Okay so where were we? How do we determine what a home is worth in the Phoenix Real Estate Market in 2010?
In my last entry I covered the basic way of determining how to value a home in the good old days circa 2002-2005 and it was pretty straight forward. We looked at area active listings to determine what the competition looked like, the past sales to determine a baseline lending value and we looked at the supply of money available.
I’ve learned that when things get a bit complicated, get back to basics, find the common denominators that apply, get back to the egg. Look at it this way… get out of bed, put right leg in right leg pant leg, left leg in left leg pant, pull up pants, pull up zipper (very important) fasten belt, walk…. Or “lather, rinse, repeat”…Basics always work and become more important as the task gets bigger, whether you’re preparing a seven course meal or building a spaceship, you fall back to the basics and build up.
You see although there are a myriad of factors that determine what a home might be worth, all the other factors particular to this market affect the major three, competition, baseline value and money supply.
So what about foreclosures and short sales? Does the fact that in my neighborhood a home with the same floor plan I have goes on the market at a low price owned by the bank affect what a prospective Buyer offer on my home? You bet it does. Like it or not that’s your competition and Buyers will determine how much more (or less) they would offer you based on what they see out there.
Does the condition matter? Yes it does but within reason. A Buyer will not give you $50,000 more if the bank home down the block is similar and he can fix it up for $25,000! Oh Iheard you, you’ve got granite counters and extra thick insulation in the attic, and you’ve got thicker nails in the wall (a homeowner actually once told me that to justify his ridiculous higher price!)
Does the fact that it would be difficult for a Buyer to get a loan in my neighborhood affect me? Yes it does. Remember what’s happening in the in the million plus market? If banks won’t lend, cash is king and when was the last time a Buyer with a million or more in cash paid a premium price? Especially when there are a ton of homeowners that would like or need to sell, maybe worse than you. Do you think the competition for the cash would be fierce? You bet! Would prices drop and drop fast? It’s already happening.
If people are losing their jobs, does that affect the ability of someone to secure a loan and the demand for homes in our market? Yes it does! It affects the overall demand in the economy and hits certain price ranges more than others.
What about closed sales, the basic focal point of what a willing and able buyer HAS paid? Are these recent sales price numbers lower because they reflect sold foreclosures and short sales? Yes they are! Will an appraiser figure these numbers into what the value of your home might be? Absolutely! Fair? Absolutely not, but who are you going to fight?
So as I’m standing there at a party enjoying my appetizers and glass of wine, my concern is not having a discussion about what your home might be worth because if I study the factors that affect the basics, I’m pretty confident I can give you pretty good idea what range your home might be worth. My “Jaws” movie scenario comes from the desire not to give you news you might not want to hear since 99 percent of the time it isn’t what you want to hear. So my bottom line is this: If you don’t, have to sell, don’t. Not at the moment anyway until things get a bit better. And if you must, ask me to come by and we’ll look at ALL the factors that affect the basic three and determine what that number is. Then we’ll open a nice bottle of Merlot. We’ll most likely want to share a glass….
Sal Cartagine is a 23 year veteran of the Real Estate industry specializing in residential sales, rentals, property management and investments working in the Phoenix Metro area.
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