21 Dec Real Estate Values
Building wealth trough real estate takes just a little determination, dedication and education. One very important aspect of real estate investing that you should educate yourself on is how to evaluate or appraise a property’s value. This is very important to understand since your profit is made when you buy the property and only realized when you sell it. Determining a property’s value is a tricky field and you must have sound real estate tricks up your sleeve to pull it off successfully.
Fair Market Value and market demands
Naturally, factors such as market demand tend to abide by the notion that the higher-priced recorded sales best represent true market value, while those lower-priced sales probably represent distressed sales. However, this inexact science often results in higher assessments and tax protests by homeowners.
The Supreme Court defined fair market value in the 1973 case, United States vs. Cartwright, as “the price at which the property would change hands between a willing buyer and a willing seller, neither being under any compulsion to buy or to sell and both having reasonable knowledge of relevant facts.” Some states have legal codes that present more refined (and longer-winded) definitions.
It is important to note that value opinions are based on the subjective interpretation of available information. Commercial real estate education plays important factor in subjective interpretation. This may be in contrast to imposed market values, which can set by the IRS or by legal action such as eminent domain. With the IRS, fair market value of real estate can be a very important consideration. For example, if you were to sell your home to your daughter for a sum that is considerably under local comps, the difference between that reduced price and what the IRS considers fair market value will be treated as a gift for tax purposes.
Real Estate Calculation Centre
The method of calculating fair market value should not change with a down market, at least hypothetically. But in reality, there are so many homes sold at auction and foreclosure in distressed sales that such transactions are no longer the anomalies they were a few years ago. Hence, these sales results almost have to be factored in with conventional sales to reflect a true market standard from a marketing and taxing perspective.
Fair-market values are probably lower than estimated at this bottom stage in the real estate cycle. As is true with any asset, what someone is willing to pay for it, not its list or assessed price determines its real value. A home’s condition and “location, location, location” play big roles in determining fair market value in residential real estate as well as other factors like nearby amenities, home features and crime statics.
Most real estate agents can calculate a reasonably accurate price based on “comps,” short for a comparative (or competitive) market analysis. You can create your own “comps” based on information from your local property tax office and perusal of Internet and newspaper sale ads, but this strategy probably will not give you as accurate a picture as actual recent neighborhood sales in your price and size range.
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