What is the market reaction of SFRs located next to Railroad Tracks?

01 Feb What is the market reaction of SFRs located next to Railroad Tracks?

In my market area, there are various areas with SFRs located next to or close to railroad tracks.  As with most appraisal assignments, the market reaction can vary and one can’t assume the same negative market reaction applies to all. I recently completed an appraisal assignment where the subject was a cul de sac location located on a larger lot (compared to most subdivision lots) and backed to railroad tracks.

Here are my takeaways:

1) With any property located on railroad tracks, busy roads, highways, etc. Always check for prior sales history for the subject. 

If there was a prior sale, look at how the property trended vs. competing SFRs at time of sale. In my situation, the subject sold in 2015 so I was able to review how the subject trended vs. other RR track SFRs and all SFRs (see graph).

As the graph indicates, most SFRs located on the railroad tracks trended from the middle to low end of sales range. You may be thinking “Of course these homes will sell lower.” However,  the range from middle to low can be greatly different so using the historic sale as a barometer is great market support  to help your value conclusion. In my subject’s case, I concluded it sold in the middle range and was able to use a trend line with current sales as a barometer for current value.

I reviewed current railroad SFR sales; however just as noted above, the sales range was middle to low compared to competing SFRs. My historic data gave me the support to estimate the subject’s in the middle range. Moreover, I was not guessing the reaction blindly.

2) How to make a conclusion if there is no prior sale of the subject property?

The reality is there may not be a prior sale of the subject property to reference. In this case, look at historic sales in the subdivision for any RR sales.  Maybe there was a home similar in location that sold 4 years ago for example. While that is not a recent comp, use that sale as a reference and compare to other SFRs at time of sale.

If there are no prior sales at all in the subdivision, expand out and look for the most similar RR comps in competing subdivisions. In the scenario above, while there were not any RR sales back one year, I was able to use a few sales of SFRs in the subdivision located on typical interior tract locations and compared these homes to the RR sales in competing subdivisions. That along with the historic graph helped support my value conclusion.

Conclusion:

I’ve learned that graphing can be a powerful tool in conveying trends to a reader. An appraiser colleague showed me these excel graphing tools years ago and haven’t looked back. Looking at a sheet of numbers and data can start to blend together; however extracting this data to a graph can provide the clarity and context for your appraisal conclusion. Contact me and would be happy to share some of these tools.

Disclaimer: All information deemed reliable but not guaranteed. The information is meant entirely for educational purposes and casual reading only and is NOT intended for any other use.  This information is NOT intended to support an opinion of value for your appraisal needs or any sort of value conclusion for a loan, litigation, tax appeal or other potential real estate or non real estate purpose. This appraiser is NOT a qualified home inspector and any tips are for informative purposes only. If you’d like to obtain and order an appraisal for your specific needs, please contact Bryan at 530-878-1688 for more information.