I wanted to put up a brief post to talk about neighborhood boundaries and how important it is to know the local market when appraising (or hunting for real estate). Often times it is obvious when a new neighborhood or housing niche begins because the style of homes change or there is a natural barrier such as railroad tracks, a main street, commercial property or a highway. Other times it is not so obvious to the unfamiliar eye.
The image below is a portion of Sacramento known as Tahoe Park South (blue), Tallac Village (green) and Fruitridge Manor (orange).
According to our uniform appraisal standards called USPAP, appraisers are to select the best available comparable sales when doing an appraisal. Lenders know this and so most of the time they have a standard requirement for the “comps” to be located within a one-mile radius from the subject property (NOTE: the best comps are not always located within a one mile radius). So when applying this lending guideline, in theory an appraiser can value a property location in the orange section (Fruitridge Manor) and then find comparables in the blue portion (Tahoe Park South), right? Well, not really because even though these housing areas are well within a one-mile radius of each other, they are actually much different market areas as illustrated with the data below.
Tahoe Park South (blue):
- 5 sales over past 90 days
- 32 sales over past 12 months
- Median price over past 90 days: $225,000
- Current Actives: 11
Tallac Village (green)
- 20 sales over past 90 days
- 59 sales over past 12 months
- Median price over past 90 days: $89,500
- Current Actives: 31
Fruitridge Manor (orange)
- 13 sales over past 90 days
- 66 sales over past 12 months
- Median Price over past 90 days: $85,000
- Current Actives: 31
The most obvious difference above is the striking change once you head North of 21st Avenue from Tallac Village to Tahoe Park South. If one were comparing property values between the areas above, the median price levels alone tell you that property in the current real estate market in Tahoe Park South sells for a great deal more than Tallac Village or Fruitridge Manor. For more information on the Tahoe Park area, click HERE.
We can also see that Fruitridge Manor and Tallac Village have a similar median price level and so they appear more similar on paper. However, one important difference to note that comes from knowing the local market is that the bulk of houses in Tallac Village are block construction (yes, houses made out of block) in comparison to the typical stick-built houses in Fruitridge Manor.
Knowing local neighborhoods is important when buying a house, investing in real estate and definitely when appraising properties. This post is not meant to be exhaustive, but only briefly informative. If you have further questions or any real estate appraisal needs, you are welcome to contact me at 916-595-3735 or firstname.lastname@example.org.
www.SacramentoAppraisalBlog.com A Lesson in Neighborhood Boundaries: Tahoe Park, Tallac Village & Fruitridge Manor in Sacramento