Neighborhood

[sarah saunders]

I am sure this is a simple question, but I am having trouble with exactly what "my neighborhood" is in the top of the URAR. Mainly, I am confused how to answer the predominate price range and age, boundaries, and factors that affect marketability sections when I have to leave my particular subdivision or area for comps. I live near the coast and deepwater access makes a great difference in value. To find similar comps, sometimes you have to go several miles. What do you think? Many thanks.

 

[Tim Hicks (Texas)]

The neighborhood boundaries should be just that, the neighborhood. Now, certain properties will have expanded neighborhoods. A lake front property can be similar to a property 5 miles across the lake. A rural property on acreage doesn't really have a neighborhood, but has market boundaries usually significant by school districts or other characteristics. However, if you are appraising in a cookie cutter neighborhood your boundaries should that addition. I have noticed on the most fraudulent appraisals I have reviewed that the neighborhood boundaries are usually exaggerated to include the better neighborhoods. I was taught that way and realized later it was wrong. It seems that all the manufactured home appraisals I get to review give neighborhood boundaries that are basically the county lines and cover about 1,000 square miles. It was through those reviews that I learned to be specific about the neighborhood boundaries on rural properties. Rural and lake properties have specific interests that you can only understand if you know the market. It is a competency issue that tends to be ignored.

 

[Terrel L. Shields]

I try to define the neighborhood in terms of the Market area. But within the physical boundaries of the area I define as fannie mae requests (but I notice is often absent from reports) I try to sample the area.
I might define my boundaries as below - Floyd Moore Rd N; Pioneer Lane /WPA road (W); Dawn Hill Road (S) and Robin St /Edmonson Road (E), ie.- Gentry city limits approximately
If your MLS allows you to make a broad search it might go this way.

Market Area - Gentry (a small town of 2500)
Interval - 1/1/2002 to 1/1/2003
Price range ($5000 - $1,000,000)
Age 0 - 50

run

45 residential sales, median $67,000 mean $68,123, max $225,000, min $13,200 DOM avg 134, avg listing price $69,857 avg age 23.212 ; 5 commercial sales - median $47,000 mean 51,222 max $157,000 min. $6,000, DOM avg 314 ; no vacant land sales

Show list you might decipher something like >> 90% Residential, 10% commercial - 100% build up; about 1/2 are between $45,000 and $85,000 so $67 dominate age 50% between 10 - 30, predominate 23.

It is statistical and can be done by sampling a population of sales.

 

[Tim Hicks (Texas)]

As far as market range and predominant value is concerned, I let the MLS tell me the range. When I run a subdivision on the MLS, I don't put minimum or maximum values on the search or a specific date. Then I can see what the low sales have been and the high sales. too. I never put one value as the predominant value. I give a range derived from those sales. If most of the sales are between $120-160,000, that is my predominant value. It amazes me on reviews how the predominant value always seems to be one value (the appraised value). That is next to impossible. I also don't care if my value is above or below the predominant range. They never ask if it is below, but sometimes they ask if it is higher. However, I always point out is is within the high for the market range and that it is only typical for some homes to be higher and some to be lower. They are always satisfied with that answer.

 

[Thomas N. Morgan]

Sarah,

What's already been said is good.

I can add only these thoughts. When writing a neighborhood description, I always try to keep my reader in mind. What do they need to know?
(I don't do work for stuff that will be sold to Fannie Mae).

Lately I have started saying "the specific neighborhood is ....." and describe it a bit, and then say, "the general neighbohood is ......"
If you put a lot of thought into it, you'll come up with something no one should criticize. There's lots of right ways to do things. Only they have to make sense in the context of what the appraisal is for.

With some subjects, it' s better to just make a neighborhood map, and refer to that. If you try to describe some neighorhpods by street names, it will sound like you are sending the reader on a scavenger hunt.

The production people just develop stock phrases that sound good, but tell you nothing. With fees as they are, I can't really blame them.
The Loan Officers and Loan Processors don't read the reports, anyway. They just want to know if it's enough to make the loan.

You do sound like someone who will soon become a good appraiser. I applaud your efforts to a good jobl

 

[Mike Garrett RAA]

Neighborhoods, ahhhh there is an interesting topic...this might go on forever on the forum.

The Language of Real Estate Appraisal defines Neighborhood as:

A geographical area delineated by geographical or political boundaries that is characterized by having complementary land uses.

So how do you define your neighborhood? Mine would read something like this:

"Springs Ranch - Bounded on the North by North Carefree Drive, on the East by Marksheffel Road, on the South by Constitution Ave, and on the West by Powers Blvd in the eastern quadrant of the City of Colorado Springs"

I go on to further say "Neighborhood homes are of similar design and quality with average appeal. Schools and parks are within the neighborhood and shopping is convenient. No adverse influences were noted at the time of my inspection."

The third part of the neighborhood section talks about market conditions within that neighborhood. "There has been positive appreciation for the past 12 years, no sales concessions are noted or warranted. Existing home values increased by more than 6% in the past year. Days on the market are stable at 56 and the sales price to list price ratio is 98% based on MLS data specific to this marketing area, dated 03/20/2003. A total of 76 properties were used in this analysis. VA/FHA financing is quite common with sellers paying from one to three discount points. No adjustments are made unless the discount exceeds the customary amount. The market analysis is in the appraiser's work file.

Ok, so we have said what the neighborhood is....what it contains, and what is happening market wise in that neighborhood. Now how do you decide to define "The Neighborhood"?

I have found that a neighborhood can be comprised of several different subdivisions. The one thing that seems to be common to all of them is the grade school. You might want to see if that is a search-able feature on your MLS. Another thing you can do is do a coordinate search if your MLS has that function. Mine gives me a one square mile grid around the subject property. This is my preferred method. When creating your search don't force the price range and include solds, pendings, and active listings. If you are ever ask to prove your neighborhood information you will have a nice little CMA tucked away in your work file.

Always ask yourself..."do I have to go outside of the neighborhood to find comps?" If so, why? One of the quickest ways to determine if an appraiser is appraising to a pre-determined value is to see all of the comps coming from outside of the neighborhood. When indicating the single family price range and age...eliminate the extremes if they are atypical. Also remember most neighborhoods will have some vacant lots so it is rare to have 100% single family.

I hope you find this helpful...I was in a particularly good mood this evening.

 

[Tim The Enchanter]

this might go on forever on the forum.

Good answer Mike G. Sounds a lot like mine, except I don't put numbers in the third part usually.

"the specific neighborhood is ....." and describe it a bit, and then say, "the general neighbohrood is ......"

I've done this on occasion when the micro 'hood does not have enough data and you have to expand to the larger area. Hollyweird Hills comes to mind.

As far as the age and price ranges, I search Win2Data for the last 6 months or year for all sales in the area. Our MLS's tend to have a lot of bad data. Sales that never closed, wrong age, etc. Export those as a text file, open it in Excel (delimited by tabs and commas are the options 8) ), select/highlight everything except the top row with the column names, then sort by age first, then price. You need to know which lettered columns are the ones you seek. There's you're numbers. Lo, hi, predom. Ignore those off the wall too high and too low. Then I save it as an excel file for my workfile. :wink:

 

[Mountain Man]

In my rural area, I use the same approach as Tim and Terrel. The neighborhood may not be just your subdivision. Look at the market, where would the buyer go if they could not have that house.

Deepwater access makes a great difference in value.

In my area, on the lake starts around $700K. Across the street NEAR the lake starts around $100K. When appraising a lake front homes, I define the neighborhood as lake front homes. Someone who can afford and wants a lake front home is not going to consider a "lake view" home for $100,000. Consequently, the comps may very well be over 2 miles..... by land. 8) So to help the UW, I'll say 1/2 mile across the lake. Hey, if they want me to show them the comps, I'll put the fishing poles in the boat too. :lol:

 

[Pamela Crowley (Florida)]

I define what is located within the parameters of the 'neighborhood boundaries'. Some of our spread out 'city' neighborhoods are bounded with miles in between. I stop and think about buyers. If I were going to show a friend the house I'm appraising because I know they would be interested in buying it, what other subdivisions would I also show them with houses like it that are nearby? What are the houses/properties like that they will be driving by every day as they come and go from that house?

In the 'Factors that affect...' section, I describe that full 'neighborhood' first which could be just the subdivision if that's what in my boundaries (rarely). Sometimes it's extremely diverse where there are 1M plus waterfronts with older MHs across the street and that's what I say. My range of values could be $30,000 to $1,500,000 in those areas and age New to 80 yrs. (extreme example) The land use is broken down according to what's in my boundaries also, usually starting with looking at the map within those boundaries and making an educated guess on the amount/percentage of the vacant land there first.

If the subject is really an oddball and I know comps are going to be miles apart, I describe the immediate area surrounding the subject. Comps will be described as applicable / needed because all will be outside of the subject immediate area. If a buyer wants a 10+/- acre horse facility, they might look at what's available in 4 surrounding counties and those properties are competing with each other for that unique style.

When I think of the Neighborhood section, I try to think about being a buyer for the subject and where else would I look to buy something similar.

It's what makes sense to me, it's what I do. UW questions are very rare here anymore.

If the surrounding area is diverse, I then try to squeeze in a little about the subject subdivision, if it is a subdivision.

 

[Mike Garrett RAA]

Excellent points from all of you! The best is to "think like a buyer" but I would also add..."think like an underwriter". Did I adequately describe it so that the reader has a good understanding of what I am describing.

Several times I have reviewed work where the appraiser said..."the neighborhood is all of Colorado Springs (500,000 population)". Price range $50,000 to $2,000,000. Age 1 to 100. I don't think so!

Good work troops, think this will really be of help to the newbies :n00b: It is something their mentors should be looking at quite closely in the beginning. My software allows for saving the neighborhood data (up to 200 on the quick list). Very helpful in consistency.