Neighborhood Economic Factors

HCAD uses a computerized system to appraise homes. Using cost data from a national supplier of construction cost information, the system calculates a replacement cost for each residential structure based on the property's characteristics, such as size, type of construction, quality, and age. A land value for each property is also developed using generally accepted appraisal techniques. The neighborhood economic factor, sometimes referred to as market adjustment factor, is used to adjust the sum of the improvement replacement cost plus land value for specific neighborhoods.

For example, a home with an average construction cost plus land value, according to the system, of $100,000, may sell for $120,000 in a very desirable area, and it might sell for $80,000 in a less desirable area. Using sales of actual properties, our valuation analysts develop adjustment factors to take these differences into account.

In the first example, the factor for the desirable area would be 1.20; multiplying the $100,000 base value by 1.20 gives the $120,000 selling price. In the less desirable area, the factor would be .80, to reduce the base value to the $80,000 selling price. These adjustment factors are the neighborhood economic factors. A listing of HCAD NBHD number and corresponding neighborhood economic factor is available at the district information center.