Subject Property On Traffic Street

[Ryan Leonhardt]

I'm appraising a house that sides a major traffic street and I can't find any comps within six months that do also. I only found comps that are in proximity to a freeway, but suffer more noise. What should I do to bracket the traffic street as a freeway is different from a traffic street? Would it be better to exceed six months and find a traffic comp or exceed a normal distance from the subject to find one?

 

[Bob Alexander]

Ryan,
My suggestion is to go back as far as necessary on your Subject's or similar street nearby and pick a Sale. Then for the same period check the Sales nearby, not on a traffic street. See what the difference in Sales price is. Convert that to a percentage and apply that percent to your current Comps. Its a little extra work but you have to have some support to make an adjustment. You can also go to a competing area where there is a similar street and again, find another Sale away from the traffic and do the same thing. Hope this is what you were looking for.
Bob - San Jose

 

[George Hatch]

Do both. Even if it's only for your own knowledge. This is one of those situations that you'll need to be able to point to later on to demonstrate how you are able to make a specific adjustment for a specific problem. If this is a sale, keep track of it when it closes and keep the information in the back of your mind for future assignments.


George Hatch

 

[Tawfik Ahdab]

Bob and George are both right on.

Go back in time, and go to a competing location within your market area.

There are two kinds of adverse traffic influences,namely

1 )heavy traffic along the street, and sometimes separately,

2) traffic noise, which may from the front, from abutment to a heavily used street/freeway/ expressway/ highway, or merely ambient (that is, from heavy traffic nearby without abutting the property).

Do your best to use the most comparable adverse externality in the selection of comparable sales.

 

[Phil Rice]

quote:

"but you have to have some support to make an adjustment"

I disagree.

It is good advice to use historical data and matched pair analysis. By all means, give this a try. Look at the data.

But also, use your knowledge and experience. Matched pair analysis sounds good in theory, but sometimes in the real world it does not work so well. What will you do if your research shows that people pay extra to live on a busy street or next to the highway? Will you make a positive adjustment for busy street location?

More likely you will "massage" the data until it gives you an answer that looks something like what you expected to find.

If you pretty much know the answer at the start of the process (kinda like the cost approach), look at the market data with an open mind and then do what makes sense in the circumstances. Don't get hung up on a self imposed need for support.

 

[Bob Alexander]

Phil,
This has got to be a slow day for you. ( What will you do if your research shows people pay extra to live on a busy street ). I would do the same as I would if my research showed that people will pay extra to live in a house with no roof. (Sheech!) You suggested that Ryan rely on his knowledge and experience. He obviously does not have that knowledge and experience or he would not be on this forum asking for advice. The last thing we need to do is to recommend using the SWAG. Lets try to help this guy get started right.

Ryan, imagine yourself on the witness stand when asked how you came up with a particular adjustment. Your conclusions whether on an individual adjustment or on the final value conclusion, must be supportable and defensible. "Appraisal 101".
Bob - San Jose

 

[Phil Rice]

On the witness stand? Bob, you are entitled to your opinion. Is it supported by data? Have you ever been on the witness stand or observed another appraiser on the witness stand? Have you seen a situation where an appraiser had done a matched pair analysis, and was somehow glad that he had? I know this sounds like an argumentive response, it is not intended that way. I have been on the witness stand 1 time, and this topic (support for adjustment) never came up. I humbly submit that in most appraisals, the possibility of this happening is so remote that it is not a good idea to make decisions based on what would happen if called to the "witness stand". If anyone has real life experience to the contrary, I would be glad to hear what they have to say.

Is every adjustment guilty until proven innocent? Depending on the circumstances, it could be "wrong" to make no adjustment (busy street would be a good example). Does an appraiser need to somehow support and defend every addjustment that is not made? IMHO, it is desirable to be able to defend and support every adjustment with market data, but in the real world, the majority of adjustments are made based on knowledge and experience. Again, my opinion -- we are not helping new appraisers by trying to make them paranoid about the USPAP POLICE coming to arrest them.

I am trying to give advice based on experience. If they want Appraisal 101, they can read the text book.

It could be that this person has no idea what kind of adjustment to make, but I doubt that is the case. IMHO, they prolly know already that a busy street location is less valuable. I advocate a look at market data AND to use their knowledge and experience, don't sell themself short.

 

[Mike Garrett RAA]

A busy street is a busy street. Go to other areas, go back in time. Compare homes that sold on busy streets to similiar homes what were not on a busy street. Develop a file to support your adjustments. Doesn't have to be current data. Express as a percentage and then convert to a dollar amount.

Example: House of busy street sold for say $150,000. Same house on typical residential street sold for $162,500. Establish a percentage adjustment of say, 5% for busy street. Apply to your subject property. Do several pairs so that you have a broad enough base.

Another key is what did the buyer think. Was the property listed for say $150,000 and sold for $140,000? Look at listings....do homes offered on busy streets have a lower listing price?

This is where an appraiser's experience comes in real handy. Not an easy job sometimes but that is why we get paid a lot more than an AVM.

 

[Blue1]

In my market there is a dearth of inventory. Homes with heavy traffic frontage don't usually sell for less than those in more quiet areas. I would have never believed this until our market went up like a rocket......There's just nothing to buy...therefore, homes with external inadequacies such as traffic don't usually sell for less.

 

[Mike Garrett RAA]

Blue.... I tend to agree about our market also. Generally there is insufficient data to support a conclusion; however, if the appraiser says the property is influenced by heavy traffic they create their own nightmare. I prefer to say something like..."subject property backs to a (minor/major) arterial street. There appears to be little, if any, affect on value noted by current sales within the neighborhood". Sometimes we become our own worst enemy by attempting to put too much information and conjecture in the appraisal report.

Expect underwriters to question more and more as those in the secondary market and those making government guarantees and insurance programs begin to enforce the requirement for better underwriting and/or shared liability with the appraiser.

The appraiser should ask themselves..."what is the traffic situation"? Is it a residential street? Is it a major/minor arterial street. Does it back to a parkway or boulevard? So much depends upon the community, what is the community standard? Are there sound barriers or buffers? Can you detect increased noise within the house?

Along those same lines how about railroads and airports? My personal residence is near the flight corridors for the municipal airport which also is a military field. This is a newer part of the city (the airport once was 12 miles east of town) and has grown up around the airport. There is no negative affect on values due to the noise at this time. In this case the key is to use comparable sales similarly affected by the airport and noise...and there are lots of those. 30,000 new homes have been built in this area in less than 10 years. Another 30,000 are on the drawing board.