。
She seems to live near the school.
Literal
She [topic-は] school [attributive-の] near [at-に] is-living [seems-ようだ].
近く ('vicinity, nearby') is a noun derived from the i-adjective 近い ('near, close') — same ~く pattern that gives 高さ→高い→高く, but here ~く forms a noun rather than an adverb. 学校の近くに ('near the school,' literally 'at the school's vicinity') uses に for static location. 住んでいる ('live, reside') is one of the verbs whose ~ている form is essential — without it, plain 住む would imply a one-time act of starting to live somewhere; ~ている locks it into the ongoing state of residence. ~ようだ adds the speaker's inferred conjecture: 'judging from what I've observed/heard, this seems to be the case.'