Calculating Fair Value in today's market

[georgie girl]

on subject of assessment value they are more used by vancouver buyers looking here....but they are so inaccurate.....especially on waterfronts where everything is so different,,,,pricing in Roberts Creek is different than Selma Park.....Pender is falling and falling quickly....so sure if your looking at a subdivision or condo project.....But assessments dont consider if you for example are on the highway or off the highway....now for waterfront that can mean the difference between hearing traffic all day or hearing the waves of the ocean...my thoughts anyhow...georgie girl

(05-22-2014, 10:43 AM)JimmyWW Wrote: Hi Gang

I thought Skook, Navier and some others might have some perspectives on this. First of all, the situation: after a long period of inflation, many of us here recognise that certain peripheral markets are topping out, to put it mildly, or in slow multi-year decline. And yet certain sellers, or their realtors, are still proposing prices which are >20% over assessment, despite the properties in question not selling for quite a while.

That led me to question how one might calculate a reasonable and fair value in today's market. Where I'm looking, most deals close on average at around 0-4% above assessed value, with some outliers tipping the balance by being up to 10% over assessed value (almost never more than this). Additionally, sold values have decreased by 12% over the last 6-7 years (underlining the "slow melt" I refer to above).

Other than the infinite patience counselled to me by some, how to find a value which will persuade sellers to sell at a reasonable price, their expectations notwithstanding? I've come up with a blended method based on some comments made by other posters, and offer a worked example below:

Seller Wants - $628,000
Assessed Value is : $510,000 of which building is $215 and land is $295K

Valuation 1 - assessed value + 4% = $535,000
Valuation 2 - 50% of difference between ask and assessed = $570K
Valuation 3 - calculate price per square foot of building ($215K/2872)=$73.40 psf, then offer premium of 5% on building = $575K including land valuation.

Then take an average of these three methods and you get to $560,000. I wonder if this is at all useful? To me, this would represent the price I would not be prepared to offer above, given the current and future anticipated longer-term market declines.

Anyone have any views? I know this is a bit wonky, but before I jump in, I really don't want to overpay....


Jimmy

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jimmy....lots and lots of people from lowermainland looking at waterfronts...but above $700,000 pretty dead .....buyers who have made a ton in vancouver view this as a margin call purchase.....but think they can steal stuff.....what surprises me are all the condos at the water mark....between 480 days and 1000 days on the market...must be 2 dozen....with just a handful a month in condo sales for the entire coast it will take 10 years to move that back log....not optimistic at all for sales on sunshine coast....but at least its a little better than last yea

(07-01-2014, 07:19 AM)JimmyWW Wrote: hey Boomer

Thanks for those updates. From where I'm looking (Southern Gulfs) the market is looking decidely sticky and choppy. What I mean by this is:

- inventory now at (or very close to) all time highs;
- "bunching" of listings in the $400-$600 bracket (23 out of 83 listings), and in the $600-700 bracket (17 out of 83 listings), then, weirdly, another bunching in the $1m-$1.5m range,
- mixed findings against assessments. Some of the higher-priced homes ($1m-$1.5m) are now trending BELOW assessment; meanwhile, in the $600-$800 range, people are still hoping for up to 50% above assessment.

That last fact, speaking frankly, kind of annoys me. I'd like to think they'd never sell if trying that kind of pitch (50% above assessment) but the fact is that if you are selling up in TO or downtown Van, a $850K home which is only really worth $550K probably still looks like a steal.

The venerable Skook believes (and I share his view) that we are probably still around a year away from reality setting in for the Southern Gulfs. I think we need a poor sales year this year and for listings to hit the 90 mark (currently 83) before we see any significant shifts down in price. That said, some places are now down between 35-40% from original asking and are still not selling.


Jimmy