Property assessments are used to determine the amount of taxes that each property owner will pay.  Can these assessed values also be used to estimate the value of a home?  In theory, yes --- after all, the assessed value is intended to be the true market value of the home --- but it doesn't always seem to work.

Case in point....one of my clients is considering two homes (among others) that have very similar assessed values, but have asking prices over $50k apart.  Is the owner of the higher priced home just being unrealistic?  Or are the assessments less than accurate?

One way to examine this is to compare recent sales prices to assessed values.  I'm going to focus on homes over $300k, as I sense that there might be more disparity in assessments with higher priced homes.

In the past three months, there have been 10 sales of homes in Rockingham County with sale prices over $300k, with Harrisonburg mailing addresses.



As you can see, there is an enormous swing in the ratio between sales prices and assessed values.  These ten buyers paid, on average, 16% more than assessed value for their homes. 

A few inconclusive conclusions:

• If you are considering an offer on a house that is assessed at $350k, the only thing you can glean from that assessed value is that it will probably sell for somewhere between $332k and $560.  That range is based on the -5% to +60% swing shown above.
• If you are pricing your home to sell, you will quite likely be pricing it above the assessed value -- based on the data above, which is only $300k+ homes, in Rockingham County, with Harrisonburg mailing addresses.

I suppose the only conclusion that we can really make is that while assessed values are interesting to examine, they can't really tell us much at all about the true market value of a house in the current market. 

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It is hard to do, but is still a reasonable approach.

I am working with three couples right now who each want to move to a new home.  One family wants more space in the house, one wants more space around the house (land), and one wants to live in a different part of town.  Each of these three couples must sell their home in order to buy a new home. 

In our current market (with many more sellers than buyers) I always encourage seller/buyers (people who have to sell before buying) to put their house on the market before they make an offer on the replacement house.  Since it is a lot easier to buy than it is to sell, it's usually best to start marketing your home for sale and seeking a buyer before you try to contract on the house that you are going to buy to replace your current home. 

These three couples want to take a different approach, however, and it is quite understandable!  As they look at the market to find homes that they might purchase they each find that there are not too many homes that meet their unique set of buying criteria -- size, price, location, etc.  They thus conclude that they don't want to put their house on the market yet because if they don't find the right home, they won't sell their current home. 

You might push back on that and suggest that they could and should go ahead and put their current home on the market anyhow, since they won't necessarily sell it right away, and because they could always turn down an offer from a buyer.  Their position, however, runs deeper:

• It can be a pain to get your house ready to go on the market.  There are often quite a few odd jobs that were never quite completed that need to be finished off on a home.  Then there is getting rid of clutter, doing a really deep cleaning, and doing some staging.  All of this seems quite unnecessary if you don't yet know if you will be able to find a home to buy in place of your current home!
• It can be a pain to keep your house on the market.  I spoke to a homeowner this past weekend who was tired of selling his house.  He was tired of people coming to look at his house and to then give him quite predictable feedback about what they didn't like about the house and what they think he should do differently.  Again, putting up with all of this seems quite unnecessary if you aren't sure whether you'll be able to find a replacement home to buy.

So let's turn this all the way back around....

If you are hoping to sell your current home and buy a new home, the first step might not always be to put your house on the market.  If you know of plenty of homes that you would buy as a replacement home, then it probably is appropriate to start by listing your home for sale.  If, however, you aren't sure whether you'll be able to find a new home to buy, the most appropriate first step may be to start checking out the candidates for a replacement home before you go to the great lengths of putting your home on the market for sale.
 

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I heard someone make the comment below yesterday....and it struck me that it might be a bit of a contradiction....


Forget the appraisal aspect for a minute --- let's focus on whether it is possible for people to sell their homes for less than they are worth.

$400k perceived value vs. $365k sales price
Let's suppose a house is on the market for $450k for 90 days, and then $425k for 90 days, and then $400k for 90 day, and then $375k for 30 days before finally selling for $365k.  If we really, really think it was a $400k house, does it mean that the $365k sales price indicates that it sold for less than it is worth?  Is it not possible that because it sold for $365k, that it was worth $365k?

$250k perceived value vs. $200k instant sale
Now let's suppose that we judge a house's value to be $250k in the present market.  If the house is listed for $200k, and sells in 24 hours, is the value really $200k?  Perhaps it is higher?  Perhaps in this case it sold for less than it was worth?

I would argue that if a house is marketed effectively, and that it is not an instantaneous sale, that the house sold for what it was worth.  In the first example above ($400k perceived value) it's very difficult to argue that the house was really worth more than $365k.  Nobody stepped up to the plate to buy other than the $365k buyer.  I suppose the counterpoint here is that perhaps if the house had been marketed for two years at $425k, someone might have eventually come along to pay $400k.  Seems doubtful to me, but everyone is allowed to speculate.

Of note, I'm not trying to poke fun at anyone who might think homes are selling for less than they are worth these days.  I actually have a much more convoluted way of saying rather similar....


Perhaps now more than ever it is important to remember (I'm stealing this from you, Andy)....nothing is worth something unless someone wants to pay.
 

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As I mentioned in my market report earlier this week, fewer and fewer buyers have been present in the market over the past six years (demand fell) but prices have not fallen in the way that that shift in demand would suggest. I'm watching hburgnews to try to learn some answers as well, but here's what I have so far.

1. "We did not have that much of a bubble here, which is why they [home prices] do not need to drop all that much."  (Barkley Rosser)
    
   
2. Buyers in this area stuck to traditional financing and didn't over extend themselves.  (Richard Baugh)
    
   
3. The local job market has been relatively stable, and some folks are still moving into the area.  (Richard Baugh)
    
   
4. Prices are still low in this area relative to larger urban areas where many people relocation from.  (Richard Baugh)
    
   
5. Most sellers aren't distressed such that they have to unload their house in a hurry.  (Richard Baugh)

What can you add to the list?

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Read on for several highlights of the November 2010 Harrisonburg and Rockingham County Real Estate Market Report.  Or click here to view the PDF.



Despite early gains in 2010 (particularly in April and June) home sales have stagnated over the past several months.  July, August, September and October of 2010 have been the slowest such months during the past five years.  Despite these low sales figures, however, year-to-date sales are only 4% below last year's sales. 



Late 2009 through mid 2010 showed some promise.  After several years of declining home sales (pace, not values) it seemed that our local market had finally turned around.  Now looking back, that increase in sales pace may have been largely related to the home buyer tax credit, as the pace of sales is now on the decline yet again.  What surprises lie in store for us in 2011?



As demand falls, prices should fall --- isn't that what I learned back in my economics class at JMU?  Not so in the Harrisonburg and Rockingham housing market!?!  Fewer and fewer buyers have been present in the market over the past six years (demand fell) but prices have not fallen in the way that that shift in demand would suggest.  Calling all economists....how can we explain this?



Click the image above (or here) to review the entire November 2010 Harrisonburg and Rockingham County Real Estate Market Report, complete with an all new Executive Summary this month.

If you have questions about this report, or if I can be of assistance with real estate that you own, or that you'd like to own, please be in touch.  You can reach me most easily at 540-578-0102 or scott@HarrisonburgHousingToday.com.
 

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I continue to find it quite amazing that one-third of the homes that sell these days do so within 90 days of when they come on the market.  However, even with that startling statistic, many (most?) homes languish on the market.  There are, after all, 632 single family homes on the market right now in Harrisonburg and Rockingham County, and last month only 32 such homes went under contract.  That gives each home a 1 in 20 chance of being purchased in any given month.  Ouch!

So, with so many homes for sale, it is very important to make sure that you stack up well against the competition.  By competition, I mean the homes that buyers will also view when they come to view your home.  Sometimes these homes are in your neighborhood, sometimes they are just in the same price range but in a different area.  Put yourself in the mind of a buyer that might be considering a purchase of your home and then search online for homes that would meet their needs (including your home).

Sometimes....beyond just viewing these homes online, it can be helpful to walk through the competing homes.  As you are viewing each competing home you should consider whether you (as a buyer) would buy your home (given your list price) or the competing home (given that list price).  This context can help you to better understand whether you have priced your home competitively in the market.

One word of warning --- competing active listings could lead you astray!  You could have your home listed at $200k, go through five competing homes that are priced around $210k and be reassured that your list price of $200k is right on target.  However, you also need to check recently sold properties that would have also been competing with your home.  If all of the recently properties that recently sold were at prices around $180k, then even though active listings confirm your $200k list price, you still may be overpriced.

Pricing, positioning and marketing are tricky right now, with fewer home sales, and lots of inventory --- but they are more important than ever.  I enjoy working with people who like to dig into the numbers and get a good feel for an appropriate list price for their home.  If you're ready to start the research, analysis and discussion process, let me know.

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Photos are one of the most important marketing assets when selling your home.  Blurry photos, dark photos, few photos don't do you much good in telling the story of why your home is outstanding.

So...as we approach the bleak and dreary winter months, I encourage you to take some photos of your home if you're thinking of listing your home anytime in November, December, January or February.

A few other notes about photos, while I'm on a roll....

• You can't have too many photos.  If a buyer is seriously thinking about your home as they view it online, or in a printed brochure, you couldn't have too many photos.  Multiple angles of a single room can be helpful to show perspectives and how rooms interconnect.
• One photo, of the front of your house, won't be enough.  I had a conversation with a buyer client this morning about why a particular house in a desirable new neighborhood hadn't sold, even though it was the house that seemed most favorable to her out of those we had viewed.  One conclusion we came to is that the house is being significantly under-marketed.  The only photo in the MLS (and thus on all public real estate web sites) is a photo of the front the house.  The interior of the house, the back of the house and the backyard all have plenty to show for themselves.....but they don't get the opportunity. 
  
• Photos should go everywhere and anywhere buyers are looking in with any regularity.  I believe that high quality photos should not only be present in the MLS (and thus on public real estate web sites) but also on color brochures in front of your house.  This puts a dent in my marketing budget (and keeps a local printer busy) but I think it's worthwhile since so many buyers cruise through neighborhoods where they might buy....picking up brochures as they consider each home they pass.

But back to my main point --- the fall leaves are beautiful right now, but the bare trees and bleak skies of the coming months aren't as attractive.  Take multiple exterior photos of your home now if you're thinking about listing your home anytime between November and February.

If you're planning to list your home with me, then I'd be happy to come take the photos now to prepare us for the months to come.

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There is a strange conundrum in the market right now --- how can inventory levels be so high, buy yet buyers aren't finding any homes they want to purchase?

As you can imagine, this is quite frustrating for both sellers and buyers.  Sellers can't fathom how, with 20+ months of homes for sale (in some price range) a buyer couldn't find just the right house to purchase.  Buyers can't fathom how, with more options than ever before, they can't find the right home to purchase.

But it happens, relatively frequently!  Over the past few weeks I have worked with several buyer clients to try to find a next home for them to purchase.  We have looked at quite a few homes (8 in one case, 10 in the other), but none were the right fit for them.  Whether it was the location, the floor plan of the house, the amount of yard space, the interior finishes, or the price, there was *something* about each property that made it not quite right.

The first set of my clients did eventually find something to buy --- by looking at a slightly higher price range, and then being fortunate enough to want to buy a house where the seller was able and willing to negotiate down to the buyer's initial price range.

The second set of clients did not find the right home for them.  They did find two houses that were pretty close to working --- both of which we perceived to be pretty good "deals" in the market --- but they would have been compromising in some way to purchase either home.  My clients thus concluded that even though one of those two houses was their best option, and was a reasonable deal in the market, that this still didn't mean that they should buy it.

By no means am I encouraging all buyers to hold out for the perfect house, nor am I suggesting that you won't have to compromise on some of your goals and desires as a buyer.  But I do hope that buyers remember that unless they will truly be homeless if they don't find a house to buy, that just because a particular house is the best option on the market today, that doesn't necessarily mean you should go ahead and buy it.  Look at the full picture, and think of the short term and the long term!

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