Upcoming Free (& non-promotional) Home Buyer Classes:
Saturday, May 14th, from 9am-12pm (ish)
Vancouver YMCA, conference room
11324 NE 51st Circle, Vancouver WA (corner of SR500 & Gher Road/112th Ave)
Thursday, May 19th , from 5pm-8pm (ish)
Marshall Community Center, conference room
1009 E. McLoughlin Blvd, Vancouver WA (kitty corner from Clark College)
If these class dates and/or times don’t work for you, please let us know. We understand that you have lives, and families, and work. We will work something out that works better with your schedule. Just let us know….
….we also have home seller classes available too…link on left on website
Remember…with reservation…we will throw in lunch, or dinner! 😀
Happy Sunny day & happy belated Mothers day…
I thought that greeting might be easier since I have been working on this for 3 days now. 🙂 Thank you to everyone who came to the Client Appreciation even for Captain America: Civil War on Saturday. That was pretty awesome!! Our next one is Saturday, June 18, from 3pm-6pm for Finding Dory.
It is beautiful right now…absolutely gorgeous outside, but as we know, in real estate even the prettiest of things have a dark side.
So this week, I had an excellent question about home values. How are home values determined? What determines value? How come there are so many values? These are all such very good questions that I wanted to talk about it this week….
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 2011-2012, 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. Land right now is astronomically expensive…even for builders.
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. Right now, many homes, especially starter homes, are getting multiple offers, and that is driving up the home prices…but that still depends on one person, which brings us to…. 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…I had a recent sale where the comps in the neighborhood were topping off around $230,000-$235,000, and the sellers agent and I were stressing the appraisal as my clients had it pending at $250,000. This home was gorgeous, with quite a bit of updating. The appraisal came in at $280,000!! I have no idea where the appraiser came up with that number. Buyers (who are wonderful) bought the home with some equity. I called the sellers agent, and told him that the home appraised. I certainly didn’t tell him for how much though! LOL Some appraisers will take homes condition, upgrades, and work done into the computation…and some won’t.
On the other side of the coin though… Last spring, (May) I had clients buying a 3 bedroom/2 bath home that had been totally redone for $212,000. 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 $185,000! 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. In this particular case, my client had a conventional loan. He switched to a FHA loan, and we had the home reappraised….10 days later it came in at $215,000!! Two different appraisers, and 12 days apart…go figure. This only worked since he had it appraised the first time with a conventional loan.
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.
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 hold 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 Whether you are VA, FHA, or conventional loan types…doesn’t really matter…it depends on the appraiser, and we never know who we are going to get. Sometimes it’s Captain America, and sometimes it’s Hitler.
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!
#5… Sold Value
I know…I said 4, but the fifth value is what the home actually sells for. It doesn’t matter what it is listed at, or what price it goes pending sale at, it matters what the home actually SELLS for. This is the value that an agent, and an appraiser will use when valuing the other homes for sale in the neighborhood. This is a fluctuating number depending on the market, time of year, what the appraiser says it’s worth, and what a seller is willing to accept.
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. 🙂 There are a lot of moving parts in real estate, and a real estate brokers job is to try to move them in your favor…if we can.. 😀
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…. AND 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 home 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 home 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…
Upcoming Topics: Buying a home & buying a car…how is that alike & different?
Last Week: 10 rules for showing homes
Have a great day, and I will talk to you soon,