Using A 20 Mile Radius As The Neighborhood

[Don Clark]

Sad thing is, many Appraisers do not know the difference in neighborhood and competing market area and expand their "neighborhood" to accommodate comp selection.

"many Appraisers do not know the difference in neighborhood and competing market area"

And neither does Fannie Mae.

I am set to appraise a Townhouse at the Ocean front next week. Only 1 sale in subject "Neighborhood'. 2, maybe 3 sales i can use in a 3 mile radius. In my opinion the entire ocean front area is the subject "Neighborhood". If not, the 1004MC will have mostly 0's.

 

[norapp]

Working on a sale in a very rural area of Wisconsin. The subject consists of two reports: One is for a manufactured home on one acre and the other is a bermed/earth home on 41 acres. Very few comps for both properties as manufactured and earth homes are rare in the area. I have used a 20 mile radius from the subject as my neighborhood. Bank is telling me that I can't do that and that I have to use a Township or partial area of the County as my designated neighborhood. Any thoughts?

Describe your initial search parameters and then expand the comment as to why you had to go that far. I work in rural areas and if I don't have comps within a 5-10 mile radius and see some outside that in similar wilderness (Adirondack Mountains) I tell them before accepting. If they are ok with it I charge a lot.

 

[Meandering]

And the neighborhood for River side vacation homes is???????????



All zeros on a 1004MC

 

[J Grant]

The search area is where (ideally) the typical buyer for subject would consider an alternate substitute purchase. Depending on type of subject and density build out or sparse population (rural), that area might be very close or far or anywhere in between. When there are close location comps, those are usually considered the best to use for obvious reasons....the point is client can not demand a search be made on their terms.

 

[Sid Holderly]

Using a school corporation would cover parts of three counties for the neighborhood and the market area may be 6 counties or rural properties.
Waterfront properties are often just on the water regardless of address within a large irregular stretch of lake or river. In many rural areas the
distance to the employment center may be a better guide to average value than county or school system. It is based on what you have to work with.

 

[Terrel L. Shields]

In many rural areas the
distance to the employment center may be a better guide to average value

Classic Von Thünen Model
Works for me... We can grow concentric circles around Walmart Hdq. and the Univ. of Ark... smaller ones around the other towns.

 

[residentialguy]

Banks don't tell appraisers where appraiser "should" search. Explain to your client why the expanded search, if they insist on dictating area it is an unacceptable assignment condition

Has NOTHING to do with the OP and stating the correct neighborhood. There is nothing wrong with going outside of the neighborhood to search for comps. He can do that. He can't lie about the neighborhood, however.

 

[J Grant]

Every post I've made on this thread supports appraiser going where they feel they need to find the best comps. If it's a rural, spread out area, the appraiser might have too narrowly identified "the neighborhood".?
With the OP it sounds like in part it is a client problem.

 

[J Grant]

Some buyers would look in a narrow geo area, others a wider one. There would be a reason for either choice. A buyer focused on a narrow area is most interested in location, assuming they can find a property that fits their needs in that location. A buyer looking further out is flexible in location, since they seek a specific kind of property such as .ocean front or large acreage, fixer upper to flip etc...their motivation is driven by a specific type of property than living in a particular location.

But an appraisal is about what a property would bring on the open market, so it is not just about the buyer , it is also about the seller. The subject seller is a fixed location seller and would compete first against the closer similar properties and next against further away ones (typically)

Since subject is in X fixed location, and a buyer for subject would buy a similar property in X subject location, it makes sense to start a search closer to subject and widen out from there. Anyone can have a particular search method ; as long as it ends up identifying the most similar/best comps it works.

 

[residentialguy]

Every post I've made on this thread supports appraiser going where they feel they need to find the best comps. If it's a rural, spread out area, the appraiser might have too narrowly identified "the neighborhood".?
With the OP it sounds like in part it is a client problem.

It has nothing to do with going where they feel they need to find the best comps. From OP's post, the bank is not trying to tell the appraiser where they can and can not go...they are telling him that the neighborhoods do not go out 20 miles into other townships. The neighborhood boundaries are the boundaries. It does not broaden due to lack of sales. It has nothing to do with sales. The appraiser expands their search area for the SCA to include sales that are outside of the neighborhood if there are not enough appropriate comps within the neighborhood boundaries. But that not change the neighborhood boundary.