Values Are Down But There is A Silver Lining: Part 1

A few days ago, I went to a real estate investors meeting to better understand what small investors are looking to buy and the information they were receiving. One of the primary topics of discussion was about foreclosures, values and how to buying bank owned real estate or REO. Bank owned real estate value is currently one of the primary indicators of property values, thus an important topic.

Before countinuing, let me pass this little tip. I met a property auctioneer and for few minutes we talked about the process and what was happening at auctions. One of the most interesting pieces of information was that most properties auctioned are never bought. Banks, put properties though auctions but in 99% of the cases they repossess them.

Private money lenders are concern about property values 100% of the times. Not only they have to look at the value of properties today but they need to think about values few years later when their loans expire. This is in part a reason why when we approve loans the property valuation will be more conservative than a government sponsored lending institution. Keeping a close tab on what the real estate market is doing, where it is headed, is one important task of private lenders. To value a property we all have slightly different approach methodology. We use a combination of different tools, such as appraisals, automated valuation systems etc.. in addition our experience and understanding of local markets will be complimentary tools.

Numerous reports in January came up with the following pieces of information, property values dropped on an average 18% year over year. California has 4 of the top five markets that lost the most values. Number of sales of properties that have been previously owned has increased. The question is why are we seeing an increase in sell but a decrease in value. The answer is investors and in some cases first time home buyers leveraging low interest rate. Current home buyer are not upgrading or downgrading as it is a really bad time to sell a property.

More about valuation and market in our next post.