Neighborhood, Class and Effective Age are criteria that resonate with the Appraisal Review Board. A Realtor’s Comparative Market Analysis (CMA) doesn’t recognize them the way the ARB does.
Your neighborhood is one of the important elements considered in evaluating your property. It may or may not be the same as your subdivision or what MLS considers to be your neighborhood.
A Neighborhood may be defined as a portion of a large community, or as an entire community, in which there is a homogeneous group which may consist of several subdivisions or part of just one subdivision. Differences in Neighborhoods generally are quite obvious and often coincide with natural barriers, major streets, subdivision lines, housing styles, city limits or school district lines.
School district and city lines may divide seemingly homogeneous Neighborhoods. Physical characteristics may do the same. For example, a creek side lot will be more valuable than a lot facing it on the other side of the street. A lot with a view may be more valuable than one without the view. Usually, these differences are also reflected in the price of the land, which is why we provide land value per square foot in our detail reports of comparable sales and assessments.
We analyze your property by your Neighborhood (as it is defined by your CAD) and not just by what MLS considers to be comparable properties.
But ultimately the value of your property will not depend as much on the Neighborhood of which it is a part as on the individual characteristics of the home. These include Class, Age and Size.
Class, as used by the appraiser, defines groups of properties which are similar in their physical characteristics. Dallas Central Appraisal District, for example, has 23 different classifications of residential homes ranging from Class 1 (a “Shotgun” house, generally located in a low value Neighborhood) to Class 25 and 26 (generally estate size properties with custom features throughout and located on larger lots). In between, differences can be as subtle as Frame on Post (Class 2), Frame on Slab (Class 3) or Frame on Pier and Beam (Class 4). Or Brick Veneer on Pier and Beam (Class 8), Brick Veneer on Slab with Shallow Roof Pitch (Class 11) or Brick Veneer on Slab with High Roof Pitch and Higher Quality (Class 12).
So if you are using for a comparable sale a property that’s in a lower class, the district and the ARB will adjust the comparable upward to make it fit your property and the upward adjustment — which is usually a standard percentage added to the comparable’s price — can inadvertently support a higher value for your property rather than a lower one. The lesson: be careful when selecting comparable sales and don’t take what a CMA from MLS offers without checking for class differences.
Effective Age is not chronological age.. A home built in the 1930’s may have been remodeled in 2010 while another built in 2000 may be effectively older than the home built earlier. We consider Year Built as a guide in evaluating comparables but more importantly Effective Age (which is not a factor in MLS) relative to yours. If there’s a significant age difference, it might be advisable to tell us about it so we can use it to your advantage.
Size is also significant. All other things being more or less equal, larger homes appraise for less per square foot than smaller homes. We search for comparables within a range above and below your home’s size and we include size (living area) in our presentation to the ARB, which values properties within 200 sq ft living area of the yours over those larger or smaller.
It’s important that your comparable sales are as close as possible to your property in Neighborhood, Class, Effective Age and Size. Frequently we cannot obtain comparables sales that are directly comparable in all categories because such sales did not take place within the time period that makes them relevant. In that case, we may widen the search. The district’s appraiser labors under the same limitations so the result should be that both we and the appraiser are “speaking the same language.”
The result, we believe, is more comparability than if the sorting and filtering were done by a real estate broker through MLS without regard to the characteristics that matter most to the appraisal district or to the ARB..
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