A neighborhood factor (also called location adjustment, market area factor, or neighborhood code) is an adjustment appraisal districts apply to account for location differences in property values. Two identical homes may have different values if one is in a more desirable neighborhoodâbetter schools, lower crime, newer development, or other location amenities.
In mass appraisal, properties are grouped into neighborhoods or market areas with similar characteristics. Each area receives a factor that adjusts values up or down relative to a baseline. Your neighborhood factor significantly affects your assessmentâsometimes more than your home's physical characteristics.
If your neighborhood factor seems wrongâyour area treated as more desirable than it actually isâthat's a valid protest argument.
Neighborhood factors are somewhat hidden in mass appraisal but can significantly affect your value. Understanding them creates protest opportunities.
Signs your neighborhood factor may be wrong:
⢠Your area has negative changes (new highway, declining school ratings)
⢠Nearby lower-factor areas have similar characteristics
⢠Recent sales in your area don't support the premium
⢠Boundary between factor areas seems arbitrary
How to challenge:
⢠Ask what neighborhood code your property is in
⢠Request the factor applied to your area
⢠Compare sales in your area vs. adjacent areas
⢠Show comparable sales don't support the factor
This is an advanced argument, but effective when your location is genuinely overrated.
How neighborhood factors work:
Mass appraisal grouping:
⢠Properties divided into market areas
⢠Each area assigned adjustment factor
⢠Factor reflects location desirability
⢠Applied uniformly to all properties in area
Example factors:
⢠Premier neighborhood: 1.15 (15% premium)
⢠Average neighborhood: 1.00 (baseline)
⢠Below-average area: 0.90 (10% discount)
Impact on value:
Base improvement value: $300,000
Neighborhood factor: 1.15
Adjusted value: $345,000
The $45,000 difference comes solely from locationânot your home's characteristics.
Ask your appraisal district what market area or neighborhood code your property is in and what adjustment factor is applied. This information may be on your property record card or available upon request. Some districts publish neighborhood maps online.
Yes, if you can show that your neighborhood doesn't warrant the premium applied. Evidence could include declining school ratings, increased crime, new negative influences (highways, commercial development), or sales data showing your area underperforms similar areas.
Properties near boundaries can be misassigned. If your home is grouped with a higher-factor neighborhood but shares more characteristics with an adjacent lower-factor area, argue for reclassification. This is especially valid if you're literally across the street from lower-valued properties.