Market Decline

Market Decline

Several weeks ago we had a strange call from a seller who was claiming that the Real Estate agents in the Rincanada Hill complex were against him and are trying to devalue his property by creating odd comps on Zillow!!   The story was too complicated to even follow, but suffice it to say that he was convinced that the 2 trees that are in front of his condo should contribute more than $50,000 to the value of HIS condo!

Well, stranger things have happened on valuations, but we wanted to explore the use of math and not magic voodo in appraising real estate.  

Real Estate and Cost Price : Price is simply one indicator of the Real Estate value but they are not equal all the time.  Cost simply defines the total amount of money one has to spend to build an identical home.   It coves all the  expenditures including materials, labor, permit and plan costs.   Price on the other hand is the exact amount paid by the buyer.

Market Value: Appraisal reports are used by banks and tax collectors office and investors to determine the value of a home for the purpose of computing taxes or placing a mortgage on this property.

Market price is the price at which a property can be sold given a Fair Market where the sales are not dominated by foreclosures. Let us know the appraisal methods, we can find three types of appraisal to calculate the real estate value in the correct way.

Sales comparison approach: This technique is commonly used in finding out value of single family home and land; it is at times also regarded as market data approach. This is an estimate value derived by comparing property with the one, which are recently sold.

Cost approach: Cost approaches are generally used to calculate value of properties that has improved by one or more buildings. This method also involves estimate value for building and land, considering depreciation. If estimates are calculated together then one can get the value for improved property.

Cost approach says that a reasonable buyer do not need to pay more for an existing property than it would cost him or her to construct a building that is compared on the basis of desirability and usefulness.

Income Approach: This third and final method of real estate valuation and is based on the relationship between rate of return than an investor requires and net income that a property produces. This is used to estimate the value of income producing properties like apartments, office buildings and shopping centers.

Calculating the accurate real estate valuation is important to mortgage lenders, investors, insurers, buyers, and sellers of a real property.   Contact Us if you are having a difficult time with valuations of your home during Short Sale negotiations.

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