A General Residential Real Estate Overview

Real Estate, consisting of land and improvements to the land will change over time.  While over the long run Real Estate is generally an appreciating asset, believe it or not—there have been markets or situations  were owners have seen real, hard earned money (not equity build up) lost selling or disposing of their Real Estate.  Conversely, a lot of money has been made in Real Estate. 

There are numerous factors which can impact the value, selling price, and marketing time performance of a given property.  Often we hear Location, Location, Location is the most important aspect of Real Estate.  When times are rocky, Location will be the one component that will give one property an edge over another.  Location forms a general economic foundation which directly impacts pricing.    However, there are numerous other factors which impact Real Estate.  

A summary of these items include:

·        Global, National, Regional, and local economic issues.  This would include global conflicts, disasters, stock market performance, interest rates, unemployment, and consumer confidence to name a few.

·        The Neighborhood and Competitive Market Area:  Is the subject a typical property for the neighborhood and market area?  Is the property the small fish in the pond (typical of most), or the best and most extravagant home in the neighborhood.  What are the total real estate taxes. Typically municipalities which offer an annual real estate tax to value relationship which is less than 2% are the best performing municipalities in terms of price appreciation.  Are there non residential uses, road noises, rail lines or some other issue which would create an adverse impact.  Are you aware that road noise travels due to wind and atmospheric conditions.  What is the subject’s primary and secondary competitive market areas (if a buyer is looking for a property—where would they most likely be looking).  How many homes are available for sale in a given price range.  Is there New Construction Competition.  Remember, a buyer would rather have something new versus old (a resale) if it is available and competitively priced.

·        The Site: Is the site a stand alone lot or situated within a neighborhood.  Topography. On site vs. public utilities. Flood plain, easements, encroachments or potential environmental issues.  Is there excess land available for other uses.

·        The Dwelling:  Type-is the home a row/townhouse, a condominium unit or PUD, twin or detached single family dwelling.  Design-a ranch, split, cape, or colonial.  The Floor plan—the simple rule that 80% of a family’s living is done in 20% of the home.  There are different markets, price and listing performance according to Type and Design.  Improvements (proposed or completed) and cost of the improvements (cost-value recovery relationship).  Deferred maintenance.  Deferred maintenance and the need for modernization.  Today's buyers want it done and will pay a premium to have it done (kitchen and baths).  Does an inground pool offer any contribution to value?--today's pools are an extention of ones living area.  Just look at how elaborate today's pools are.  Potential home inspection, municipal code requirements that may be required.  Other buildings (barn, tenant house, large garage)-uses (in home professional office) on the property. 

-       IS THERE A POSSIBILITY THE EXISTING HOME COULD BE TORN DOWN.  Meaning the land has such a high value that there is little or no value in the existing dwelling/home.  A new home would be built on the site.   

·        Other Issues.  How is the property going to be marketed vacant, occupied, or staged.  Potential adverse selling conditions (divorce, relocation, foreclosure) depending upon the market MAY adversely impact marketing time and price performance.

The above is sampling issues which impact Real Estate.  Each and every home is different.  Even in a tract development of homes, each and every home is different.  The Home is a very personel and emotional asset.

What is a general process of  Consulting or Valuing a Typical  Residential Property.

The process is most often misunderstood and under estimated.  It not just simply walking thru the home, looking at it, looking at some listing and sales in the neighborhood and saying is worth X.

Below is a framework of Real Estate Analysis

-       Initial subject property and neighborhood research (county assessment records, plot plan, multiple listing information)

·        Commuting time to and from the property

·        An interior and exterior inspection of the subject property (Site and dwelling) and neighborhood environment including review of sale and listing activity within the neighborhood and or market area

·        Analysis, review, and selection of competitive Listing and Sales in the subject’s neighborhood as well as competitive market area

·        Developing an Opinion regarding supply/demand and pricing conditions in the subject’s competitive market area

·        Verification of the Sales and Listings considered and utilized in Developing and opinion of market value for the subject property