Upcoming free (& non-promotional) Home Buyer Education Classes:
Saturday, April 11, from 9am-2pm
Marshall Community Center, conference room
1009 E McLoughlin Blvd, Vancouver WA (kitty corner from Clark College)
Saturday, April 18, from 11am-2pm
Vancouver YMCA, conference room
11324 NE 51st Circle, Vancouver WA (corner of SR500 & Gher Road/112th Ave)
Monday night, April 20, from 5pm-8pm
Marshall Community Center, conference room
1009 E. McLoughlin Blvd, Vancouver WA (kitty corner from Clark College)
…if these dates/times don’t work for you, we have others. Check out the website for more class dates, times, and locations. PLEASE always check the web site www.freehomebuyerclasses.com for any changes regarding the classes!
Remember…with reservation…we will throw in lunch, or dinner! 🙂
Hello, Hello, Hello!
Happy Spring to you too! 🙂 Yes, I am aware that this weeks picture has nothing to do with the topic or anything else, but it always makes me laugh, and this week, that is good enough. I hope it brings a smile to your face too…. I have had a lot of conversations recently as a Realtor about homes values, what it is, how it’s determined, and who determines it so I think that it would be an excellent topic for this weeks discussion.
I also want to thank everyone who reads these since I type them up myself….I promise you they are NOT computer generated. I am sure the computer generated reports are probably not as long-winded. 😀 The computer probably wouldn’t be putting it together at midnight either…. I just want to say that I did get it out on Sunday and ‘on time’ this week (since technically it IS still Sunday!). 😀
I am going to ‘attempt’ to keep it short(er) this week. Please note that I said ‘attempt’….no promises or guarantees are made since I tend to be a walking dictionary, and encyclopedia of information that may (or may not be) useless. LOL….i am a great person to have on your team if you are playing Jeopardy or Trivia Pursuit…..just saying… 😉
There are actually FOUR values to a home….
#1…Tax Assessed Value
T ax assessed value is about 1-2 years behind value but is what the county uses to evaluate the property taxes of a home. This is the LOWEST value of the home in a typical market. When market values plummeted back in the mid-2000’s, they plummeted down to tax assessed values, and in some cases, even lower because the tax assessed values were being based on when values were higher. I had many clients, back then, who were taking their appraisal that they received when they purchased their home, to the county to have the county lower the taxes based on that value. For years now folks have seen their tax assessed value dropping, and only recently have those tax assessed values started rising. Why? Because the bottom of the market was 2011, and prices have been rising since then….which tax assessed values have only been reflecting for the past two years. At the bottom of the market people were buying at, or near tax assessed value, but this is NOT market value. Tax assessed value is just that…the value assessed on the home by the county for property tax purposes. As tax value rises, so does your property taxes, and this will be reflected in your mortgage payment.
Buildable value is what the home would cost to rebuild if it were to burn down or otherwise be destroyed. This is the cost of the labor, materials, etc that would be needed to rebuild your home. This is the middle value of a home. For awhile there it was cheaper to buy a home already built than to have one built. As the market has gotten healthier, it is now about the same to build, as it is to buy one already built…it just depends on what you are looking for in a home. This does not translate though if you are looking for a home on acreage. It is still cheaper to buy a home on acreage than it is to buy land, and have one built. This is because of the premium price that land is currently bringing in, and the fact that most land tracts are not allowed to break down to 1-2 acre plats still.
Market value is actually determined by the market… by what buyers are willing to buy the home for. So, in this case, this might be better determined as listing value. Listing value is determined by a Realtor using comparable homes in the close area. This is an estimated listing price of a home, from a Realtor, and is based upon what is currently active in the market, currently pending sale, and recently sold. If the home were to be listed, this is what we would list it for. So…listing value is what the Realtor things the home is worth using comparable homes in the local vicinity that are currently active (competition), pending sale, and that have recently sold. Market value is what buyers are willing to pay. Sometimes we, as agents, will see homes that, we think, are excellently priced, but for some reason or another, isn’t receiving offers. Sometimes we will see homes that we, as agents, think are over priced, but get multiple offers. It really just depends on the market. As realtors we can look at all the numbers, all the other homes, everything pending or recently sold, location, amenities,…everything…and still be off. Why? Because real estate really isn’t about numbers…it is about PEOPLE, and RELATIONSHIPS. People make offers on homes based on some indefinable…something.. because that home is right for them…because it strikes a chord that makes a house into something more…a home.
and last, but not least…
So what is appraised value? Well, this is where it gets sticky. The appraisal is ordered by the bank (paid for by the buyer) to evaluate the value of a home for their estimation. They are supposed to be looking at the same information as an agent, but they have some weird math formulas to apply. The bank will only lend a buyer either the purchase price of a home, or the appraised value of a home…whichever is LESS. There is no way to say what kind of appraiser we are going to get either. We could get Captain America or Hitler.
Examples…Two sales last year….
A. a recent sale where the comps in the neighborhood were topping off around $170,000-ish, but with the work that had been done on the home, and its condition, I was telling the owners it was worth more around $180,000. The owners were very good friends of mine who were going to sell to this cute young couple. I admit, I was stressing this appraisal….a lot. I had a couple of comps to show the value of the offer which was $178,000, but with an appraiser…you never know. The appraisal came in at $184,000!!! You could have knocked me over with a feather I was so surprised we came in that high! Buyers (who are wonderful) bought the home with some equity, and the sellers were thrilled with the value of the home because they thought it would be worth much less based on the comps in the area. Some appraisers will take homes condition, upgrades, and work done into the computation…and some won’t.
B. A couple of months before example A… I had clients buying a 3 bedroom/2 bath home that had been totally redone for $180,000. We all thought this was a no brainer since the comps in the area were, at least, $10,000 more. The appraisal came in at $168,500!! WHAT?!?! We couldn’t believe it was so low!! The appraiser was using comps from 9 months to a year ago where our comps were much more recent. Bank doesn’t care what we say….only what the appraiser says.
The sellers don’t know what the home appraises for…unless the home appraises for less than what the purchase price is. If this happens, the appraisal is sent to the sellers, and the sellers can either a) accept the appraisal price and agree to sell at this price, or b) back out of the agreement. If the seller chooses to accept the appraisal value and to sell at that price they will usually re-negotiate closing costs, or something like. This is time for new negotiations. If both parties can’t come to a consensus, then the deal dies. Earnest money is returned to the buyer.
Some sellers will get the home appraised before going on the market thinking this will help. It doesn’t. The buyers bank will still order another appraisal and go with what their appraisal says…not what the sellers appraisal says. The hard thing is no two appraisers are the same. Some will come out, walk around, do some measurements, and leave. Some though think they are inspectors and will actually inspect the home. Their prerogative, I guess.
A good example of this is a home I had clients trying to buy last year. Home was being sold for $195,000. The first appraisal came in at $196,000, but because this was an investment property that hadn’t been owned for more than 90 days, the lender required a second appraisal though. The second appraiser sent in his report at $160,000!!! There was a 3 day difference between the two appraisals! Why the difference? Different appraisers…captain america vs hitler.
Some appraisers will require repairs to be done to the home…and sometimes they are small, stupid stuff. If the appraiser calls out repairs then those repairs are now ‘lender required’ repairs and must be completed prior to the close of the home. Yes, the repairs will have to be signed off on by the appraiser. Sometimes the appraiser doesn’t call out anything….again, it depends on the appraiser. I have a client buying a home using a VA loan right now (actually I have about 4 clients buying a home using VA loans right now), and VA is pretty strict…but again, depends on the appraiser. I was fairly certain the appraiser would call out the broken bathroom window, and require a roof certificate since the homes roof is at the end of its life cycle…but surprise! No repairs were called out by the appraiser.
I have had appraisers in the past call out black berry bushes in the back yard, a man hole cover in the front yard (supposed trip hazard), peeling paint on the trim, or around the garage, etc. I currently have another VA appraiser calling out for a Well inspection….on a home that is on city water. Go figure… LOL
The thing to remember is that tax assessed value has no relation to a homes market value, and neither does buildable value.
An agents estimation of listing value is based on what we are pulling up on the rmls for homes currently active (competition, and this changes as homes come on the market, go pending, or get sold), pending homes & how long they were on the market for, and of course, recently (usually within last 6-9 months) sold. This is also where we see what homes actually sold for vs what they were listed for. Market value is determined by the market itself, and appraisal value is the last, and final word….and is very arbitrary. It is very hard to argue with an appraiser. I always tell my clients not to start packing until the appraisal comes in!
I am not sure if that clears anything up, but hopefully it at least explains some things. Real estate…ever changing depending upon the seasons, and the market itself. 🙂
One last thing you need to remember is that a real estate agent is not a sales person. It is not our job to ‘sell’ you anything. We are assistants, advisers , guidance, and help. You should not feel as if your agent is trying to sell you a home, or anything else, our job should be to help you in getting the home you want. This being said remember that you do not get T-Bone steaks for the price of hamburger…Look ONLY at homes within your budget. ALWAYS ask questions, and expect answers without a lot of lingo. I was always told that if you can’t explain something in a way that the other person can understand clearly, it is because you don’t understand it yourself. 🙂
Information is power, and I hope that I am able to help you. Good luck, and as always…May the odds be ever in your favor out there…. If you are looking for a real estate agent, I would love to be able to help you.
As always….this is just a quick overview…. please remember that your agent, and your lender work for YOU. You drive the bus…we are merely GPS to help you get to your goals. Like the classes, this weekly blog email is to help you with your homebuying adventure. The goal is to be informative and non-promotional. 🙂 We are, however, hoping you will call and want us to help with your adventure.
If you have any questions about this, or something you have heard…or if you would like me to help you with your homebuying adventure, please call, email, text, or facebook me anytime. I am, as always, happy to help!
Thank you again for your business and your referrals!! …and thank you for referring these classes to your friends, family, and co-workers.
. ..disclaimer…if you have already purchased a home, or would no longer like to receive these emails, please let me know and I will be happy to remove you from any further mailings…
Next Week: “Hidden” Buyer fees when buying a home
Last Week: Where to ‘find’ homes & what the status’s mean
Have a great day, and I will talk to you soon,