How school boundaries impact real estate values

The quality of a neighborhood school can make a huge difference with real estate values. Yeah, I know that’s a Captain Obvious statement, but let’s talk about that. Last week I was reminded yet again how powerful school boundaries can be, so I wanted to share an example of this concept and then kick around some ideas. I’d love to hear your take in the comments below.

school boundaries and real estate values - sacramento appraisal blog

Do you look at school ratings? While appraising something in the Didion school boundaries in the Pocket area of Sacramento, I looked up greatschools.org to find Didion had a rating of 8 while neighboring schools in the neighborhood had a rating of 3 and 4. Could there be a difference in value depending on which school your home feeds into? Maybe so.

Ratings from Great Schools and Real Estate - by Sacramento Appraiser Blog

Do school boundaries matter? Okay, so Didion clearly has a higher rating, but do we actually see properties sell for more? Agents regularly say there is a value premium, but is there really? I decided to create a quick visual by comparing similar-sized sales from the surrounding neighborhood with ones in Didion territory. What do you see?

Pocket and Didion Market Trends - by Sacramento Appraisal Blog 2

The black dots that represent Didion show us these homes tend to sell toward the top of the neighborhood market. This tells us buyers are clearly in tune with the school system in the neighborhood and they are clearly paying higher prices to be in this niche.

5 Things to Remember about Schools & Real Estate Value:

  1. Know the school boundaries: One of the fastest ways I’ve been able to obtain school boundaries is through GreatSchools.org. I type in the name of the school, click on the map, and then observe boundaries and even ratings of surrounding schools (just like the image above). Obviously the website could be wrong, but it’s a good start.
  2. Don’t trust MLS comments: Properties are sometimes identified incorrectly in MLS, which is why we have to double-check by looking up various websites or even calling the school district.
  3. Choose comps attending the same school: Since value can be different depending on the school, it’s important to choose comps that have the same school influence (if possible). Many times a tract subdivision only has one school, so that makes it easy when choosing comps. But in the case above there are several school options, which means if we aren’t in tune with the neighborhood market and the school system, we just might pick the wrong comps.
  4. Don’t adjust based on GreatSchools ratings: As much as I like GreatSchools.org, at the end of the day I wouldn’t make a value adjustment because Didion has an 8 rating and other nearby schools have a 3 or 4. After all, I don’t want to impose the idea that one area sells for more or less because of a rating. If there really is a value difference, I’ll likely be able to see that in the sales. Or better yet, I can just choose comps that go to the same school so I don’t even have to worry about figuring out a value difference.
  5. Communicate about the school: If you are an agent, spend an extra minute studying school boundaries so you know for sure what school(s) your home feeds into. Your knowledge can come in particularly handy too when talking with appraisers. If the school boundaries are a big deal for value, I recommend highlighting this when talking with appraisers (or using my Appraiser Info Sheet to do so). Appraisers, it’s easy to miss details like school boundaries, so it might be a good idea to bookmark a few sites to help quickly see boundaries and/or ratings.

I hope this was helpful.

Questions: What is point #6? Did I miss anything? Do you have any other tips for finding out about school boundaries? Any stories about buying a house and paying more or less because of the school? I’d love to hear.

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Comments

  1. says

    Great post Ryan. In our area, sometimes the school boundaries are what is important and neighborhood boundaries are meaningless. One more reason for me to dislike appraisals for lenders where an appraiser might be required by lender guidelines to spend time running statistics, describing, and analyzing the neighborhood when it is the school boundary that they should be focused on for that assignment. In that case the appraiser would need to analyze both to have a credible market analysis.

    • says

      Great point Gary. I’m glad you said that. We have to think through what drives value in a neighborhood. What motivates buyers? Schools are absolutely one of the key factors. My observation is many first-time buyers don’t consider the importance of schools because they don’t know any better. Then when they start having kids, it becomes all the more important, which is why they move.

  2. Joe Lynch says

    Great post Ryan. Another example is Davis. 30-50% difference in value for homes in the Davis school district versus Woodland. It really plays in the homes in unincorporated Yolo County between Woodland and Davis.

    It’s fun adjusting a comp 40% for a lender appraisal and showing them the data….

    • says

      Davis is definitely unique and cannot be compared to Woodland… there is also a subsidized UCD faculty home loan program of 3% rates w/o MI to $750K 90% LTV….. leverage helps this unique market supporting near zero new home supply.

  3. says

    Good article as always. I never make a school district adjustment. Much better to go back in time, in necessary, for comps in the same school district. It’s easier to support a time adjustment.

    All that said, there are several areas in Los Angeles with competing and adjacent neighborhoods that have perfect “10” school district ratings. I suspect they have figured out how to game the results!!

    • says

      I totally agree about it being best to go back in time. I’m not opposed to making some sort of an adjustment if needed. Most of the time I’d much rather use an older sale. Well said. Yeah, there are always ways to manipulate the system to get that perfect 10 or perfect whatever. It seems like everything has a rating now, which means there is always a way to work the system. I have a family member who sells on Amazon and it’s amazing the stories he tells me of how other companies will pay for fake ratings or even join rating groups to exchange products in hopes of getting more ratings (positive ones encouraged)).

  4. says

    Great post, Ryan! In some of our markets, school districts make a difference and in some of them the impact is minimal. It is always a good idea to see if there is an impact or not if you are using comparable sales located in different school districts. Preferably all of our comparable sales will be located in the same school district but as we all know, rarely is it a perfect world when appraising. Thank you for this.

    • says

      Well said Shannon. I agree. It’s definitely not a perfect world out there. We just have to do our best. Part of that is knowing what influences value. Schools certainly are a bit part of that (bigger in some areas).

  5. says

    Lived in the Pocket 95-97 nearby while my first two started elementary schools. Friends really pushed hard to live in the Didion boundaries. Its a rare suburb that has only one highly rated school. THATS a dramatic demonstration of the value of a great school… $20-30 per foot?

    Buyers with school aged kids have always shopped schools first, then the home. It’s one of the primary “location” drivers and why parents commute to jobs. Look region wide at suburbs where the home prices are driven up and the school ratings will also peak for the most part.

    • says

      I didn’t know you used to live in Pocket, Jeff. I appreciate the first-hand take. Schools do come first. It’s amazing how much better the schools are in neighborhoods with higher values. Something doesn’t seem right about that, but that’s how it is.

  6. Joe Harvard says

    Thanks Ryan for the article and the resource. I looked at the schools for an assignment I’m working on and it really helped. How did you get GreatSchools.org to draw the boundary map for a particular school. I did not see a way to do that.

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