Usually in classified advertising websites to catalog ads by area is used the category/subcategory system's. Like this:
Region / province / city / district
It's quite understandable for users, but I think it's not so accurate: some cities are nearest to other region than others city in the same region.
Some websites has implemented maps for drawing search areas or the radius from the user's position, but in small devices is not so practical.
There are other solutions to catalog ads by area, can you suggest some reading?