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Appraised Value in a Changing Market 2015

by Administrator on Jul 9, 2015 Market Conditions Articles 694 Views

Some real property markets change slowly, especially those that contain more supply of a specific property type than demand, and it's not unusual to see a relatively small increase or decrease in property values based on the sales approach or the income approach.  For appraisers these markets make for difficult times.

Real property owners and potential buyers realize that there is little movement in prices and few transactions occur, that generally means fewer appraisal reports are ordered.

On the other hand when market activity increases due to a sharp increase in demand, prices can spike and it's difficult for a property owner to keep track of the activity.  This is especially true in the market for vacant land.  If you are not following sales closely, like an appraiser must, an owner can miss the signals and get caught off guard and discover that prices have increased or decrease by a significant amount. 

Owners who are contacted by potential buyers regarding the sales of their property who do not take the time to find out if the market is changing are the ones who sell too soon or for too little.  I always ask potential clients if they are willing to miss the sales price of their property by $ 1.00 a square foot or by 10% of the property value or would they rather pay for an appraisal report.  While appraisal services are not cheap, if you miss the market value of a property by 10% you could end up losing tens to hundres of thousands of dollars.   

There are some property owners who follow real property sales prices as closely as appraisers.  Their holdings are usually significant or they are in the real estate business themselves.  These individuals are great sources of information for appraisers, they are like supplemental data sources, ready with details and leads that can be helpful when you are gauging market movement.

When a real property market begins to move many property owners and potential buyers want to know, for some what appears to be a relatively modest change in value can equate to millions of dollars.  Even though for some the movement is only a "paper" change in value, it can affect plans that they make for their retirement plans and their futures. 

Some of my past clients ordered appraisals all the way through several years of land appreciation only to see an abysmal report in 2008 or later that indicated that they lost all of those gains.

When a real estate market or market segment begins to appreciate, and properties begins their upward value climb as the market cycle changes, appraisers have to make decisions about what constitutes sufficient evidence of a market change.

One significantly higher sale would likely be considered by many appraisers to be an outlier.  Two or more significantly higher sales and your confidence improves.

When your research reveals that listings are swelling and reports indicate that there are a number of pending sales when there were relatively few it has then become obvious that demand has improved and that prices are likely rising.

Appraisers are constantly inundated with sales price "evidence" presented by agents, owners and others who are potentially going to benefit from a higher appraised value.  Often the provided sales, which I always review, are not similar to the property being appraised, and the sales usually do not point to a changing market trend.

Multiple listing services usually provide statistics and graphs that clearly display market trends and appraisers find these tools useful for the comparison of relatively homogeneous property types like new homes.  It's easier for an appraiser to predict where a real estate market is going when they have good month-to-month and year-to-year statistics.

Real estate still offers investors one of the best opportunities to really become wealthy, and accurate, timely inforamtion is invaluable.  The individuals who successfully buy and sell real property are in the market today, they have been in the market for the last several years even though their profits were not as fat as in boom times they maket money with each sale.  Appraisers follow the activity of those people who are active market participants, they are on the "front line" of the markets.

For more appraisal information contact Glenn J. Rigdon MA, MRICS, ASA is a Las Vegas / Henderson Nevada based appraiser who can be contacted via email or via his business website known as Appraiser Las Vegas  (http://www.appraiserlasvegas.com), or you can also click on “Contact Us” on the home page of this website or visit my public profile at LinkedIn at http://www.linkedin.com/pub/glenn-rigdon-ma-mrics-asa/1a/30b/879/

Article source: http://www.appraisalarticles.com/General-Appraisal-Articles/Market-Conditions-Articles/4550-Appraised-Value-in-a-Changing-Market-2015.html

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