Appraisals required for the renewal of Section 8 project-based contracts must take into consideration representative comparables that are reflective of the property as compared to its’ standing within the community. Usually property comparisons are provided from the perspective of only a single neighborhood- the neighborhood represented by the subject property. Using only the neighborhood where the subject property is located excludes from consideration other “like properties” within the submarket that may consist of comparable properties with amenities more similar to the subject. The submarket for a property includes boundaries, geographic orientation, and physical features including the nature, age and condition of improvements. For example, the subject property may be newer or offer a greater range of services or include a population with higher income than other properties in the neighborhood. The selection of comparables from the neighborhood to the submarket expands the potential of identifying like properties.
Comparables are not required to be in the same neighborhood, but must be within the same market area. This stipulation compels appraisals to identify representative comparables that focus on property specifics, in terms of location, and related data such as income, accessibility to services, employment and transportation.
Submarket analysis using Geographic Information System technology (computerized maps) generates spatial viewpoints that greatly enhance the viability of comparable properties that are most similar to the subject based on layers of data that narrows the number of comparable submarkets based on pre-selected criteria. For example, if income were the only layer, there may be a great many submarkets that compare to a subject property. Adding addition layers demographic profiles defines submarkets that “match” that of the subject. Once matching submarkets are defined, comparable properties can be identified.