Well… “What’s My Home Worth” is a loaded question. Instead of telling you what it’s worth, I’d like to preface my opinion with a show, don’t tell approach. In the following, you’ll find my Deep Analysis framework used to establish property value.
Firstly, artificial intelligence, Zillow, Redfin, and all the others haven’t figured it out… yet (think of a Zillow “Zestimate”)
Although it’s simply a matter of time, their algorithms as of today don’t provide accuracy or confidence when it comes to providing you with a valuation.
Sure, they work well in cookie-cutter metropolitan markets where algorithms are constantly fed sales data from legitimate comparables. However, if you understand the Lake Tahoe market then you know this doesn’t apply here.
Why? Because two neighboring properties can be drastically different in terms of value. Their attributes or lack thereof isn’t always seen by the untrained eye. Take for example a street where one side of the street receives great sun exposure, and the other side receives none. This could mean that one neighbor has an ice-free driveway, where the neighbors have an ice skating rink. To the inexperienced, these problems affecting value are tough to gauge.
Especially if you purchased this home in the warm summer months. Crashing your car into your garage due to ice is something far from your mind but a real possibility.
For now, let’s go back to showing you some steps of the valuation process, instead of telling you the value.
The following are some of the questions that I will research to establish value:
- What’s the state of the buyer demand for the property type? Low, to significant, to high?
- What are the comparable properties selling for?
- What are the contributors that are hindering or benefitting the property?
- HOA related issues?
- Competition related? Little, vs lots of inventory.
- Functional obsolescence?
- Material Issues?
- Excessive carrying costs?
- What does the Prelim tell us? Are there liens against the home?
Market Price (think appraiser) vs. Market Value (think buyer demand)
- What does the appraisal valuation contribute to our scenario?
- What does buyer demand mean in regard to market value?
Construction & Development:
- Are local developments going to affect future value?
- Future demand? Positive vs. negative.
- What are the general sentiments and public reaction to 2 and 3?
- What inspections have been completed?
- Are there significant issues like termites, mold, or radon gas problems?
- If so, what has been done to remedy these defects?
State of the local market vs. the economy as a whole.
- What happened to this property type during the great recession?
- Was it insulated from many other markets?
- Was it hit harder than many other markets?
- History repeats itself, so what does it tell us and how does it apply?
- Is the investor outlook positive or negative?
- Is there an advantageous lending environment?
What is the rental reality?
- Are there short term rental restrictions?
- Do you anticipate the local government implementing rental restrictions?
As you can see, there is a lot that goes into the valuation process. More than anything, you need an experienced local professional to walk you through what isn’t noticed by the untrained eye.