Sex Offenders & Appraised Value

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Dustin Harris
Latest posts by Dustin Harris (see all)

How Does the Presence of Sex Offenders Affect Appraised Value?

“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”..

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:

Image credit wikimedia- Pax Ahimsa Gethen
Dustin Harris

Dustin Harris

A multi-business owner and residential real estate appraiser. He has been appraising for nearly two decades. He is the owner and President of Appraisal Precision and Consulting Group, Inc. He owns and operates The Appraiser Coach where he personally advises and mentors other appraisers. His principles and methodologies are also taught in an online, Mastermind group. He and his wife reside in Idaho with their four children. Dustin Harris on e-AppraisersDirectory.com

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9 Responses

  1. Avatar Mag Jones says:

    So, valuation research is now beholden to “university-level studies”. I assume these studies were done by trained, certified appraisers and not university researchers with agendas? And these university researchers are licensed by the state and held accountable to be unbiased in their research opinions? No? They’re not? Wait – I thought it was “beyond question” (a term liberal academics use when they don’t want to hear a dissenting opinion). Well, I guess I’ll have to go back to that old-fashioned way to determine the validity of a valuation opinion- the actual market data in the local market. There are a thousand things that are “public record” that we could pick out and decide they might affect our property. The question is how many rabbit holes we want to go down. Perhaps if the state comes calling asking about the verification of this data it can also ask itself what all my local appraisal PEERS would do in a similar situation – which, according to USPAP, is the judge of whether my actions are reasonable, not whether I’m keeping up with obscure university social-science journals.

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    • Avatar don says:

      In California Agents are required to report grizzly deaths within 3? years of occurrence. Appraisers know this and so does everybody else. This research is much more tedious and revealing.
      I lived in a low density area and we were able to burn the tumble weeds during the season with an annual fire permit. I alerted the FD and got my shovel and hose and began burning. Shortly thereafter the BIG RED TRUCK arrived with a full contingent of firemen. They said, when they saw the smoke they couldn’t tell which house was burning, they worried because one house on the block had an identified FIREBUG!
      Whoda thunk, these records are based on POLICE & Fire records and inconvenient.

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  2. Avatar Michael jones says:

    Mag said it very nicely. Not going there. Neither are any appraisal boards!

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  3. Avatar Scott T Baczkiewicz says:

    I don’t know what the map of the sex offenders looks like in your area, but in my area, they are everywhere. I live in a very suburban/rural community also. There is no possible way that the effects can be “beyond question”, otherwise, a high percentage of homes would be impacted and if it was a major influence on the value then almost every buyer would be aware, and a high percent of appraisals would be mentioning them. Your example of being located 2 blocks away. If you are using the term blocks then I assume the property is located in a highly-populated area, then wouldn’t most of the comparables also be located within similar proximity to the halfway house? At what point does our research stop and responsibility fall on the buyer? I think the sex offender registry falls under the category of not within our scope of work, similar to appraisers not doing home inspections, taking water and air samples or any other number of factors that are beyond appraisal work. In all my years of speaking with agents, I have never once heard “That house sold for less because there were sex offenders on the registry in the area.”

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  4. Great article and information. A good reminder to all.

    I have had only TWO properties in which proximity to a registered sex offender halfway house definitively affected value (two neighboring properties at two different times-just an odd coincidence where the agent on the first one happened to own the second one).

    Interestingly, there were also more than 11 other individual registered offenders within a one-mile radius (Los Angeles) where it doesn’t appear that values were affected.

    This was one of the diciest appraisals I had done in a very long time (a few years ago). Quite lot of back and forth between the lender and I. THEY didn’t want it even mentioned.

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    • Avatar Scott T Baczkiewicz says:

      Maybe the halfway house is something to consider, possibly like being close to a prison? Aren’t there halfway houses for drug offenders also? You mention LA, I have to say I am completely unfamiliar. Is it possible that these halfway houses where ever they may be are located in areas that already have values affected and that is why they chose to locate there? Chicken/Egg?

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      • Different than prison proximity I think. Prisoners aren’t allowed to roam the community. Drug rehab can be a factor too, though again recovering addicts or alcoholics don’t trend toward molestation of kids. The one instance where I was able to measure impact was an above-average economic area.

        MOST neighborhoods have registered offenders. Or are in proximity. I think having a few isolated instances is less risky than a house with 6 to 10 may be. It also may be limited to subjective market perception.

        The article makes some valid points. We need to be aware of the potential impact. Not that it will apply in all instances.

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        • Baggins Baggins says:

          Two issues conflated. An individual on the registry vs a half way house with many individuals on the registry. You don’t adjust for it either way. If there is market response then you’ll see something. When disruptive person(s) moves in, the money moves out. That’s a constant in real property markets. There is no need to even define disruptive persons. It is an individuals subjective perception. Could be different this or that, spoiled rotten silver spooner, felons to junk yard dawgs. It does not matter, if there are negative influences someone will cut and run, the market evidence will be there. Or it won’t. Disclose. Disclaim. That’s the end of it. If there is a community response, there will be a prohibition or statue dealing with whatever issue is on the table. Some communities make it more difficult to carry the past into the future and vice versa. The market evidence is presumably already constant and present in real time figures.

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  5. Baggins Baggins says:

    Can of worms. For states that track this there is also a constant proportion of such registered individuals whos exact whereabouts are unknown, or only loosely verified. On the registry pages there are clear disclosures you can not discriminate against them, simply because they may appear on the registry list. Unless you also have a specialty in interpreting exact statutes to understand the level of the offense which landed them there… If you go down that avenue you then need to have scaling adjustments for the minor vs major offenders. Never seen that before and a sure fire way to get complaints filed is to claim a non offenders value is diminished by no fault of their own with no way to remediate the condition. It’s not the same thing as external obsolescence or something you can call the city regarding code compliance or cleanup. The city/county has already ‘managed’ the issue. Read the disclosures on the registry more carefully. It is up to buyers and agents to research this and then theoretically, assuming everyone has performed their due diligence, the effects on the market are already apparent and there is no need to apply adjustments. Caveat Emptor. If in doubt post the registry research link as a standard inclusion with a disclosure disclaimer you are not allowed to discriminate based on the state laws regarding this. It is an individual buyer or sellers issue, and therefore the appraiser need only post the research link but the responsibility to research and make decisions based on those research results, does not fall on the appraiser. In my entire county (suburban sf det areas), you can’t go more than 5 or 6 blocks without finding another one. Then to add more complexity to the issue, each state has different laws and regulations regarding what lands a person on that list or not. In one state a person can land there for drunkenly whizzing in public on a pine tree, in other states they may actually have to do something really bad to land there. Know your state laws and the federal anti discrimination rules. I did all that research when I bought our home then don’t you know it, within a few months, some dude on the registry randomly rented across the street, with elevated charges even. Thankfully he’s gone but only after 5 years. Should my 30 year mortgage note be effected over the entire term even though this was a temporary condition? Does it matter if the individual rents or owns? What if the person on the registry is the borrower/buyer? Would you adjust the price down and short the non offender seller? You can’t measure what is unknown, therefore, buyer beware. Disclose, disclaim, move along. The appraisers don’t set the market, we merely measure it. Do not adjust for this issue.

    https://apps.colorado.gov/apps/dps/sor/faq.jsf

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Sex Offenders & Appraised Value

by Dustin Harris time to read: 2 min
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