A lakefront lot and a lot one street back are in the same neighborhood. What does appraisal guidance say about their locational characteristics?
Correct Answer
D) Small location differences within a neighborhood can matter a lot
Properties in the same neighborhood often share location characteristics, but even small locational differences, such as a lakefront versus a street view, can have a significant effect on value.
Why This Is the Correct Answer
Option D is correct because properties within the same neighborhood often have similar locational characteristics, but even small locational differences can have a significant effect on value. A lakefront lot and a lot one street back are geographically close and share a neighborhood. They may still have significantly different values because of the view and water frontage.
Why the Other Options Are Wrong
Option A: They must have the same value, since they share a neighborhood
Option A says the lots must have the same value since they share a neighborhood. Guidance states that parcels in the same neighborhood may have significantly different values because of small locational differences such as a lakefront view.
Option B: Lot sizes are the only source of value difference between them
Option B says lot sizes are the only source of value difference between them. Location features such as lakefront or wooded views versus a street view can create value differences even when lot sizes are similar.
Option C: Neighborhood location effects apply to commercial property alone
Option C says neighborhood location effects apply to commercial property alone. The example given involves residential parcels, showing that location effects within a neighborhood apply to residential property as well.
Same Block, Different View
Neighbors share a zip code but not always a view. One street can change what buyers will pay.
How to use: Use this phrase when a question suggests that a shared neighborhood means equal value.
Exam Tip
Be wary of choices claiming properties must share a value because they share a neighborhood. Location analysis can extend down to individual sites.
Common Mistakes to Avoid
- -Assuming all properties in a neighborhood have the same location value
- -Attributing value differences to lot size alone
- -Skipping location adjustments for comparables from the same neighborhood
Concept Deep Dive
Analysis
This question tests understanding that location can vary within a single neighborhood. Properties in the same neighborhood often share locational characteristics, but small differences such as a lakefront versus a street view can significantly affect value. Candidates should reject answers that treat a neighborhood as uniform or that limit location effects to one factor or property type.
Background Knowledge
A neighborhood is a useful area for analysis, but it does not make every site within it equivalent. Views, frontage, traffic exposure and proximity to amenities or nuisances can vary from one street to the next. Appraisers consider and, where supported, adjust for these site-specific location differences.
Real-World Application
An appraiser values a lakefront home and uses comparables from the same subdivision. Some comparables sit one street back with no water view. She supports a location adjustment for lake frontage with paired sales instead of treating all subdivision sales as equal.
More Market Questions
In market area analysis, what characteristic distinguishes a district from a neighborhood?
Under USPAP Standards Rule 1-3(a), which item must an appraiser identify and analyze when necessary for credible results in a market value assignment?
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An appraiser is asked for a retrospective value opinion as of three years ago. When must the appraiser meet the Competency Rule?
Can mixed land uses in a residential neighborhood ever enhance home values, according to Fannie Mae?
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