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House values dropping in Las Vegas? Maybe..

 

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October 2005

If you own one or several real estate properties in the USA, you probably could not help but notice that in the past year they have increased in perceived value. Prices have gone up in most parts of the country. In some areas like Las Vegas or Miami prices have gone up to ridiculously high levels.
A popular way to estimate what your home is worth are web sites like ditech.com or Bank of Americaís web site where you can punch in an address and it will show you comparable homes in the neighborhood, their size etc and last sale price. All these web sites draw from the same backend so the numbers coming out will be the same.

I have wondered several times why the estimated values were so high. For a given property - in Utah - it would list 3 very recent (within less than 3 months) comparable sales at 160k, 165k and 169k but then conclude that my property must be worth between 195k and 215k. The funniest part is that I actually had bought that particular property for 159k only 2 months ago Ė yet those sites try to tell me it is worth much more? I donít think so.

Now to the Las Vegas market. I have two rentals there. I bought one in June 2004 for $265k. I just visited BofAís electronic appraisal site and it states this property is worth between $330k and $374k. It bases this on 3 comparable sales for $305k, $300k and $299k. I do not understand that kind of math. The average of 305, 300 and 299 is possibly 301 but not between 330 and 374. Or?

Yesterday came a rude awakening for me.

I have nice 15 yr fixed, fully amortizing loans on all my properties except on one. The idea is that I want to pay my mortgages off. I know, for some people this may be a novel concept. I also like the fact that you get lower interest rates on the 15 year term.

So I am going to refinance that Vegas rental home. The lender ordered an appraisal and I received a copy yesterday.

The appraiser looked at 18 sales ranging in sales price from $250k to $299k.
The appraiser looked at 15 listings ranging in sales price from $265k to $349k.

The three comparable homes that he found had sold recently for $294k, $294k and $284k. After adjustments he established a market value range between $286k and $292k (letís just say $289k for now).

$289,000! Not the $330k Ė $374k that ditech and BofA claim.

Now in my particular case, I am still fine. I owe only $180k on the property and thatís only 62% LTV (Loan To Value). I still qualify for the best mortgage term. Also the appreciation from my purchase price of $265,000 since June 2004 is not too bad. Thatís 9.1% in 15 months or 7.3% annually. If I had to sell now, the transaction cost would eat up all the gain from appreciation. Since I am refinancing into a 15yr term I obviously have no such plans.

The appraisal was very thorough. There have been reports about appraisers who where strong-armed/ pressured by lenders to appraise a property at a certain value. This was not the case here.

I found it very interesting that the sales ranged several tens of thousands of Dollars below the current listing prices. This doesnít mean necessarily that sellers get 30k under asking price Ė it is quite possible that only smaller town homes sold lately and the more expensive (bigger) houses are just listed. But I think it is safe to assume that people get asking price at best and most likely less than that.


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Comments:

2005-11-05, 13:19:27
anonymous from United States  
where can i get an appraisal without having to give my contact info?
2014-12-28, 06:24:38
anonymous from Walnut, United States  
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