4 Signs Your Home Is About to Lose Value

http://finance.yahoo.com/real-estate/article/107508/4-signs-your-home-is-about-to-lose-value.html

Besides the fact that this article fortells a boom in REO inventory, it gives intereting insight into how an REO could negatively impact the value of your investment properties, so I shared it.

Edited: 06/26/2010 at 09:19AM by Moderator : activated link

Paul H.

Real Estate Coach · Jacksonville, Florida

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Sep 11 '09, 09:46 AM

Read the article - basic knowledge.. Good info for the noobs though.

As far as the point she makes about foreclosures affecting home prices by 1% a house, I don't stand by that arguement, but for the sake of being nice, its close.

As for BUYING in a neighborhood where there are many foreclosures though..

When you buy in these areas, you need to be basing your COMPS (CMA) on the retail market and do not use foreclosures as your median average. Why you may ask?

Because the foreclosures are deflated value and you will make you OFFER based on this but not your CMA.

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Edited: 06/26/2010 at 09:41AM by Moderator : Place web site in signature. It will appear after 10 posts.

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Jan 04 '10, 12:56 PM

Agreed, When appreisor is doing CMA he/she will not do homes in forclosure. It doesn't count.

Edited: 06/26/2010 at 11:06AM

Eddie Ziv

Real Estate Investor · Studio City, California

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Jan 04 '10, 01:07 PM

Thanks for the info, but I don't think I'd miss the mark if I say that for most of us here at BP who have been investing in RE , already familiar with the basics as pointed out in the article.

Edited: 06/26/2010 at 11:06AM

Tim W.

Real Estate Investor · Indiana, Indiana

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Jan 05 '10, 07:20 AM

1. You own in California.
2. You own in California.
3. You own in California.
4. You're a Californian who bought a "cash flowing" property out of state.

Sorry, I just love ribbing my California buddies. :-)

Edited: 06/26/2010 at 11:06AM

Aaron Mund

Real Estate Investor · Arvada, Colorado

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Jan 05 '10, 07:31 AM

LMFAO I moved away from that hole in the ground were people throw money called Cali. I knew more people who were in foreclosure then were not.

Edited: 06/26/2010 at 11:06AM

J Scott

Real Estate Investor · Atlanta, Georgia

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Jan 05 '10, 07:38 AM

Agreed, When appreisor is doing CMA he/she will not do homes in forclosure. It doesn't count.

These days, that's not necessarily the case. FHA appraisers have the discretion to use REOs as comps where there are an insufficient number of retail comps, and HVCC appraisers (I believe) also have this discretion...

So, if you're planning to buy for the purpose of reselling in the near future, make sure there are retail comps in the area...if there aren't be prepared for an appraiser to potentially use REOs..

Edited: 01/08/2012 at 03:18PM by Administrator

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Aaron Mund

Real Estate Investor · Arvada, Colorado

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Jan 05 '10, 07:44 AM

I think value is in the wallet of the owner. As investors it isn't how much a house is worth it is how much it can make you.

Edited: 06/26/2010 at 11:06AM

Eddie Ziv

Real Estate Investor · Studio City, California

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Jan 05 '10, 09:35 AM

Originally posted by Tim Wieneke

1. You own in California.
2. You own in California.
3. You own in California.
4. You're a Californian who bought a "cash flowing" property out of state.

Sorry, I just love ribbing my California buddies. :-)

Well, meet me again in ten years, then we'll see who is better off California or Indiana...? BTW, even though my house probably lost 30% of it's value since 2006, I am still better off should I bought that house in Indiana at the same time I bought mine (1987) Who's laughing now?... :mrgreen:

Remember, You never loose money until you sell...

Edited: 06/26/2010 at 11:07AM by Eddie Ziv

Eddie Ziv

Real Estate Investor · Studio City, California

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Jan 05 '10, 09:44 AM

Originally posted by Aaron Mund

LMFAO I moved away from that hole in the ground were people throw money called Cali. I knew more people who were in foreclosure then were not.

That because they didn't buy smart, not because they bought in California. There is a reason why people bought in California. While you are freezing your a*s off, we here enjoy 78 degrees.
That hole in the ground as you call it, was and will be in the long haul, a best place for appreciation. Would I invest in it now for cash flow? No. But if you can buy cash, this will be have an appreciation bonanza and not so long in the future.

Edited: 06/26/2010 at 11:07AM

Bill Gulley

Real Estate Investor · Springfield, Missouri

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Jan 05 '10, 10:57 AM

Hi, all I know about values in CA is from HGTV! Not much!

About the apprisal....according to teh "rules" when hiring an appraiser they are to ask what the purpose of the appraisdasl is for....if it is a foreclosure, comps should be similar according to marketing time and exposure expected to sell the property! Have the new rules gone into effect yet? Telling an appraiser what comps to use could have consequences, the appraiser does not need to say a word to his employer, but in the process it could come out easily. If I'm buying an ORE/REO, I want to know what they should expect to get, using retailed comps is not appropriate until it's or if it is marketed as a retail deal, which means disclosing faults, warrant deed and seller's responsibilities that go with a retailm deal! If I thought a Realtor was doing that I'd call them out on it real quick. I mean they don't have to take my offer, but there is the reality of realty! Bill.

Edited: 06/26/2010 at 11:07AM

Ryan Hinricher

SFR Investor · Orlando, FL

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Jan 05 '10, 11:15 AM

Agreed with J Scott. If valuing a property where there are few sales and one of them is an REO, is recipe for inclusion in the appraisal. This is good to know if you are financing FHA. Seems like appraisals are all over the map.

And for the record I wish I was in California tonight...freezing here in Memphis! :)

Edited: 06/26/2010 at 11:07AM

Bill Gulley

Real Estate Investor · Springfield, Missouri

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Jan 05 '10, 11:28 AM

Yes, I'm in agreement as well. Hope I wasn't understood to the contrary, it's an option if there are limited comps, but the appraiser should adjust for an REO due to type of sale and perhaps marketing time allowed. Not doing so goes against the grain of comparable sale by definition. Bill

Edited: 06/26/2010 at 11:07AM

Tim W.

Real Estate Investor · Indiana, Indiana

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Jan 05 '10, 11:38 AM

"BTW, even though my house probably lost 30% of it's value since 2006, I am still better off should I bought that house in Indiana at the same time I bought mine (1987) Who's laughing now?"

I know the Indiana guy who bought 8 houses for the price of half of a Reseda house sure is. :lol: Why wait for the market to do something in 10 years? Income valuation is a beautiful thing. Before long you're going to find yourself trying to become a California tenant and putting more of your money into being a bigger Alabama owner. I know it's going to happen to you. The pull is inevitable.... :lol:

In the interest of total and complete honesty, I have looked at Palmdale and I like it. It's a pretty redneck area and home of The Gunny R Lee Ermey. There are deals there to be had and if you really wanted to make some money in the future in CA, now would be the time to buy... but I'd have to be in another line of business to make it work and I've got too much good going on here now.

Tim

BTW - Eddie what's wrong with the weather? You can't trap muskrat and raccoon in their prime coats without this kind of weather. :mrgreen: I'll bring you a muskrat pelt next time I'm out there to show you. You'll see how much nicer it is in winter prime. You can show all your friends in Hollywood. I'm sure they'll love that.

Edited: 06/26/2010 at 11:07AM by Tim W.

Richard J.

Real Estate Investor · Carlsbad, California

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Jan 05 '10, 11:51 AM

Didn't read the article. Only read some of the posts. Here in California, the Appraisers use only the most recent comps, going back only 3 to 4 months, and include ALL sales! When we do our pricing, we do it on a block to block basis, it is deadly otherwise! What a mess! -- Dawn

Edited: 06/26/2010 at 11:07AM

Eddie Ziv

Real Estate Investor · Studio City, California

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Jan 06 '10, 01:56 AM

Originally posted by Tim Wieneke

I know the Indiana guy who bought 8 houses for the price of half of a Reseda house sure is. :lol: Why wait for the market to do something in 10 years? Income valuation is a beautiful thing. Before long you're going to find yourself trying to become a California tenant and putting more of your money into being a bigger Alabama owner. I know it's going to happen to you. The pull is inevitable.... :lol:

Oh, I'm sure you can. I bought four houses in Alabama cash and I still cannot buy one house for the triple of that combined price, but again, dollar for dollar appreciation, you cannot beat Cali. As I said before, this is no cash flow state but still, there are great deals here for the cash buyer.

Originally posted by Tim Wieneke

In the interest of total and complete honesty, I have looked at Palmdale and I like it. It's a pretty redneck area and home of The Gunny R Lee Ermey. There are deals there to be had and if you really wanted to make some money in the future in CA, now would be the time to buy... but I'd have to be in another line of business to make it work and I've got too much good going on here now.

BTW, if you ever consider buying in California, I would suggest Santa Clarita, Saugus or Canyon Country. They are closer to LA than Palm Dale (Although in the same direction) and the prices are quite reasonable so they are very desirable places.

Originally posted by Tim Wieneke

BTW - Eddie what's wrong with the weather? You can't trap muskrat and raccoon in their prime coats without this kind of weather. :mrgreen: I'll bring you a muskrat pelt next time I'm out there to show you. You'll see how much nicer it is in winter prime. You can show all your friends in Hollywood. I'm sure they'll love that.

Hey, I'm from the middle east, the one with the crappy health care system, remember? I cannot stand cold weather. In a matter of fact, I would even consider moving to a red state like Florida, before even considering moving to Oregon or Washington...LOL :mrgreen:

Edited: 06/26/2010 at 11:07AM

Tim W.

Real Estate Investor · Indiana, Indiana

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Jan 06 '10, 02:54 AM

Originally posted by Eddie Ziv

dollar for dollar appreciation, you cannot beat Cali.

Income valuation Eddie. You're beyond hoping and praying for the market to bring you appreciation. You got into a whole new level of investing when you started buying your Alabama rentals that you haven't even realized how smart it was. It will probably hit you when you first start talking to a bank, or even better yet a regional credit union, about a blanket commercial loan on your rentals. I haven't gotten one yet because I haven't needed it and don't have the credit for it yet but I've been talking to them and it will blow your mind. In fact, once you see it you can't go back to waiting on market appreciation. There's no going back to trying to be a lead sheep in a herd when you've figured out how to be a shepherd. The only thing to wait on market appreciation for is to sell it to the overpaying fools to create some extra cash to wait for 5 years and buy it back at 20% of what you sold it for and then do the income valuation again if you want to.

And what's this about trying to move me closer to LA? :lol: The only thing that kept me interested in Palmdale was the chance for seasons and less restrictive zoning. I hear it's about 20 degrees cooler up there today than in the valley.

Tim

Edited: 06/26/2010 at 11:07AM by Tim W.

Rich Weese

Real Estate Investor · sioux falls, South Dakota

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Jan 06 '10, 03:09 AM

Heh Eddie- Come on over to FL! We still need to get some inventory absorbed and you can buy it cheap.
Now for CA. I don't know of another state that has as big of "mood swings" as CA. Many of you have read my info here and my start was in SO CA. I made tons of money there. Then things changed.
I had a brother that bought in Placentia for 150K. Refied when value topped 300K. Pulled out 100K! When value dropped back to 200K, he complained he lost money! He dumped the "loser" and moved out of state, the value went up over 300K again.
With just this one example, CA could be real good or real bad. Timing is not an exact science, but stupidity seems to be!
When everyone is getting out, get in. When everyone is getting in GET OUT!! That works in most flucuating assets, imo.
I didn't read the article, but here are my things to look for.
1. Inventory going up or down
2, Length on market trend- up or down
3. # of rental signs in a neighborhood and in the rental section of the newspaper- increasing or decreasing?
4. Vacant homes- up or down
Rich

Edited: 06/26/2010 at 11:07AM

Tim W.

Real Estate Investor · Indiana, Indiana

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Jan 06 '10, 03:30 AM

Originally posted by Rich Weese

When everyone is getting out, get in. When everyone is getting in GET OUT!! That works in most flucuating assets, imo.

Agreed and I'm going to reiterate that when all ribbing is said and done, IF anyone wanted to get into SoCal, now's the time to do it. I saw one 2 b.r. there in decent shape in a decent neighborhood for 35k. That's ridiculous cheap. It was just like this one: http://www.realtor.com/realestateandhomes-detail/40237-176Th-Street-E---Littlerock_Palmdale_CA_93591_1114442001

Again, different line of business from what I do as an investor (still costs about 3-4 Indiana houses - obscene!) but it is one way to make money.

Edited: 06/26/2010 at 11:07AM by Tim W.

Rich Weese

Real Estate Investor · sioux falls, South Dakota

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Jan 06 '10, 03:38 AM

If I was buying, I'd be in certain parts of CA. Rich

Edited: 06/26/2010 at 11:07AM

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