Neighborhood Boundaries & Comp Selection

[Leedega]

I wrote a 1025 for a duplex in a rural area. My market analysis in the defined neighborhood boundaries netted 0 sales and 0 listings/pendings. I put zeros in the area above the sales comparison grid. I went outside of the defined neighborhood boundaries to find similar properties and made adjustments as necessary. The lender wants me to redefine my neighborhood boundaries so all of the comps are within those boundaries and the area above the grid has something other than the zeros. I told them I wouldn’t do it as it would create a misleading report. They are persisting and want to know the source of that rule/requirement. I thought I remembered it was a USPAP issue to properly identify the neighborhood area and report the data (or lack there of as in my case). Then to report that it was necessary to go outside of those boundaries to find comparables. Can anyone help me out with more a definitive rule/guidance? Thank you!

 

[Overimprovement]

I wrote a 1025 for a duplex in a rural area. My market analysis in the defined neighborhood boundaries netted 0 sales and 0 listings/pendings. I put zeros in the area above the sales comparison grid. I went outside of the defined neighborhood boundaries to find similar properties and made adjustments as necessary. The lender wants me to redefine my neighborhood boundaries so all of the comps are within those boundaries and the area above the grid has something other than the zeros. I told them I wouldn’t do it as it would create a misleading report. They are persisting and want to know the source of that rule/requirement. I thought I remembered it was a USPAP issue to properly identify the neighborhood area and report the data (or lack there of as in my case). Then to report that it was necessary to go outside of those boundaries to find comparables. Can anyone help me out with more a definitive rule/guidance? Thank you!

I don't think that is any USPAP requirement. If you are using a Fannie form for a GSE, their selling guide has a good description of all the fields. Here is a link:
https://www.fanniemae.com/content/guide/selling/b4/1.3/03.html

On a general level the appraiser gets to decide issues like this. Which rule/requirement do they think exists? Something that says the appraiser completes the appraiser and decides what is is credible and not misleading? I think all of USPAP speaks to that issue.

A commercial appraiser may go to a completely different city or even part of the country to find the best comparables. Sometimes the best comps stink, but they are still the best ones.

Is this a GSE loan that CU might be giving the underwriter fits over?

 

[Overimprovement]

By the way welcome to the forum! I hope you get as much out of it as I have.

 

[Terrel L. Shields]

I wrote a 1025 for a duplex in a rural area. My market analysis in the defined neighborhood boundaries netted 0 sales and 0 listings/pendings. I put zeros in the area above the sales comparison grid. I went outside of the defined neighborhood boundaries to find similar properties and made adjustments as necessary. The lender wants me to redefine my neighborhood boundaries so all of the comps are within those boundaries and the area above the grid has something other than the zeros. I told them I wouldn’t do it as it would create a misleading report. They are persisting and want to know the source of that rule/requirement. I thought I remembered it was a USPAP issue to properly identify the neighborhood area and report the data (or lack there of as in my case). Then to report that it was necessary to go outside of those boundaries to find comparables. Can anyone help me out with more a definitive rule/guidance? Thank you!

Yes you are right. The neighborhood is one thing. The market area is likely larger. But the forms want you to define the neighborhood. So you might simply put in a map of the equally competing market area that includes your comps, but the MC remains the same.

 

[DWiley]

The neighborhood boundaries are the neighborhood boundaries. They do not change based on the presence or absence of sales within the neighborhood boundaries. And as T pointed out, the neighborhood and the competitive market area may well be two different things, especially for unique properties.

 

[Mike Kennedy]

I wrote a 1025 for a duplex in a rural area. My market analysis in the defined neighborhood boundaries netted 0 sales and 0 listings/pendings. I put zeros in the area above the sales comparison grid. I went outside of the defined neighborhood boundaries to find similar properties and made adjustments as necessary. The lender wants me to redefine my neighborhood boundaries so all of the comps are within those boundaries and the area above the grid has something other than the zeros. I told them I wouldn’t do it as it would create a misleading report. They are persisting and want to know the source of that rule/requirement. I thought I remembered it was a USPAP issue to properly identify the neighborhood area and report the data (or lack there of as in my case). Then to report that it was necessary to go outside of those boundaries to find comparables. Can anyone help me out with more a definitive rule/guidance? Thank you!

May 2014
Fannie Mae Releases New Guidelines for Rural Appraisals
Fannie noted that it recognizes how properties in low-population areas can present appraisers with special challenges due to unusual building types, distances between properties, large lot sizes that may include farmland and nonpublic utility sources.
https://www.appraisalinstitute.org/FannieMaeReleasesNewGuidelinesforRuralAppraisals/

 

[Tom D]

i'm sure if you stay on your point you will have more time to look for new clients, unless they have the same desire. i think you can satisfy your stance, and their need, with a hybrid comment about neighborhood & marketing/competing areas. would a buyer in your area only look for that house in that neighborhood boundary? i got some general & very specific neighborhoods in this big city. if you are living on the edge of several neighborhoods then what does the buyer think. sometimes being too precise indicates that you are following a scientific chart, instead of appraising the house, and what the typical buyer would think. we have to find go a rounds for some supid stips, or questions.

 

[Sid Holderly]

Any rural away from a city center (location of major employment) X number of miles in most directions often falls under the same market and price range. They may all be a rural neighborhood of the large city even though they include small towns and more rural county seats. Run a spreadsheet to compare.
In my area using one of several school systems will include parts of several counties. and using one county will include several school systems. I have not found an adjustable difference between school systems outside of the major city. Rent on your example duplex will likely be similar to those of other rural counties if you can find the data, a similar distance from the major place of employment.

Changing the neighbor is up to your perception. Defining all rural areas outside of the major city might be a possibility. ie bedroom communities of zzz

You are not likely to get their definition of neighborhood for a reference in your report.

Duplexes in a rural area I will only do for a local lender since they generally know the problem of having good comparables for such.

 

[J Grant]

I wrote a 1025 for a duplex in a rural area. My market analysis in the defined neighborhood boundaries netted 0 sales and 0 listings/pendings. I put zeros in the area above the sales comparison grid. I went outside of the defined neighborhood boundaries to find similar properties and made adjustments as necessary. The lender wants me to redefine my neighborhood boundaries so all of the comps are within those boundaries and the area above the grid has something other than the zeros. I told them I wouldn’t do it as it would create a misleading report. They are persisting and want to know the source of that rule/requirement. I thought I remembered it was a USPAP issue to properly identify the neighborhood area and report the data (or lack there of as in my case). Then to report that it was necessary to go outside of those boundaries to find comparables. Can anyone help me out with more a definitive rule/guidance? Thank you!

Two different issues here- the neighborhood boundaries are the geo boundaries that define a "neighborhood",,,(if you type it in there should be text about it found online for reference, plus peer practice.) There may indeed be no comp sales found within the subject's neighborhood...which fits with why you had to search further out for comps. The lender is wrong, we don't expand our neighborhood just because it lacks good comp sales

That said, the # of sales and listings above the grid are not zero , because you did find comp sales ! Therefore,they should be reported above grid. Including with MC form, the comps are property sales identified as competitive to the subject, not necessarily confined to the neighborhood boundaries.

So if you found 3 comp sales and a listing, those should be reported above the grid, regardless of whether they are located within the defined neighborhood boundary or not . Just explain.

 

[DWiley]

That said, the # of sales and listings above the grid are not zero , because you did find comp sales ! Therefore,they should be reported above grid. Including with MC form, the comps are property sales identified as competitive to the subject, not necessarily confined to the neighborhood boundaries.

So if you found 3 comp sales and a listing, those should be reported above the grid, regardless of whether they are located within the defined neighborhood boundary or not . Just explain.