THE VIRGINIAN-PILOT
Copyright (c) 1994, Landmark Communications, Inc.
DATE: Saturday, October 29, 1994 TAG: 9410280504
SECTION: REAL ESTATE WEEKLY PAGE: 12 EDITION: FINAL
COLUMN: WHAT'S IT WORTH?
SOURCE: Thomas Tye
LENGTH: Medium: 99 lines
Several properties have been foreclosed on in my area and sold by HUD and the VA at ridiculously low prices.
Does this mean my property is worth less?
The number of foreclosed upon properties, by the Federal Housing Administration, Veterans Administration and the Resolution Trust Corp. has increased tremendously over the past few years.
It is not unusual now to see a full page advertisement in the newspaper by either the VA or HUD offering a large number of properties for sale.
Many times these properties are sold ``as-is'' and are sold at somewhat distressed prices. The problem that is created, in your case, is that virtually the only sales in your subdivision have been foreclosures. This creates a problem in that there are not arms-length market transactions of typical buyers and sellers in your area.
The typical seller has been extremely motivated and the typical buyer has been someone who, rather than looking for a place to live, has been looking for an investment, either to rent out or to fix up and sell.
This causes a distortion, to a degree, of the value of properties in your subdivision.
Since these are the only sales in your area, the appraiser can make an adjustment to take into consideration the effects that seller motivation would likely have had on the properties that sold.
This is a typical adjustment process which would take place when valuing any property.
In your specific subdivision, once some of the privately owned properties that are listed for sale have sold, it will be readily apparent whether these foreclosures have had an adverse effect on your neighborhood.
Unfortunately at this time there is only an indication of what foreclosures are worth to investors. There is not a strong indication of the value of a homeowner selling his property to another typical homeowner, such as you.
If numerous foreclosures continue and these properties are rented rather than leased, the area could become less desirable, and yes, the value of your property could be affected.
To prevent something like this from happening, it is important for you to become active in your civic league and notify the city if the exteriors of these properties are not properly maintained.
This will help the neighborhood have a better appearance and be more desirable for potential buyers. In the long run this could cause a more favorable return on your investment.
I live in a tract subdivision in Virginia Beach. The appraiser that evaluated my house was there less than 10 minutes. How can this person know what the house is worth in only 10 minutes?
Please do not confuse the physical inspection of a property with an appraisal. The inspection is only a very small segment of the appraisal process.
The majority of time spent in valuing your home was spent at the office, in the city courthouse and in inspecting comparable sales in your neighborhood.
A highly trained appraiser needs only a few minutes in a typical house. Many houses in your area are standard models. It is likely that the appraiser valued many of these over the years.
Once a standard model is inspected the appraiser is simply there to determine which model you have, what the condition is, and what recent improvements you have made. The physical inspection is relatively brief for these reasons.
After the physical inspection, the appraiser has not valued the property, but has only identified the physical and locational attributes of the property being appraised.
While it appears that it took only 10 minutes, if the report was properly prepared, it actually took a day or more to complete.
This is due to the fact that it is necessary to verify city records, Multiple Listing Service listings and sales, and perform an analysis of your property as it compares to others in the neighborhood. The remaining portions of the appraisal process, excluding the inspection, take much longer to complete.
Although the appraiser may not have spent much time there, it is likely that all of the necessary information to value your home was obtained.
In the future I would suggest that you point out those items that differentiate your house from others in the neighborhood and may make it more valuable.
These items could include improvements that you have made to the home such as room additions, roof replacement, upgraded carpeting, cabinetry, painting and the like.
Some of these items may not be apparent from an inspection but they should be considered in the valuation process. MEMO: A new column, What's It Worth?, debuts in Real Estate Weekly this week.
Thomas Tye, a member of the Appraisal Institute, will deal with what
affects the value of property and neighborhoods. Tye is a Senior
Residential Appraiser and has evaluated commercial and residential
property in Hampton Roads for more than 15 years. Send comments and
questions to him at Real Estate Weekly, 150 W. Brambleton Ave., Norfolk,
Va. 23510.
ILLUSTRATION: Photo
Thomas Tye
by CNB