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How Do You Value Properties

June 18th, 2008 · 2 Comments

I found a very good article about what affects property values. Joe Manausa of the Tallahassee Real Estate Blog wrote a great post called How Home Values Are Determined. While this is aimed at sellers it has value for investors too.

In today’s market you are likely to run into sellers that are just unrealistic about what their property is worth. It may help to refer them to this article. One thing I particularly liked was his list of things that Do Not affect value.

What does not affect value?

  • What you paid for the house
  • Your remodeling costs
  • The amount of cash you need to buy your new house
  • What you want for your house
  • What I say your house is worth
  • What other real estate agents say your house is worth
  • What an appraiser says your house is worth
  • What the tax assessor said your house was worth

The last four on this list may all have very strong opinions what the property is worth, but they do not actually affect what it is worth.

It’s a good list and a good article. You should check it out.

Happy investing,

Ned

Tags: Beginner · real estate

2 responses so far ↓

  • 1 Cori // Jan 25, 2009 at 10:27 am

    Hi Ned,

    I have a related question. I placed an offer on a bank-owned property here in Maryland through my agent. The bank countered a price $30k over the list price (on the MLS) saying they were going repair the property (which was not done). Two weeks later, I see that the property has an Open House. The agency listing the property and the bank haven’t changed. But now, the list price is $30k less than the price originally listed on the MLS. (a $60k difference). I’m concerned that my offer was discriminated because now they are offering the house for less than their own counter 2 weeks ago.
    Is something “inappropriate” happening here or is this just normal business? I would be interested in your opinion.

  • 2 Ned // Jan 29, 2009 at 3:05 pm

    Cori,

    Thanks for stopping by and commenting.

    Banks do a lot of stupid things. They sometimes do things for reasons that are not obvious.

    Perhaps the bank has a lot of foreclosures on the books. Their original intent was to renovate to get top dollar but the bank regulators came in and told them to move some properties quickly. Or maybe after getting repair estimates they realized they should simply take what they can get now.

    I doubt it is a case of discrimination. No bank is going to take $30,000 less because they don’t like your age, skin color, religion or for any other reason. I am not saying descriminati9on doesn’t happen, but it sure doesn’t happen for $30,000.

    A better question is “What can you do now?” I would call the agent and ask why they lowered the price. You may also ask why they didn’t accept your previous offer.

    I wouldn’t hesitate to submit another offer if you still want the property. One strategy for bank owned properties is to submit the offer you feel comfortable with. If the bank does not accept that offer, keep resubmitting the same offer every few weeks. If no one else buys it, ultimately the bank will realize yours is the best offer they are going to get.

    Good luck,

    Ned

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