Can you use comps from a different city? Most of the time that’s a bad idea, but sometimes it’s the best option. Let talk about this a bit as I share an example of why I did this recently in an appraisal. The discussion below really has to do with school district boundaries too. Anything to add? I’d love to hear your take.
The situation: I appraised a duplex (two attached units) in the city of Citrus Heights in an area that was just a few streets away from Fair Oaks. As locals know, Fair Oaks tends to sell at higher levels compared to Citrus Heights, so pulling “comps” from Fair Oaks could quickly inflate value if I’m not careful. But this portion of Citrus Heights is located in Bella Vista High School territory, which is a top-rated school. The school boundaries include the eastern portion of Fair Oaks, Orangevale, and a small portion of Citrus Heights where the subject property is located. Does this matter for value? Is it going to be okay to use comps from a different zip code or city? Let’s take a look.
Here are all duplex sales in Citrus Heights over the past 10 years:
Now let’s compare duplex sales in Citrus Heights with duplex sales in Bella Vista High School territory to see if there might be a price difference. As you can see, Bella Vista has a much higher school rating on GreatSchools.org compared to surrounding schools.
How to find school boundaries: I found the boundaries for Bella Vista on GreatSchools.org. When you pull up a school profile on this website all you have to do is click “nearby schools” located on the right side of the page to bring up exact boundaries and a comparison of ratings. Otherwise the school district might have a map.
After finding school boundaries I drew them in MLS to look at specific data. Being that there are portions of three zip codes in this area, a zip code search would not have worked. A one-mile radius definitely wouldn’t have worked either.
It’s pretty clear duplex sales in Bella Vista territory are selling toward the higher end of the market. They don’t always sell for more compared to everything in Citrus Heights, but obviously they’re selling toward the top.
The big question: Do Citrus Heights duplexes within Bella Vista boundaries sell for more?
In short, it looks like Bella Vista High School boundaries matter for value for Citrus Heights duplexes. These sales tend to compete toward the top of the Citrus Heights duplex market. Not only that, they also compete toward the top of the Bella Vista market which includes portions of Fair Oaks and Orangevale.
Three Takeaways:
1) Using comps from different cities: It’s fine to use comps from different cities and zip codes, but we have to be sure we are really looking at the same market. If we’re just “cherry-picking” higher sales from around the corner in a different city, that’s no good. Appraisers get handed so-called “comps” all the time that are from areas that clearly command higher prices. I’m definitely not advocating for that here. What I am saying is if we study the market and it’s reasonable to use sales from a different city or zip code because they’re competitive, that’s fine. Remember, it’s never about how far an appraiser can go, but where an appraiser should go for comps. Sometimes we are bound tightly in our comp search by just one or two streets, but other times (like above) we might end up using sales from other zip codes and cities. In this case after my research I ended up using comps from Fair Oaks for a Citrus Heights duplex because they were similar in price and they fed into the same highly-rated high school.
2) School boundaries: Sometimes school boundaries can be a big deal for value, though other times not so much. In most areas there is really just one school that serves a neighborhood, but when different cities and zip codes collide it might be a good idea to consider if there is any value impact with the boundaries. Sometimes we might even have to step back and maybe search for comps by school district, which will mean we might end up with comps from different cities.
3) Different trends: Just because I used Fair Oaks sales for a Citrus Heights duplex does not mean I would do the same for single family homes or vacant land. The market might not be the same for every property type.
I hope this was helpful or interesting.
Questions: When have you used comps from a different city? When would you NOT use comps from a different city or zip code? Anything to add?
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