• Skip to primary navigation
  • Skip to main content
  • Skip to primary sidebar

Sacramento Appraisal Blog | Real Estate Appraiser

Real estate appraisals for divorce, estate settlement, loans, property tax appeal, pre-listing and more. We cover Sacramento, Placer and Yolo County. We're professional, courteous and timely.

  • About
  • Appraisals
  • Order
  • Ask Ryan
  • Areas
  • Classes
  • Press
  • Trends
  • Share
  • Contact

how to appraise a property

The myth of the one-mile radius in appraisals

March 16, 2012 By Ryan Lundquist 20 Comments

It’s often believed that appraisers need to use comparable sales only within a one-mile radius. But that’s not really accurate or a good methodology for valuing a property either. Appraisers should really use competitive sales located in the neighborhood or a similar neighborhood – regardless of whether they are located within one mile or not. Besides, has there ever been a neighborhood in the shape of a one-mile radius anyway? That would be interesting.

The Danger of a One-Mile Radius: Take the following image for example in the northern portion of Oak Park in the Sacramento area. If I were to search for comparable sales within a one-mile radius of the red dot below, a return of sales from all sorts of neighborhoods would come back. Portions of Med Center, Elmhurst, Curtis Park, West Tahoe Park, Midtown and East Sacramento really don’t compare well with the location of the house (red dot) despite being within one mile. This example shows very clearly how inaccurate it can be to simply use a radius to measure a real estate market.

One Mile Radius for Comps - Sacramento Appraiser

Lender’s One-Mile Guideline: It’s true that most lenders have guidelines wanting appraisers to stay within a one-mile radius, but there is actually no official “one-mile rule” from Fannie Mae that appraisers have to follow. Of course, in a tract neighborhood with ample sales, there probably isn’t a good reason to use comps outside of one mile anyway, so that’s why lenders issue their own guidelines to say appraisers need to stay within one mile. But the appraiser can definitely travel outside of one mile if need be. Check out the video below (or here) on Fannie Mae’s guidelines for distance in appraisal reports:

Which comps should the appraiser use? Ultimately appraisers should utilize sales in competitive neighborhoods – whether those are inside or outside of a one-mile radius. Where would a typical buyer consider making a purchase instead of the subject property? That’s a critical question to ask when defining the boundaries of a neighborhood. In the case above, it would be highly important to stay as close as possible to the red dot in the photo, and not cross the freeway either because a typical buyer looking in Oak Park would not simultaneously be looking in Curtis Park, Elmhurst or other portions of Tahoe Park due to price differences. By the way, New York appraiser Jonathan Miller has an outstanding post entitled “What is a Comp?”

Why does this matter?

  1. Appraisers: Appraisers need to select the best comps in their reports.
  2. Not Bound: It’s important for everyone to know that unique properties, major fixers, historic homes, rural homes and oddballs are not bound by a one-mile radius.
  3. Resale Value: Sellers and investors need to understand the neighborhood and how appraisers are going to view the subject neighborhood too in order to gauge resale value. Be careful not to base your price on a superior tract nearby outside of your neighborhood boundaries. Check out a post on the importance of knowing your neighborhood boundaries.
  4. Giving Comps to Appraisers: When agents give “comps” to appraisers while at an inspection, it’s best to give properties that are actually located in the same neighborhood or at least deemed competitive in a similar neighborhood (as opposed to nearby sales that meet a certain price level). Moreover, the “comp” should really be similar enough that the buyer would have theoretically considered it as a replacement instead of the subject property. I had an agent give me “comps” recently and one sale was located 7 miles away from the subject property. While the subject property is a bit on the unique side in a standard subdivision, the sale 7 miles away was in a totally different and superior market – and therefore not similar at all.
  5. Zillow and Online Sites: Zillow has value for what it is, but doesn’t always understand the importance of tight neighborhood boundaries. See a previous post on Zillow and comparison to actual appraisals.

Any thoughts?

If you have any questions or Sacramento area real estate appraisal or property tax appeal needs, contact me by phone 916-595-3735, email, Facebook, Twitter or subscribe to posts by email.

Share:

  • Click to share on Twitter (Opens in new window)
  • Click to share on Facebook (Opens in new window)
  • Click to share on LinkedIn (Opens in new window)

Filed Under: Appraisal Stuff, Resources Tagged With: appraisal methodology, Curtis Park, East Sacramento, Elmhurst, how to appraise a property, importance of competitive sales in appraisal report, Med Center, Midtown, one-mile radius for appriasers, West Tahoe Park

Primary Sidebar

Connect with Ryan

 Facebook Twitter LinkedIn YouTube Instagram

Subscribe to Weekly Post

* indicates required

Search this site

Blog Categories

  • Appraisal Stuff (406)
  • Bankruptcy (3)
  • Divorce (4)
  • Estate Settlement (6)
  • FHA Appraisal Articles (56)
  • Internet (53)
  • Market Trends (476)
  • Photos from the Field (126)
  • Property Taxes (70)
  • Random Stuff (230)
  • Resources (566)
  • Videos (161)

Blog Archives: 2009 – 2019

Lundquist Appraisal Links

  • Appraisal Order Form
  • Appraisal Website
  • Rancho Cordova Appraiser Website
  • Sacramento Appraisal Blog Sitemap
  • Sacramento Real Estate Appraiser Facebook Page
  • Twitter: Sacramento Appraiser (@SacAppraiser)
  • YouTube: Sacramento Appraiser Channel

Most Recent Posts

  • The housing market nobody predicted
  • Real estate trends to watch in 2021
  • You carried me & a spreadsheet for Christmas
  • Real estate drama (and a market update)
  • Goodbye California. Is everyone leaving?
  • How much are buyers paying above the list price?
  • What would happen to the housing market if we went on lockdown again?
  • Overpricing, multiple offers, & hot ranges
  • Why your home isn’t worth 16% more today
  • Condos, halfpipes, & cooling 2-4 units

Disclaimer

First off, thank you for being here. Now let's get into the fine print. The material and information contained on this website is the copyrighted property of Ryan Lundquist and Lundquist Appraisal Company. Content on this website may not be reproduced or republished without prior written permission from Ryan Lundquist.

Please see my Sharing Policy on the navigation bar if you are interested in sharing portions of any content on this blog.

The information on this website is meant entirely for educational purposes and is not intended in any way to support an opinion of value for your appraisal needs or any sort of value conclusion for a loan, litigation, tax appeal or any other potential real estate or non-real estate purpose. The material found on this website is meant for casual reading only and is not intended for use in a court of law or any other legal use. Ryan will not appear in court in any capacity based on any information posted here. For more detailed market analysis to be used for an appraisal report or any appraisal-related purpose or valuation consulting, please contact Ryan at 916-595-3735 for more information.

There are no affiliate links on this blog, but there are three advertisements. Please do your homework before doing business with any advertisers as advertisements are not affiliated with this blog in any way. Two ads are located on the sidebar and one is at the bottom of each post. The ads earn a minor amount of revenue and are a simple reward for providing consistent original content to readers. If you think the ads interfere with your blog experience or the integrity of the blog somehow, let me know. I'm always open to feedback. Thank you again for being here.

Copyright © 2021 Sacramento Appraisal Blog