Sex Offenders & Appraised Value
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OK. You’re well and truly involved with your research on a job that’s already late. You think you’ve got all your due diligence-bases covered. But you call the broker to confirm on last detail and she asks you, “You know there is a half-way house for sex offenders in the neighborhood, don’t you? It’s about two blocks away from the subject”. Needless to say, you are taken aback! No, you had no clue there was such a facility two blocks away from the subject. All other things being equal, that is not a question you would have even asked. And besides, who would you ask the question to if you even thought of it in the first place?
Understand that each of the states, under federal law, must register their convicted sex offenders. This registration, while perhaps not easy to find, is a public record. Since it is a public record, it is part of what USPAP’s SR1-4 calls “…all information necessary for credible assignment results…”. In other words, merely because you did not know this registry existed does not mean you are not responsible for researching its contents to determine how the presence of such a facility might affect values in a neighborhood.
To make a long story short, there are numerous university-level studies out there to show that the presence of a registered sex offender in a neighborhood affects the values of the properties in that neighborhood. To be sure those effects vary with the density of housing in the neighborhood, the number of children in the neighborhood, the general demographics in the neighborhood, and so forth. That there is an affect on values, however, is beyond question.
Given the effect on value is beyond question, then we have to analyze the market to determine if that proximity affects the subject’s marketability as well as its market value. These university-level studies suggest that the nearer you are to that halfway house, the greater is the impact on value. So, if your subject is two blocks away from that facility, and your comps are too, any loss in value is likely already baked-in to the comps. If they are farther away however, thus less subject to its influence, you’ll probably need to make adjustments.
Let me stress again what SR1-4 says. It calls for the appraiser to collect, verify and then analyze all information necessary for credible assignment results. If there is a halfway house for sex offenders in the neighborhood, and that presence impacts the sales prices of houses near it, then that is part of all of the information necessary to arrive at credible assignment results. To choose to analyze it or not to analyze it is part of the appraiser’s scope of work. However, that appraiser will not have a choice if the state comes calling to ask why s/he did not collect, verify, and then analyze this datum to determine its impact on the subject’s value.
Is this just one more hoop the appraiser has to jump through? Yes, it is. By jumping through that hoop, does the appraiser work to lessen the chances s/he will have to face the inquisition of an appraisal board. Yes. Is that one way an appraiser can protect her/his business, thus benefit her/his family? Yes. Since our families come before anything else, check that registry to determine if this is an issue you need to handle.
For more information on this subject, please download and listen to The Appraiser Coach Podcast Episode: