A market area analysis should address which four categories of influence?
Correct Answer
D) Social, economic, governmental and environmental
Social, economic, governmental and environmental forces are a broad organizing framework for relevant market influences. Apply objective evidence about actual demand, supply, law and conditions; the categories do not authorize unsupported demographic desirability judgments or exclude overlapping technological and physical effects.
Why This Is the Correct Answer
Option D is correct because social, economic, governmental and environmental forces are the broad framework for general data about trends that affect property value. Fannie Mae guidance likewise asks appraisers to consider economic, governmental and environmental factors in the neighborhood. The analysis should rest on objective evidence about demand, supply, law and conditions.
Why the Other Options Are Wrong
Option A: Residential, commercial, industrial and agricultural
Option A is wrong because residential, commercial, industrial and agricultural are land-use types, not the categories of forces that influence value in a market area.
Option B: Physical, financial, legal and technological
Option B is wrong because physical, financial, legal and technological is not the standard four-force framework. Some of these effects overlap with the standard categories, but the recognized list is social, economic, governmental and environmental.
Option C: Historical, current, projected and speculative
Option C is wrong because historical, current, projected and speculative describe time frames, not categories of market influence. Speculative judgments are also not a basis for market area analysis.
SEGE: the four forces
SEGE stands for Social, Economic, Governmental and Environmental, the four forces that influence value.
How to use: Use this when a question asks for the categories of influences in a market or neighborhood analysis.
Exam Tip
Distinguish forces that influence value from land-use types and from time frames, which are common distractor lists.
Common Mistakes to Avoid
- -Confusing land-use categories with the forces that influence value
- -Using social factors to make unsupported demographic judgments about desirability
- -Ignoring governmental forces such as zoning and taxation
Concept Deep Dive
Analysis
This question tests the standard framework of forces that influence property value in a market area. The four categories are social, economic, governmental and environmental. Candidates should recognize this grouping and distinguish it from land-use types or time-based lists.
Background Knowledge
General data covers trends in the environmental, social, economic and governmental forces that affect value. Economic forces include employment and income; governmental forces include zoning and taxes; environmental forces include location and physical features; social forces include population and household trends. The categories organize evidence and can overlap.
Real-World Application
In a neighborhood analysis, an appraiser notes a new employer moving in, a recent rezoning, a flood zone along the creek and household growth trends. She organizes these under economic, governmental, environmental and social forces in her report.
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?
How does the Fannie Mae Selling Guide define a neighborhood?
Several homes in a neighborhood are vacant and boarded up. Which market force does Fannie Mae classify this as?
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A city raises property tax rates and tightens building regulations. Which market force does Fannie Mae classify these as?
An appraiser believes, without market evidence, that a nearby group home lowers values. What does Fannie Mae require?
Which three categories are used to report the supply of properties in a Fannie Mae neighborhood section?
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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