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

[Fernando]

If you know the area, you know the neighborhoods especially pocket areas and school districts.
Appraisers out of the area generally don't know these boundaries.

 

[GWISC]

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.

No MMing5000. My first paragraph in statement #15 says it all. The subsequent (2nd) paragraph illustrates what happens when you apply your metric for a homogeneous area of homes (all are like in age and part of the same subdivision) to other areas which are not. Nowhere did I say or imply that a broad and more encompassing neighborhood description is better. I am saying, the description of the neighborhood is up to the appraiser. You know, analyze the surrounding uses and influences on your property and those that are also influenced by those same elements.

In some areas, such as rural where I do a large portion of my work, a neighborhood could be an entire township as there may consist of only a a handful of houses. The neighborhood description could include more than one township. What I am saying is that some neighborhoods are beyond one singular subdivision, or a phase within a subdivision. And yes, people in rural areas will consider others that live 5 or 6 miles away as their neighbors. Heck, your next door neighbor could be more than a mile from your house.

As a reviewer, just read what the appraisal report describes and see if they indicate why the particular boundaries were chosen. If the description is lacking, say so.

 

[Terrel L. Shields]

Interpretation varies as to what is meant by


In my county one could argue the entire county has "common characteristics" - Prices are uniformly rising, WallyWorld & Tyson influence the primary drivers of employment with building being a natural outgrowth of expansion of both the poultry industry and Walmart...So my county is a "neighborhood"??? perhaps. Even with a smaller view, I can say that in the small towns on the west side of the county, the economic factors are relatively the same. They have local jobs but many commute the 30 or less miles to Bentonville or Springdale or Fayetteville. We have few communities of defined ethnicity. In fact, I cannot think of one that isn't very porous (i.e.- there may be concentrations of Hispanics or Marshallese Islanders but they are probably still no more than 40% or so of an small defined area by race.

There are no "bad sides" of the track. And the small town is a "complimentary use" in having retail, business, and residential uses, and a mix of apartments, duplexes, single family homes, etc. Likewise, the rural areas surrounding these small towns are typically under the sphere of influences of the small town but also interact with other county towns routinely. I go to a doctor in one town, a dentist in another, for a procedure yet a third, an eye doctor has offices in 2 towns....and many of these medical offices are interconnected by association or ownership. "Neighborhood" ultimately is a sort of silly distinction under that set of circumstances, and certainly is much bigger than a mere subdivision.

 

[Fernando]

Last year I went to this town to check out a property to buy. I decided to visit this new home subdivision to get an idea of what new home prices were going for.
The agent said this subdivision goes to the adjacent city's school district. I understood what she meant (more white people).
Thus, school district plays a role in selecting comps.

 

[Dublin ohio]

Last year I went to this town to check out a property to buy. I decided to visit this new home subdivision to get an idea of what new home prices were going for.
The agent said this subdivision goes to the adjacent city's school district. I understood what she meant (more white people).
Thus, school district plays a role in selecting comps.

It seems you have a problem with "white people".

 

[Fernando]

Last month, I did an appraisal in this area which I have done for years. My subject is in poorer part of town sort of in the bario.
Driving around for comps, I went into this nearby section of homes and I realized the streets were blocked going into the bario.
All these years I didn't noticed it but the pocket of white people had blocked the streets within the two neighborhoods.
The blockage must have occurred over 40 years ago and had helped keep their neighborhood prices higher.
Imagine an unscrupulous appraiser needing to get higher values, getting comps from that neighborhood.

 

[Carnivore]

Last month, I did an appraisal in this area which I have done for years. My subject is in poorer part of town sort of in the bario.
Driving around for comps, I went into this nearby section of homes and I realized the streets were blocked going into the bario.
All these years I didn't noticed it but the pocket of white people had blocked the streets within the two neighborhoods.
The blockage must have occurred over 40 years ago and had helped keep their neighborhood prices higher.
Imagine an unscrupulous appraiser needing to get higher values, getting comps from that neighborhood.

Often times streets are blocked to control/feed traffic to Traffic light controlled intersections of major roads.

 

[RCA]

As long as you can develop an adjustment model that accounts for 95%+ of the price variance between sales in the subject neighborhood or market area, you can make the neighborhood whatever you want, IMO. The neighborhood is just another factor you can put in your model to improve the R2, or narrow the adjusted sale prices between comps. However, almost invariably, having good neighborhood definitions is important to developing accurate price adjustment models.

However, in some areas, especially those where there are scattered upgrades of all calibers done to homes of all ages, condition and quality, neighborhood definitions may not be that important. I mean you can almost always find some adjustment between neighborhoods, it is just that it can be so small compared to other factors, that you might want to throw it out rather than deal with it. School districts might very well be more important. Or geology (earthquake country), or flood plain or any other number of factors loosely to very loosely related to location, i.e. neighborhood.

Now having said that, if an appraiser presents a price adjustment model he developed using matched pairs analysis on a few sales hand-selected from a large multi-neighborhood area. That would be HIGHLY suspect. You need to test your model against all sales for the past 1-3 years, IMO.

 

[Mejappz]

As long as you can develop an adjustment model that accounts for 95%+ of the price variance between sales in the subject neighborhood or market area, you can make the neighborhood whatever you want, IMO. The neighborhood is just another factor you can put in your model to improve the R2, or narrow the adjusted sale prices between comps. However, almost invariably, having good neighborhood definitions is important to developing accurate price adjustment models.

However, in some areas, especially those where there are scattered upgrades of all calibers done to homes of all ages, condition and quality, neighborhood definitions may not be that important. I mean you can almost always find some adjustment between neighborhoods, it is just that it can be so small compared to other factors, that you might want to throw it out rather than deal with it. School districts might very well be more important. Or geology (earthquake country), or flood plain or any other number of factors loosely to very loosely related to location, i.e. neighborhood.

Now having said that, if an appraiser presents a price adjustment model he developed using matched pairs analysis on a few sales hand-selected from a large multi-neighborhood area. That would be HIGHLY suspect. You need to test your model against all sales for the past 1-3 years, IMO.

I will run descriptive statistics between neighborhoods to get an idea if there is a difference. I then add Location into the model and see if it can pick up a difference, i.e., adjustment.

 

[Carnivore]

I will run descriptive statistics between neighborhoods to get an idea if there is a difference. I then add Location into the model and see if it can pick up a difference, i.e., adjustment.

You can do a simple analysis by determining the Average/Median Site Value difference between two neighborhoods. That will reveal the location difference.

Another way to see if there is a difference is to compare the Census Tract data. Be careful with that data though. You can compare Income Data. I would absolutely ignore any racial composition data that is in Census Tract.

The weakness of Census Tract Data is it becomes dated. Certain data in the tracts is updated more often that every ten years. Also Boundaries of Census Tract don't seem to make any sense. So its not perfect by any means but it can be used in conjunction with other data. Also Census tract info reveals data on Rentals versus owner occupied percentages.

I know that Lenders are weird in how they think about certain parameters. FNMA removed references to line and Gross Adjustment percentages. they did this because Appraisers under pressure from Lenders were artificially fitting adjustments to not exceed the percentage.

This was late in coming but late is better than never.

The Myth of the One-Mile Rule​