COSC Corner: Today's Real Estate Market Values 101

Home Builders Association of Greater Des Moines
Blueprint Magazine
June 2012

By Paris Boehm, Licensed Realtor® and NAR Green® Designee

So, what's a home really worth? As a homebuilder or a developer, you've likely asked this question. Daily sources of informational bombarding us include, but are not limited to:

• National and local television news reports
• National and local print publications
• Online sources and news feeds
• Family, friends and co-workers
• Seriously...just about anyone on the street is an "expert"

So much information from so many sources...and often with conflicting perspectives! What's really going on right here in the Greater Des Moines Metro Area???

Whether a builder, developer, buyer, seller, investor or homeowner, there are some basic principles to keep in mind when determining market value.

First and foremost, contact a licensed, professional Realtor®. Personally, I recommend interviewing three before signing on with any particular agent or broker. Steer clear of friends and family members. Tell them you'd rather not compromise the relationship by doing business together. In fact, if they offer a referral they could receive at least; if not more, a 30% referral fee from the transaction and you'll preserve the relationship.

Your Realtor® helps determine market value for resale or purchase by using the following criteria:

1. Location, Location, Location!
2. Condition, Condition, Condition!
3. The past 3-6 months of comparable/apples-apples sales within a 1 to 1.5-mile radius with adjustments as needed, expanding the radius on a rural property.

Initially, you can see what's going in your specific area by contacting a Realtor® for a 15 month Market Activity Report.

Should you wish to go further, ask your Realtor® for a complete Comparative Market Analysis (CMA) to determine the market value range specific to your property.

Determining market value is NOT based on the following criteria:

1. Assessed value – it makes me crazy when I see "Priced $10,000 below assessed value!" Assessed value is for tax purposes only. If a CMA determines your market value is less than your assessed value, your Realtor® should be telling you to hightail it to the assessor's office to protest the assessed value. You are overpaying on your taxes!
2. Appraisals completed over 3-6 months ago – Note: the same as above in Determining Market value #3! I just picked up a For Sale By Owner flyer that tried to justify a $325,000 list price based on a 2010 Certified Appraisal. That would never fly for a buyer trying to finance!
3. What you feel your home is worth OR what you need it to sell for so you can make money, break even or worst case scenario; don't have to bring money to the closing table – Please know, this isn't personal and you are, unfortunately, in plenty of company if you are in a precarious situation. Again, find someone who is going to tell you how things really are in the market instead of building false hope!

Your property's market value has been established, now what? Many people decide to wait it out to see if the market will swing back up and property values rise. According to industry experts you'll be waiting over four years for that to happen. DSNews.com writes:

"It will take 46 months to clear the market's supply of distressed homes, or the shadow inventory, according to estimates from Standard & Poor's Rating Services based on first-quarter 2012 data."

These are the cold hard facts of the new normal. Foreclosures and short sales impact a neighborhood's market values and they are found in all price points.

Now, if you are a buyer or investor looking for a primary residence, you are in luck. This is an amazing time to buy for first-timers, move-uppers, right-sizers, flippers and/or rental investors. And, the residential rental business is HOT!

If this will be a primary residence and you want to make improvements, Federal Housing Administration's 203K financing allows you to purchase and make renovations within a single streamlined process. It's really amazing!

With interest rates at historic lows and plentiful inventory, I believe it is a fabulous time to buy and sell real estate - Seize the Moment!

I am happy to send you more information on any of the above. Feel free to email me at parisinwdsm@gmail.com.