This week I attended an all day certification program to receive my CBPS designation. I am now certified to perform “BPOs” – Broker Price Opinions, for banks that have properties moving toward foreclosure. I have managed to avoid focusing on the short sale/REO part of the business – though I’ve certainly done my share of both, and since it’s not going away anytime soon, I decided I better stay up on it.
So, now I’m registered with several lenders to give them my opinion of the value of their real estate holdings. But guess what? There’s no magic bullet – this class “taught me” to do what I’ve been doing for years. We just called them CMAs – Comparative Market Analysis. Because homes are not a commodity, values are highly subjective. Pricing your home is often the most challenging part of selling.
A home, your home, my home is worth only as much as someone is willing to pay for it. That’s it – nothing more, nothing less. If it’s priced low, the market will respond with multiple offers (I’ve been involved in several of those in the last year) and bring the property to it’s market value. If the home is priced high – it will not receive showings or offers, and eventually the price will come down to where it will generate an offer. The market speaks in offers, I always say.
There are many factors in determining value. Some are obvious – location, size and condition, factors that you may have to your advantage. But there are a couple factors that are less obvious and are REALLY affecting our home values right now.
The number of homes for sale in your market place is a leading indicator for what your home is worth. Why you ask? Because just like most goods and services in a free market, supply and demand dictate value.
Right now “inventory” (the number of homes on the market) is going up (supply) and there are fewer qualified buyers (demand). It is as simple as that. Fortunately for most of us, we own homes in very confined areas where there wasn’t excessive growth over the past few years, the way there was in places like Las Vegas and parts of Arizona.
There’s no more Alamo available to build on, no more Diablo and very little more Danville. So supply is pretty well capped, allowing our homes to hold their value better. That’s not to say home prices haven’t dropped, they have, and may continue that drop over the next six to twelve months. But we haven’t and won’t (in my opinion) see the sharp decline other northern California markets have seen.
I’ve just completed a detailed analysis of home values in Danville for a client and discovered that year over year from late ’07 to February ’09 single family homes in Danville dropped 17%. Not great news – but nothing like what we’re hearing in the media; home prices in California have dropped by 46%!
The last, less obvious factor in determining the value of your home is time. If you absolutely must sell because of a job loss or dropping equity in your home and a fear that it may “go short” (the mortgage is higher than what the home is worth) you will need to price your home at 5-10% below the comparable sales in your neighborhood. The sale of your home will then affect the comparable sales for the homes coming to market. Distressed properties and highly motivated sellers, like it or not, can and will affect the value of your home.
If you’d like, I can provide a quick and pretty darn accurate Value Analysis for your home. And now that I am a certified CBPS – I can even put a gold star by my opinion. It won’t be like Zillow.com or HomeValues.com – because they can’t take into account your personal circumstances or motivation for selling, I can and I will.
What about our personal Values as hinted at in the title of this article – Ha! Are you crazy?!? I’m not going to comment on that!!
Have a great week.