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Suburban vs. Rural (the meaning of the words)

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Ted Wegener

Freshman Member
Joined
Feb 8, 2003
Suburban vs Rural

I am trying to establish a fair and honest definition of the above categories of residential properties. It seems the terms are very vague and subject to quite a lot of interpretation. This is Fannie mae’s definition:

Selling Part VII
Section 402.01


An “urban” location relates to a city , a “suburban” location relates to the area adjacent to a city , and a “ rural” location relates to the country or anything beyond the suburban area

Although urban is quite well described the term suburban is very vague. It relates to an area adjacent to a city. How far adjacent? 1 mile, 5 mile, 10 miles? What is the standard? Is it so vague as to be meaningless?


Recently, a lender asked me to appraise a property located about 5-6 miles from the city limits of the small city where I live. He asked that the property be marked suburban. I refused because of the distance, presence of well/septics, and most lots in the area being small acreage.

Of course, another appraiser will go right in behind me and mark the property suburban. The lender advises me the loan-to-value ratios change on their sub-prime clients if the property is marked rural. And,of course, I will not be getting any more of the sub-prime assignments in rural areas for this reason.

I want to be ethical but it does seem as if I am slitting my own throat, especially since there does not seem to be a standard definition for suburban or rural.

When does suburban change to rural? 1 mile, 2 mile ,5 miles or some other standared?. When does it become rural?And if there is no generally accepted definition of these terms are we not at liberty to establish a reasonable definition of our own?.

Any light on this situation will be appreciated.
 

Ted Martin

Senior Member
Joined
Jan 17, 2002
Professional Status
Certified General Appraiser
State
Kansas
I have a rough rule which I apply. This rule is based on observations of buyers in my market and may not apply to your market.

1. How long does it take to drive across town from city limit to city limit?

2. Suburban is the same distance (time) outward from the city limit. Beyond that it's rural. Actual distance in miles doesn't mean anything, since buyers are only concerned with how late they can sleep in and still make it to work to pay the mortgage.
 

Ross (CO)

Senior Member
Joined
Jan 17, 2002
Professional Status
Certified Residential Appraiser
State
Colorado
Ted, .....as large and diverse as our country is, with its infinite numbers of gothams, burgs and hamlets, you might likely encounter multiples of definitions for how suburban vs. rural is played-out. I have often felt that those 3 simple boxes, by themselves, do not offer enough solid description to be exact about your designation.....and whether that is in conflict with your lenders "program" or their underwriter's command over the progress of their transaction. Your next best course may be to be sure you give enough text description of your neighborhood, even if it means you go into an addendum page. Just how important is it for a certain report that you might have to do that ? Sometimes, perhaps, very.
Consider how far out the major municipal services might extend. Electric is a given, phone may be next, water-sewer-natural gas pipeline may be third, fire hydrants-pavement-direct mailbox delivery may follow that. In my area, the suburban areas are still expanding, as are accompanying "services" and the willingness or need for residents to commute back to areas of greater density to find their work, or their groceies. Suburban probably has the broadest scope of definition. Ask, suburban to what city, or what town, or is the biggest thing a junction of merely two roads ? Population density could aid your definition. In the eastern sections of my county what are common are 35-acre tracts, dirt roads, wells, septic, tank propane and one may or may not have a mailbox at the driveway turn off the road. I have no problem calling that rural --- even when 99% of the residents are willingly going to drive 25 to 50 miles one-way to "go to work". In my neighborhood description you can be sure I will mention the prevalence for commuting considerable distances as being typical and normal for that market area. I think it is a bum rap to be told (by a LO) that a borrower can not get their loan if you put "rural" in the box. That is real baloney. There are just too many good folks who choose to live in those locations who have as solid a financial background as the other guy in the 'burbs. They CAN do the loan. The borrower may have chosen the wrong folks to seek the product they desire. This lender is also looking at (future issues of ) marketability of the property, as much as marketability of the loan right after closing.

I just love taking front and street photos of a rural subject property with 5% house and 95% open, flat prairie.....and maybe a half dozen other rooftops in the distance. It really takes the wind out of their arguement. --- As for your 5 to 6-mile distance from city limits scenario.......I would be able to justify that as "suburban" in my market area. As for being ethical, you and I both need not wrestle with that notion. Just be sure you describe fully the neighborhood and the market, and offer a second location map in your report which helps to sell your descriptions. I will often zoom-out for map #2 if relavent distances need to be portrayed. Best wishes.
 

rtubbs

Junior Member
Joined
Jan 15, 2002
...and the answer is:

And ye shall measure from without the city on the east side two thousand cubits, and on the south side two thousand cubits, and on the west side two thousand cubits, and on the north side two thousand cubits; and the city shall be in the midst: this shall be to them the suburbs of the cities.

Numbers 35:5
 

Judy Whitehead (Florida)

Senior Member
Joined
Jan 20, 2002
Professional Status
Certified Residential Appraiser
State
Florida
We have discussed this several times on the forum before, but it is always good to get new opinions. I am also in a small town, and there is not one single area in the entire county that can be considered "urban" in my opinion (and that of most other appraisers). We finally got 3 little busses that actually provide minimal public transportation and there is nowhere you could live and get to most of the services without a car (or strong legs.)

Rural and suburban can be different things in different markets, but if there are no municipal services to the subject, and one must get in their car and drive somewhere for almost everything, and (as Kathy in FL used to say) Domino's won't deliver to you, then perhaps it should be considered rural. Actually, Dominos will deliver to some rural locations in this area.

One appraiser told me that if he could "see at least 3 houses from the subject, then it was surburban." I can think of neighborhoods MILES from anything where it is possible to see 3 houses from the subject in my county. But I wouldn't consider them "suburban."

Unfortunately, you have discovered that the definitions are subjective. I wish it could be more clearly defined, but actually can understand why it is not - as it can be different in different markets. We all have to set our standards in a loosely described area. Ross was correct, in that I do plenty of appraisals of rural properties that are funded. This sounds like a requirement of that particular lender, or perhaps they are looking for a reason not to fund the loan :?
 

Pat Butler

Senior Member
Joined
Jan 17, 2002
Professional Status
Certified Residential Appraiser
State
Illinois
The census bureau has numerous sites which technical will show you what municipalities are a 'city.' If it is a city then Urban applies, if your area is adjacent (touching) the limits of a city then suburban applies. Else, it's rural.

Whether someplace is a city isn't an opinion, it is a fact that distinguishes whether or not they incorporated. Everything else falls in line from there. We can argue whether an area is suburban yet Fannie gives us a definition that can be applied on a factual basis, not according to someone's opinion.
 

Mike Garrett RAA

Elite Member
Gold Supporting Member
Joined
Jan 14, 2002
Professional Status
Certified Residential Appraiser
State
Colorado
Not wanting to further confuse the issue BUT...

We have suburban areas minutes from downtown. We have suburban areas 35 to 40 minutes from downtown.

We have rural areas 15 minutes from downtown.

My rule......(not original) "More cows than people...it's rural.

I also like to use services...such as electric, natural gas, water and sewer as a partial determination. When a property is serviced by REA (Rural Electric Association) it's sorta hard to call it "suburban" just so it fits some lenders little box.

Fannie Mae says all classifications are acceptable for them to purchase the loan.
 
B

Bemis Pownall

Guest
From The Dictionary of Real Estate Appraisal, Third Edition
Appraisal Institute

rurban
An area in transition from agricultural use to suburban residential and commercial development; an area with both rural and suburban characteristics that is within communting distance of a city.

Thought I'd throw that in I've always like that definition.

There are no hard and fast rules.

I have a well, for watering. City water to drink. Public sewer system. My neighbor has a septic system(less then 20 feet from 6 lane arterial) and they just installed a new one last year, site size .30 acre. We can walk to 7-11, lazy boy, public transportation, old folks home, US Post Office, tons of apartments, home depot etc. Surrounding neighborhood 100% built up. Average site sizes 6,500sf, mostly single family detached tract homes built in the 70's.

Once you've been to a rural community, they are usually over 5 miles form a major metropolitan area or business district, you'll never forget it. Your comps will be over 5 miles more like 10 and 20 miles now thats rural.



:icecream: my 2 pecos amigos
 

Mike Garrett RAA

Elite Member
Gold Supporting Member
Joined
Jan 14, 2002
Professional Status
Certified Residential Appraiser
State
Colorado
I thought ruban was a sammich!
 

Jo Ann Meyer Stratton

Elite Member
Joined
Jan 16, 2002
Professional Status
Certified Residential Appraiser
State
Arizona
I do have to chuckle when I read the definitions of other parts of the country. Can't use REA as a guide here--that is the City of Safford--largest town. Can't use over 5 miles from metropolitan--nearest metro area is 125 miles. Can't use cows or chickens--that is what grazes on the lawn of City Hall. Can't use distance to other properties--that depends on whether you are looking north or south or west--nearest building to the west of me would be about Yuma--300 miles. North it is 100'. Every market is unique and what is rural in New York could be urban in AZ. What is urban in Safford would be suburban in Phoenix. As water grazing rights are disappearing, so is the agricultural aspect of the land. Can't grow anything animal or vegetable if there isn't any water. At least golf course can be watered with the effluent of the sewer system after it has been sanitized, so maybe that could be a yardstick--got a golf course it is suburban.
 
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