establishing fair market value - Posted by Phil Y

Real Estate Investing Single-Family Homes
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Posted by River City on July 18, 2005 at 07:12:15:

The three market analyses are included in the appraisal. When an appraiser appraises a property, the appraiser compares it to the market around the subject property. The appraiser finds three similar properties and bases the appraisal for the most part on these comparable sales. The sales of these properties must be less than six months old and should be within a two mile radius of the subject property. This is done every day to substantiate the value of properties. You could contact a lender and ask them to order the appraisal so your brother would not think you had made prior arrangements with the appraiser.

Good luck.

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establishing fair market value - Posted by Phil Y

Posted by Phil Y on July 18, 2005 at 24:30:46:

My 2 brothers and I inherited a house in the SF Bay Area. I want to “buy them out” and assume sole ownership. One of them refuses to discuss it, claiming that there’s no way to establish its true value until its actually sold on the competitive market. He insists that the only way for me to buy it is to get a realtor and put in a bid like anyone else. This, of course kills much of the advantage of buying this property (avoiding realtors’s fees, closing costs, etc). I have been told by a realtor that fair market value is often established by obtaining 3 market analyses and an appraisal. Is this sufficient, is it legally viable, and does it accurately establish fair market value?

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Re: establishing fair market value - Posted by Jimmy

Posted by Jimmy on July 18, 2005 at 08:21:11:

I lived in the Bay Area for the past 20 years. In any other market, I would disagree with your brother. He may actually have a point, if the property is sitting in the City of San Francisco.

Ordinarily, an experienced realtor can give you a very accurate idea of market value for single family residential properties. There are thousands of comparable transactions in the region, and there will likely be many, many transacytions within a few blocks. California is a full-reporting state, so there are no secrets about sales transactions.

The same would not necessarily be true of commercial properties, or raw land in transition, or other unique situations. But SFR’s are usually not unique.

With this said, there are pockets in the Bay Area which
will prove the experienced realtor wrong. One area is San Francisco itself. A ton of pent-up demand, and a tiny supply of SFR’s makes for an imbalanced market. I had a 80 year old property in poor condition a year ago in a probate sale. 700K was way too much in my opinion. {I am no realtor—just a lawyer–and I obviously am no expert] The top overbid came in at 950K and won the prize. One realtor thought 790K was the mark, and another thought 825K was the mark. Both were off.

It’s one thing to recognize the overbidding situation. It’s quite another to accurately predict how it will play out in a particular situation.

Other areas in the Bay Area do not have this imbalance, and are much more predictable.

There are some areas where high-end homes are beginning to soften. In some of the outlying regions, the pricier stuff is slow to sell these day, and prices are heading south. This includes the ritzier stuff in East Contra Costa County. I just sold there, and am intimately familiar with the area.

Get back to me privately, and I will share other info.

Jimmy