County appraisals reliable? - Posted by Mel

Posted by Mel on July 12, 2001 at 18:15:49:

I just want to clarify a few points. All of the houses are not in the same area. I’ve viewed about 50 or so houses in the entire city so far (pop of 300,000) and I’ve found about 5 like I described. The rest of the properties I viewed were listed within a few thousand dollars of the county. On the value assessment sheets, they have the Appraised value (or sometimes listed as CAMA appraised value, depending on the county) and the assessed value. These numbers are totally different.

But I understand what you mean about not needing an appraisal and basing it on the possible income. You’re absolutely right about that. Thanks for the prompt reply!

County appraisals reliable? - Posted by Mel

Posted by Mel on July 12, 2001 at 16:49:50:

First of all, I’d like to thank you all for all the great information provided on this board. I’ve learned more here than I could have imagined.

I was wondering how reliable a county appraisal is. I talked to a good friend of mine who is an appraiser in my state (Kansas), and he said the state requires they be withing $2000 of being accurate. How much weight can I really put on a county appraisal? For instance, if a seller is selling for $11,500 and the county has it listed for $29,500, can I assume that this is a good deal? If not, where else should I look to find out? The reason I ask is that I have found a little pocket of properties that are all selling for about half of what the county has them listed for. The example I gave is the lowest priced one; I’m finding values of properties up to $60,000 the same way. Is this too good to be true?

Re: County appraisals reliable? - Posted by Ronald * Starr

Posted by Ronald * Starr on July 12, 2001 at 21:15:39:

Mel-------

You are in an interesting situation. Can you figure out what is happening there? You may have found a way to make some good investments, but you need to verify that.

If I were in your situation, I’d not pay much attention to the counties figures. I’d start by asking some agents about their perception of the market values in that area. Especially those with listings or recent sales in the area. I’d also check out the reputation of the area with ordinary folks in the town.

Often an area will get a bad reputations because of druggies, gang activity, high crime rate, etc. The area may get cleaned up, either by the police, the city government, or just be chance. It takes a while for people not in the immediate area to understant that there has been a turnaround in the neighborhood. This is an excellent time to get some bargain buys.

If you think this may be happening in the location, talk to police officers and local residences about the reputation of the area and the reality of the area. There is a good phrase: “the rep and the reality.”

If the place has recently turned around or is in the process of turning around, you may have a jackpot situation.

Even if the area is still not very good, you might make money if you buy cheap and can get in some good renters. I have heard that just one investor can sometimes turn around a little neighborhood by buying the bad properties and fix them up. Where did I hear that? Oh, I remember. On CREONLINE.COM.

If you buy in the area, ask for reassessments to lower values, to cut your taxes. I’ve done that three times and was successful every time. Maybe four times. If you’ve got a good argument, you can do it.

Good Investing*****Ron Starr*************

No - Posted by BT (FL)

Posted by BT (FL) on July 12, 2001 at 18:22:04:

I had a home that was assessed for 106k, however I could not sell it for $80k. It was in average condition. I still own it as a rental. I appealed the assessement and got it lowered to 69k.

I had a home that was assessed for 49k and sold it for 94k.

You cannot rely on the assessed value when you are trying to find fair market value.

I am sure that a typical 300k home in Kansas is not tax assessed within 2k of fair market value. You could get 3 appraisers do a full blown appraisal and easily have a 30k spread.

BT (FL)

The Truth about Appraisals - Posted by John SirJohnathon Grounds

Posted by John SirJohnathon Grounds on July 12, 2001 at 17:59:12:

Mel,

It depends on exactly how the appraisal is figured. Some states do assessed value, others do replacement value, others do fair market value, etc. My guess is if they are all being appraised by the county for a different amount than they are selling for, something is screwy.

Here is the real “scoop” on appraisals. You don’t need them. An appraisal is only good for a mortgage, and can often get you into trouble as an investor. When I am looking at a property, I don’t give a whoop about what some appraiser said it is worth. When I “value” a property, I want to know two main things.

  1. How much is my cash on cash return.
  2. If I had to sell it within 2 weeks, what would I get for it.

If I am buying for speculation (read DANGEROUS INVESTING) then I will look more at appreciation rates, use changes, vacancy rates, etc. But for the most part, the two listed criteria will keep you in good standing.

The second one is very important, and where I have a problem with appraisals. An appraisal only tells you what comparable homes have sold for in the area. Therefore an appraisal fluctuates with the local market. There is no such thing as an area where all homes are going “below appraised value”. By definition it doesn’t happen. Here is another rule of thumb. If the seller has been actively trying to sell the home for over a month, chances are slim to none that it is priced “way below value”. If it were someone would have already purchased it. Too many investors out there in even the smallest of towns.

All in all I am a believer in “effecient markets”. What this means is very seldom do houses stay on the open market for less than what they are worth. The only way to beat the market price is to be the first person to know about the sale.

Just my thoughts…

John “SirJohnathon” Grounds
JRG Holdings
www.jrgholdings.com

Re: replacement cost - Posted by JD

Posted by JD on July 12, 2001 at 22:07:26:

I have never heard of a county that values property by the replacement cost method. I find it extraordinary that a county would do that. Could you please give an example.