Series: How do I read an appraisal? Part 3


Location… location… location. The three “L’s” of real estate. Location gets two sections of the first page because of this importance. The first is the neighborhood, the macro look, and the second is a look at the individual location of the subject within the neighborhood.

Depending on where the subject is located, the neighborhood may be a small development or an entire township as in the case of rural properties. Without getting too complicated, the neighborhood of the subject is the area in which the typical buyer pool for the subject property might also look for a home. Some neighborhoods are directly comparable to each other - one end of the same school district might have the same overall appeal as the opposite end, even though the distance is quite far. However, sometimes moving just a half mile in a built up area over a school district line can have a large impact on appeal. Distance isn’t everything.

The rest of the data here asks the appraiser to analyze the overall market conditions in the market. Are home prices increasing/declining? Is there an over/under supply of homes for sale? At Town and Country we analyze the prior 3 years of sales in an area to derive our opinion. If there are more homes in the market than sold in the last 2 years combined and the days on market are creeping towards 9 months, these factors may indicate a softening market area.

This section serves as a snap shot of the market area of the subject at the time of the inspection, a look back at how the market has performed in the past, and based on current supply of homes, how the market is performing currently. It also begins to provide data on the predominate trend of homes in the area and whether the subject conforms to the market… but we’ll cover that in weeks to come.