Right

Which one is worthy of a professional-level fee? The first one clearly says too little; the second one probably says too much.

www.workingre.com

It is mis-leading, but that is what I have to work with. (most suburban appraisers in my area do it the same way).

Keep in mind:
1. I am only speaking to Fannie Forms.
2. Using UAD and Fannie Mae guidelines.

That being said, how can one use the appraisal institutes definition of a neighborhood when adhering to Fannie Mae guidelines and UAD requirements? Please read what the UAD and Fannie Mae says about there take on what is a neighborhood. It is much different than the "According to the Dictionary of Real Estate Appraisal, a neighborhood is, “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."

HERE IS WHAT I DEAL WITH. I MOSTLY APPRAISE IN A SUBURBAN AREA: ****CLICK TO EXPAND****

1. The below map has about 5 different PUD's and subdivisions of varying market appeal, ages, quality, GLA and price points.
2. The below is the defined neighborhood boundaries.

So for the "neighborhood" on the URAR, I put in the subdivision name in which the subject is located in.
The neighborhood below has a school, shopping centers, retail, and a golf course.

So what do I do? There is not a so called "neighborhood name". It is either this or none:
1. Use the subdivision name and draw the neighborhood boundaries as the subdivision boundaries (platted). **To narrow**
2. Use the town name as the neighborhood which expands for 4 miles and across major though fares. **To wide..market area.**
3. Use the subdivision name and draw my neighborhood boundaries to include other PUD's and retail centers. ***I do this**

The issue with 2 and 3 above, is that it is easy for the appraiser to hide or mis-lead when the subject is a over improvement. What about the subjects "predominate"? If you use all of the subdivisions, it will not accurately describe the subjects predominate for the subdivision. Within the defined boundaries, there is a $200K project, $350k project and a $350-$500k project. The predominant is $350. So if you are appraising a home in the $200k subdivision, there would never be a over-improvement in the subjects subdivision. On the other hand, if I draw my boundaries to include only the subdivision, it would never include any commercial land uses. (we do have some mixed use developments, but lets keep it the example simple)

That is why the new forms needs to have a "subdivision and a separate market area section to fill out.

If you ask the neighbors what "neighborhood" they live in, they would name their subdivision. Urban and rural areas are different.


View attachment 49192

https://icapweb.org/uploads/Reporting_Market_Conditions_Final_V1.0_1418844119.pdf

Getting Neighborhood Description Right

Which one is worthy of a professional-level fee? The first one clearly says too little; the second one probably says too much.

www.workingre.com

I think you've nailed it when you said "If you ask the neighbors what "neighborhood" they live in, they would name their subdivision. Urban and rural areas are different." When appraising tract home in a subdivision by a major developer, it pretty much defines your market segment in the immediate areas with competing tract home projects in the same vicinity, not the ones across the opposite side of the city.