Napa Valley Valuation BLOG

This is one of the more interesting articles that I have found recently highlighting the extent of the ongoing bailout of mortgages. It summarizes very well the bailout in numbers and percentages of the whole market. See Washington Post Article here

“The outlay has already reached about $1 trillion over the past year and is rising. During that time, the government has pumped more money into the mortgage market than has been spent on Medicare or Social Security or the defense budget, more even than Washington has paid to bail out banks and other struggling companies.”

"Absent government intervention, there would be no lending," said Nicolas P. Retsinas, director of Harvard University's center for housing studies.”

To be continued…

By Dan Brauning

I have many thoughts about the HVCC; Understanding, anger, frustration, acceptance. I have been reading numerous articles and here is a great analysis of the history and adoption of the HVCC. The satire is excessive but none-the-less, well worth reading. From the Niche Report:

http://www.nichereportonline.com/cuomos_crossing_an_outsiders_appraisal_of_the_new_hvcc_rules_by_martin_andelman.html

By Daniel Brauning

I have been saying since the inception of the HVCC that when the Realtors couldn't get their deals done because of the HVCC, then and only then, would the HVCC be rescinded.

Realtors have the biggest stakes (commission) in a transaction. In addition, they are the largest member organization with a lobby in Washington DC. When alot of Realtors have the same impasse to closing a transaction, they will have the best results at solving the problem!
 
I had estimated that it would take 90 days from May 1st for the Realtors have done away with the HVCC. I am still betting on that. From the tone of NAR President Mr. McMillan's announcement (see below) and his schedule of upcoming meetings, I think I might be right (for once). 

30 more days to go!

To:      All REALTORS®

From: Charles McMillan, 2009 NAR President

Re:     Appraisals

Dear Fellow REALTOR®,

During the past two months, we have heard from many of you regarding problems with appraisals that are causing deals to be delayed or canceled altogether. I assure you that we on the NAR Leadership Team are experiencing the same problems in our businesses. In fact, VP & Liaison to Committees Steve Brown recently shared his experiences in Ohio on the Voices of Real Estate blog.
http://narblog1.realtors.org/mvtype/president/2009/06/all_is_not_quiet_on_the_midwes.html

Let me update you on what NAR is doing to resolve these problems quickly.

On Monday, June 29th, I will be in New York to meet with the Deputy Attorney General and his staff who worked directly on the Home Valuation Code of Conduct. I plan to share our concerns, as well as your stories, and ask for their assistance in resolving any problems related to the HVCC.

On Tuesday, June 30th, I will travel to Washington, D.C., to meet with the Director of the Federal Housing Finance Agency to discuss ways we can work with Fannie Mae, Freddie Mac and lenders to ensure that appraisals are accurate.

We will keep you posted on the outcome of these meetings. In the meantime, I encourage you to check out the following resources on Realtor.org for more information on the HVCC and how appraisal problems are impacting the real estate market:

By Daniel Brauning

During tough economic times consolidation of resources becomes paramount. This includes creating new alliances, reviewing systems already in place and creating and implementing new systems and operations moving forward.

A great place to start is back at your company’s business plan. No business plan? Don’t worry; a lot of businesses don’t have one. If a business plan already exists, then its time to dust it off and take a new look. The business plan is a great place to start because it sheds light on the purpose of the business and the reasons and goals for being in existence. By analyzing these components one becomes aware of the base line for the business.

From the basics, an analysis can be performed for future growth. In tough economic times, growth can be difficult. Growth requires new revenue streams while reducing expenses. A great way to reduce expenses is by alignment and consolidation of resources with other businesses or professionals.

Consolidating and sharing of resources can significantly slash expenses. Small things like sharing an Internet connection, advertising dollars, office equipment, website resources, mailing fees, administrative assistant expenses or sub leasing office space. These are just a few things that can be quickly integrated to keeping a business’s doors open and lights on until the economic times turn around for a another positive run.

By Leon Brauning, ASA

When sellers make some improvements and dress up their property it is clear that the property will sell faster and for a higher price. When buyers purchase, they don’t want to do all that painting and remodeling – they want to open the door and have everything complete. When a buyer finds a property that needs improvement they will either pass on it altogether or they will tick off the repairs and make a low offer to cover the costs. The question becomes, “Just what repairs, improvements, remodeling and upgrading should be done and what will be the percentage return on the investment at the time of sale”?

In the dynamic markets we have now there are cases where property is not selling regardless of the condition. In other cases only REO property is selling and most of them are in need of repairs. One question that a homeowner has is, “What can or should be done to make a home more appealing to buyers”? Another question is, “What will be the return on my costs if I make an investment in upgrading my home”? Another question is, “Suppose I want to improve my home for my own enjoyment and needs and will my improvements appeal to a buyer when I sell in the future”?

Clearly one’s residence is their most solid investment over the long term and it is smart to invest in the upgrading of your home. The investment offers the homeowner a better life and it offers a likelihood of a faster sale and better price at the time of sale. As real estate professionals we all get these questions. We thought it would be informative to look at the analysis and the answers.

We refer to the National Association of Realtors which publishes a Remodeling Cost Vs. Value Report each December (Website REALTOR.org/realtormag). The following are national averages from 2002 through 2008:

-Kitchen midrange quality remodel: Costs have risen by 30% and the cost recouped has increased by 16%.

-Bathroom midrange quality remodel: Costs have risen by 62% and the cost recouped has decreased by 15%.

-Bathroom Addition midrange quality: Costs have increased by 153% and the cost recouped has decreased by 32%

-Window replacement midrange quality: Costs have increased by 1% and the cost recouped has increased by 4%.

From this data it appears that kitchen remodeling and window replacement costs have increased and the percentage of the cost recouped have also increased making them an investment to consider. Bathroom remodeling and addition costs have increased and cost recouped has decreased making them a disinvestment. And, a remodeling project that converts the use of a space such as a garage should be checked for the creation of functional obsolescence.

By Daniel Brauning

The North Bay real estate market is drastically changing. A changing market of tangible assets is always difficult because of the long-term cycle nature of real estate markets. Trying to ‘buy low’ during a down cycle in the market to ‘sell high’ in an increased value market is a matter of patience and timing.

We believe that the financial fundamentals in our country are leading to an increased interest and confidence in real estate by investors. People need to put their money to work in high quality and safe investments but the stock market is highly volatile; investments in bonds are uncertain due to declining asset values; interest rates in Treasuries are near zero and many people are uncertain about banks.

Real estate is the basis for all capital wealth and finding the right property and market timing may be different from one buyer to another. Finding the right property in the right market is always difficult especially in the North Bay market where very few properties are the same. Buying and selling to maximize earnings requires a plan, resources, a network of professionals, perseverance and most importantly; persistence.

With the declining values in the North Bay real estate market and the uncertainty and instability of stock and bond markets, it is a great time to start planning to buy investment properties. There are numerous opportunities to find properties that positively cash flow. To start finding these properties and understanding how to make a property generate a positive revenue stream, first a plan needs to be made.

Contacting your local investment Realtor is a great place to start. A great way to find a Realtor is to look in your local newspaper or periodical, asking for referrals and start making a few calls. Be sure to qualify every person with questions to find your right buying representative. Questions such as:

“How many investors’ have you worked with in the past?”

“What direction have rental rates been trending in the Napa market over the past 6 months?”

”Do you have a referral for a local bank or local mortgage professional to discuss financing?”

“What Rental Property management company would you recommend and why?”

These are basic questions however you need to make sure that the Realtor that you choose to work with is has a good network and can help facilitate the purchase of your investment

With the increased availability of market data from online Automated Valuation Models like www.zillow.com or www.housevalues.com these websites can be good starting points for finding value trends for deciding when to buy and sell. You can even receive our monthly Enewsletter chock full of free market trends and analysis for the Napa Valley markets as well as surrounding market areas.

Finding free data of housing trends and inferring your own conclusions based on the data you find can be difficult. Another step of buying and selling right is understanding regional and national statistical trends and forecasts for thins like employment or industry growth. One place to start is the great website of www.beyourowneconomist.com. Another is www.city-data.com . There are numerous recent and real time data sets and references for national data figures.

When you find a great real estate representative and combine all of your independent market data, regional and nation employment and growth statistics an investor can begin to make educated assumptions regarding real estate investing. A plan on paper with all of the numbers to tackle investing in the declining housing market can become reality. With these tools an investor can create persistence for the best deals and ultimately buy low and sell high.

If you ever need independent and objective market data or trends for a specific property or market area, Brauning Appraisals can provide that information in the format you desire. Just give us a call to see how we can cater to your investment needs.

By Daniel Brauning

The recent boom in real estate value trends led to a variety of online AVMs - Automated (Real Estate) Valuation Models. The most prolific may be www.Zillow.com. There are numerous others and they are a good starting point for market data on a specific piece of real property.

We are often asked; “How accurate are these websites” and our answer is; “We really don’t know”. But they are a good starting point because they do show which properties have recently sold and most now show active listings with photographs.

The problem lies in the algorithms that the site creators use. As a typical end user, we could never decipher the mathematics used to calculate a home value on these websites. Also, we don’t know what data they are basing their calculations. However, it is safe to assume that they use varying public record sources for data. The problem with public record sources is that public records are often incomplete or incorrect and most, if any, report sales concessions nor do they define less than fee simple transactions.

The active listings and recent sales shown in Zillow.com appear to be the most accurate information provided on the website. A valuation number on a house that has not sold for many years may not be very accurate.

Using Cyberspace to get a quick idea of value is a great stating point. However, in these uncertain times, for greater accuracy, an appraisal by a qualified appraiser could save headaches and money.

By Daniel Brauning

When purchasing a home there are several generally standard inspections and reports. There is however one inspection area than tends to be overlooked. Measuring of the home’s living area to verify what is reported you are buying actually exists.

When leasing a commercial property, no matter how small or large, always measure the space.

Did you know that the living area of homes reported in the tax assessor’s records may not be correct and that are both larger and smaller than what actually exists? It is true.

Did you know that the living area report in the local MLS is obtained from the assessor’s records, not independent measurements? This is true as well.

There is a generally a small variance from a current measurement vs. the tax assessor’s records for different property types. However, there are instances where the variation is so great that it can affect the property’s value. These cases can bring a litany of consequences which all can be avoided by verification prior to the purchase of the home.

It is also wise as a tenant when leasing commercial space to obtain a measurement of the actual size of the leased space to verify your dollar per square foot rental amount. An independent verification can help resolve disputes between tenants and landlords and the building measurement diagram reporting can be kept by the owner for future space rental. It is also wise to agree on a method standard for measurements before entering into a lease.

If you are obtaining a home loan to buy the home, simply ask your mortgage professional for a copy of the appraisal report which will have a building sketch of the house showing the measured living area. If you are buying with cash be sure to call an independent real estate appraiser and have a living area measurement inspection completed and obtain building sketch diagram report. If you own or are renting a commercial space, always verify the improvement area to avoid disagreements about the calculation of rent.

These are inexpensive reports that will help complete the due diligence process when buying renting real property. Caveat Emptor and Caveat Rentor!

What direction are we traveling?