The real estate market is definitely in a state of flux, but the fundamentals remain the same. Property comparables still determine value. The problem people are having is that as property values continue to fall, some are wondering what really determine property values. It is difficult to accept this reality but it is all we have to lean on in these times. It is rational. Property values are still judged based on the property comparables in the area.
Property comparables are closed sales of similar properties. The subject property is a property at the center of an appraisal question, or simply the property you are interesting in knowing the value. The to remember about property value is that it is an elusive prey because nothing really has value until currency is actually transferred and exchanged. Until that occurs we are dealing with opinions of value. It is this opinion of value that the appraiser renders in a real estate appraisal. (Learn about Subject To appraisals here.)
Property comparables
The most recent sales around a property are called the property comparables. And in this market, properties that have sold over three months are not carrying much weight in the eye of lenders without proper deductions for the age of the sale. The slowing real estate sales market and rising foreclosures are leaving only a few sales effecting value.
Property owners have this perception of value being at one level, but there are not any property comparables that support these numbers. For example, I have seen a couple who purchased a property in 2007 for about $350,000 appraise for less than $230,000 early 2009. You might feel your property is worth one thing, but unless there are some solid property comparables that support that value, the higher valuation is not going to happen. The homeowner is free to say in the property until sales adjusted to meet their expectation, but that is at some time in the future that is unknown.
The bottom line is property values are determined by the property comparables in a given area.
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