Buy Properties Below Market Value

Tennessee property taxes which are collected at a local level are primarily the sources of funds for the local government of Tennessee. The counties and cities within the bounds of Tennessee rely basically on the property taxes collected in the locale. Social services like public libraries, public schools, and fire and police support are primarily funded by the collected Tennessee property taxes. The biggest bulk of these funds is channeled to the education sectors or the public schools.
The tax rates collected from residents of Tennessee are determined at the local level; of course, vary according to factors needed to be considered. However, the general tax rate in the place is not high. The rate or amount of Tennessee property taxes that you’ll have to pay, like in the usual cases in most sates, is primarily dependent on two major factors: millage rate and the market value of you home. A tax assessor assigned by the local government will estimate the market value of your home and will also tell you its computed value. After that, the property will be subjected to a reassessment mainly due to tax purposes once in every six years. A much higher value of the Tennessee property taxes at the time of the valuation, however, does not entail an increase in your tax.
At the time the local budget is already created, the tax department will then use the combined property values together with some revenue requirements to determine the accurate millage rate. Frequently, the computed millage rate will be based on 25 percent of the market value computed instead of computing the full market value of the subjected residential property. Meanwhile, commercial properties have 40 percent of the computed market value as the tax rate. When the local government is planning to increase the rates, a public hearing is required before approving the increase; meanwhile, they can opt to lower the rate any time.
Tennessee has the 40th spot on the property taxes paid by the residents, among the different states of the United States. In Tennessee, an average homeowner pays around $794 annually as Tennessee property taxes for having a home worth $114,000.
If you think that the local tax assessor estimated a very high market value of your home, you have the right to question his valuation. The appeals with tax assessors are usually discussed during the motnhs of May and June every year. If you are still resolved with the value presented by the tax assessor, you can bring your appeal to the county commissioners and even to the councilmen of your city in July. If it was proven that the market value estimate was too high, the Tennessee property taxes will be deducted.
Contrary to the ways of the other states, Tennessee does not have the homestead exemption offer for the homeowners. Perhaps, it is because the state does not impose taxes on wages and salaries; although there is a fixed 6 percent rate for bonds and stocks.
There are exemptions in Tennessee property taxes, but are only for the disabled, elderly, and veterans.

Introduction
Interest rates for savers generally follow inflation trends and statistics show that these gains are always positive unless you are very unlucky. The reason why so many people invest in Banks is because they are usually a safe bet. Indeed, often your savings will be guaranteed.
Money in a savings account is usually a safe investment but the return can sometimes be limited for the investor when compared to other options.
There are many opportunities for investment depending on the level of risk an individual is prepared to take. These forms of investment might include stocks and shares, endowment insurance policies, pensions etc. We are focusing our attention on the property market where our expertise is. Stability of Property Values
In real terms although property markets do suffer from peaks and troughs, property does increase in value in the long term. Recently in some areas, property prices have actually gone down, this is due to the economy which has an effect on supply and demand. An over supply of property can easily reduce property prices when the property market is struggling.
Property prices do go down but history has shown that they always recover and they are stable in the long term. Steady or significant increases in property prices are usually the norm.
Whilst there can be no guarantee that property prices will increase over say, a one year period it is generally accepted that a well maintained property in a reasonable area will appreciate in value.Interesting Statistics
The following statistics make interesting reading:

Most of the western world, if not the entire first world, seems to be reporting that property market price inflation is decreasing or stalled. In the worst-hit areas we even hear tales of a lowering of house prices and negative equity for some unfortunate new homeowners who jumped on to the property bandwagon at the peak of the recent property boom. High Street inflation never lets up, so itâ??s natural for property investors large and small to feel that the end of the world is nigh.

This state of mind is undoubtedly an over-reaction. The human psyche drives modern man to ensure he has a place he can call home in the shortest possible time after leaving his childhood days behind in the former family house. Fair enough â?? but does this man of our times actually have to own his home outright, in theory at best? And more tellingly, does this man have a god-given right to expect that with home ownership comes enough lifetimeâ??s wealth to be able to retire from working for an income at his chosen time? The latter scenario is a common desire, and it is based upon the premise that property values will always rise faster than other commodities.

We are now finding in Ireland and elsewhere that we have come to the end of a period where property value inflation was outstripping general living cost rises. But we should not be surprised because we have had these ups and downs before. The general trend though is that property prices commonly rise again fairly rapidly after periods of stagnation. Itâ??s all about supply and demand.

The demand for new homes or at least of people looking to move house will never cease. Why? Because many old homes become dilapidated for a start. Then we have the new young families who need their own space and cannot expand into the limited environs of parental homes. On top of that, the modern world economy relies upon many workers who must be mobile throughout most of their working lives, thereby prompting housing development and property transactions countrywide and often internationally. And donâ??t forget those that opt to upgrade or downsize by choice due to family or personal needs.

What about the supply side? The builders canâ??t build fast enough in boom times because handsome returns on their property investments are almost guaranteed. If landbanks are purchased just prior to a stalling of property sales prices, then naturally there is no rush to build and sell at reduced profit margins. So any oversupply rate reduces until it balances demand. This is the period being experienced in many parts of the US and Europe at present.

In Ireland currently, un-named property commentators repeatedly get column inches reporting that house prices have dropped by nearly 10% in just 12 months. This type of statement is more than likely associated with party politics prompted by the Irish governmentâ??s opposition rather than informed economic commentary.

Letâ??s take a quick look at what the â??Irish House Prices in Freefallâ? sensational headlines really mean when based on the 10% drop in a year statistic. The house price index is based on sales closure prices, not size of property or land acreage; these latter factors generally tend to grow on average at a moderate rate over each decade because we all want bigger and better homes regardless of our individual domestic needs. So bear in mind that the average price of a house per country tends to grow because the asset is getting bigger as well as reflecting local general economy inflation.

In Ireland last year, the average price of a house had risen incredibly to over â?¬300,000 from nearer to â?¬200k a decade earlier. That statistic is part of the local Celtic Tiger boom folklore which lending institutions rammed down our throats when selling home loans and risk-laden mortgage deals up until just a few months ago. The 2007 â?¬300k average home was a bit bigger and better than houses available in the year 2000, but it was obviously grossly over-valued in real terms. It didnâ??t cost that much more to build than the average house completed and sold in 2000, evidenced by the great numbers of new self-builders who wanted a share of the money-spinning action.

In mid-2008, the average price of a house in Ireland is â?¬275,000. This seems to be getting closer to a sustainable valuation (if you seriously want to sell, that is) for the average property size available which is typically 3 bedrooms, multiple bathrooms and all the latest mod-cons. A bonus in rural Ireland is that you might even get a generous half-acre of land thrown in.

So the â??sensationalâ? loss of over â?¬25,000 on average off every Irish homeownerâ??s wealth is not a true loss as such at all. It is just a realisation of long-term property asset value. Anyone who spent their invisible extra â?¬25k in less than 12 months was a greedy fool, and we shouldnâ??t have any sympathy for them if they donâ??t display the caution and prudence of serious property investors.

Anyway, it will not be long before the local property market detects the first signs of increased demand again. Sellers will start hiking up prices and the whole cycle will slowly start to revolve again in our favourite upwards direction.

So the conclusion is â??donâ??t panicâ? and take some time to reflect on why existing homeowners feel uneasy every time this cycle reaches its low point.

Property is a reasonably sound investment, and it gives the buyer the obvious immediate attraction of having somewhere to live (or work in the case of commercial premises). However there are other ways to exist comfortably which donâ??t involve organising your life around the demands of meeting hefty monthly mortgage repayments and fretting about why the value of your property doesnâ??t always rise at a consistent rate.

Many young people are opting to rent property. The so-called home-owning critics immediately shout that house rent is â??dead moneyâ?. To a degree, yes, but if renting frees up income to invest in markets which donâ??t fluctuate in boom & bust cycles, then isnâ??t the oft-struggling mortgage payer something of a hypocrite? And who actually owns the majority of private domestic homes anyway? If a homeowner misses a mortgage payment you soon find out that the big financial institutions cold-heartedly treat lenders as no better than tenants of real estate upon which their businesses are founded. And furthermore, as tenants with much less rights than conventional renters of property who have fair and equitable rental agreements with their landlords to rely upon in times of hardship.

Itâ??s interesting to note that in previous generations the majority of house dwellers were tenants, particularly in towns and cities. Most homeowners can probably quote that their parents or grandparents lived in rented accommodation, and that is a reason why they strive to ensure that they and their dependants have the security of home ownership. What security, if you worry about why your investment and lifestyle is not always as good as you dreamt? Our ancestors survived, without the disposable income levels of today, so perhaps the property rental option should not be dismissed so readily.

Maybe the biggest lesson to be learned by property investors when global economy growth recedes is that only a few property types are guaranteed to grow in value (in the longer term) at a rate generally in excess of other inflationary factors. These are the well-maintained properties in desirable locations whether they be urban or rural. Funnily enough, my experience tells me that these properties are likely to fall into the cheaper price category or the other extreme, the high-end luxury home. The middle range property, by its very nature, forms the bulk of property sale listings, so the seller struggles to promote his property above the multitudes of similar priced homes or sites.

I suppose it can be summed up as follows:

Property buyers, renters or vendors in all three of these categories can benefit greatly from registering with web-based property advertising portals such as my own site (www.Propertysteps.ie). The exclusive luxury homes and the lower-end smaller properties are instantly brought to the fore from hundreds of listings by easy-to-use search functions which detect price range and/or location. The more attractive middle range properties also benefit in that household features and property type listings enable the website browser to easily compare the best value for money of numerous properties in a chosen location.

In Ireland, where we are based, I can report that Property Agents say that websites such as ours have contributed greatly to stability in the mid-price range domestic property market. Sale closures in this category, for sensibly priced houses, are regular and commonplace, thereby propping up the market in general. This contradicts the doom & gloom reported in the media, no doubt created by â??worriedâ? homeowners who arenâ??t even active in the buying and selling of property. The lazy expectation that easy money can be made simply by buying and living in a home for life smacks of greed, not reality. These merchants of doom should be ignored.

We also read in the press about the owners of expensive houses for sale having to dramatically slash prices to arouse interest. Probably, not maybe, the asking price was unrealistic and based upon outdated market value. The eventual selling price of a luxury home will still have made the purchase a sound investment if it was bought at any time except the very peak of the recent boom. Again, I can report in Ireland that Agents say that there is still a waiting list for desirable upmarket properties. The best of these homes are sold via website mailing lists or by the uploading of the property brochure to Propertysteps.ie and similar internet property portals.

For a fraction of the cost of press advertising, our best value for money website gets quick results. Often you never even see a For Sale sign being erected for property in the more exclusive address category, yet new occupiers appear and everyone involved in the transaction is delighted. You donâ??t read about these everyday success stories in the media; it appears to me that only boom, doom or gloom stories sell newspapers when the local economy is discussed.

Everyday, new homes are listed throughout the country. While there are many factors that can impact how quickly a particular home sells, one issue is often overlooked by frustrated sellers. If a home fails to entice any buyers within one month, chances are the listing price is not right. Generally, the listing price should be in line with the current market value of the home. However, many sellers don’t realize that the market value of a home is impacted by many more factors than simple square footage and the quality of the appliances. If you need help determining the market value of your home and setting the right price, talk with your real estate agent and consider some of the tips outlined here.
One of the first steps a seller may want to consider when determining the appropriate property value is a comparison with recently sold properties. By comparing the square footage, lot size and overall amenities of your home to those that have already sold, you and your agent may gain some valuable insight into the true market value of your property and assistance in setting the asking price. Also, as you get closer to putting your home on the market, try to keep track of other properties listed in the area. By looking at current listings, determinations can be made about how well homes in the neighborhood are selling and how your assessment of your own property compares with similar sellers.
Regardless of how long you have lived in the home, take account of your personal investment. If you have lived in the home for several years, you have probably made a number of repairs or upgrades to the property. As you prepare to list your home, take notes on any such improvements and consult your personal records if necessary. By assessing the value of improvements made to the property, you will be able to work with your agent to determine how your investment affects the current market value of your home.
One of the best ways to determine how your home’s amenities impact the value is to make a detailed list of the property’s features. Your list should include all recent updates to the property, any items that might require repairs and an assessment of the home’s overall condition. After compiling your list, work with your agent to establish how each individual feature impacts the overall value of the home and the eventual asking price.
When trying to calculate the market value of your property, you should also account for the neighborhood. Consider how factors such as nearby schools and the proximity to desirable businesses or recreation areas might interest prospective buyers. Furthermore, depending on what type of home you own, you may want consider the home’s location within the neighborhood. A home located at the end of a cul-de-sac can have added value for families with young children hoping to avoid high traffic streets.
After you have analyzed the previous factors, home buyers should try to work with their agent to set the right price for listing. A list price that is either too high or too low could pose a number of problems for a home seller.
If the list price on your home is too high, you may not receive any serious offers. After your home has been on the market for 30 days or longer, buyers may also come to see your property as less desirable. Furthermore, buyers expect sellers to reduce prices and be more responsive to offers if the home has spent more than a month on the market.
On the other hand, if the list price is too low, you will not earn what you truly deserve. In some cases, home buyers might also assume that the house has a number of flaws or is otherwise undesirable when the list price falls too far below the market value. After working with your agent to determine the market value of your home, you should consider setting your list price as close as possible to home’s current market value.
As you prepare to sell your home, there are a number of factors to consider when determining the appropriate property value and listing price. You will have a good starting point if you are able to educate yourself about both local and national market trends. Then, by gaining an understanding of how your home stacks up to the rest of the market, you will have an opportunity to set an informed price that corresponds to the home’s true market value. Finally, be sure to work with your real estate agent and let his or her experience and knowledge guide your decision.

Even the most optimistic and upbeat property developers in Ireland must now be accepting that the sales values of new and refurbished properties returned in the residential market in 2006 and early 2007 were unsustainable. It is hard to believe that some of these practised entrepreneurs are a little shocked at the realisation that property prices cannot rise and rise at rates far in excess of general domestic inflation levels.

As a nation, Ireland should be proud that it was able to combat and overturn its historic residential housing shortage within a single decade since the year 2000. This achievement was even more commendable when one adds that the country also catered for thousands of their own returning Irish emigrants plus economic immigrants from fledgling eastern EU states spurred on by tales of Celtic Tiger riches for all. The building boom needed extra foreign workers to complete the developers’ ambitious plans in record time, and the workers in turn needed new homes to live in, temporarily at least in many cases.

The speed of building was great for the developer. Mass production leads to the lowest possible site costs and outgoings. The rapidly rising population of newcomers to the Irish state initially opted mainly for short-term leasing of new homes. Rental incomes for landlords and developers went into overdrive. In a booming economy, property values tend to get ascertained from the forecast rental capacity of a housing or commercial unit rather than a calculation based upon the cost of the land plus “bricks & mortar”. This scenario is fine if rent inflation stays in line with general price increases for the domestic consumer. But Ireland’s property market overheated and got out of sync with the general economy.

By 2004 & 2005, new house buyers had to accept valuations driven upwards by comparisons to potential rental income from equivalent tenants. The banks and mortgage brokers were happy to lend large sums for the purchases of property which seemed certain to have ever-increasing capital value. With big mortgages readily available, house sales in prime urban areas were closed at prices now an incredible three times higher than market rates of the late 1990’s. House prices in the outlying rural locations followed suit.

A national growth market was well established and builders large and small invested in development sites nationwide. The banks could freely lend to developers knowing that regular sales kept the cash circulating, and house-buyers were content to take on high mortgage repayments in the knowledge that their investment was sound (according to the lenders and their own economic commentators).

In hindsight, it is obvious that the “boom” had to end somewhere. When saturation point is reached in terms of supplying the housing demand, sales naturally decrease. Then extra sales are forced or encouraged by offering discounted sale prices. Before you know it (as first seen in Ireland last year) the market value for a commonly available property type falls for the first time in years. Most buyers are not fools, and the next wave of sales is influenced by the demands of customers seeking out improved bargain offers. The developers should not be shocked to realise that just as they were happy to support the rapid escalation of property prices (whilst lining their pockets) they are now the primary instigators of house price reductions and the much-needed re-stabilisation of the property market in general. They certainly cannot blame the consumers and lenders who bought into their grand schemes in previous years.

As an example I can summarise the exploits of one typical Irish property developer who, whilst remaining nameless, is honest enough to quote a few facts and figures. In 2003, after dabbling in a few small but successful self-build schemes, an opportunity presented itself to buy some land with imminent planning permission for residential homes. The land alone would be a good investment as it was forecast to almost double in value in a matter of 2 or 3 years when surrounding plots were developed. So the land is purchased and our investor is soon persuaded by local success stories to fund the building of a couple of upmarket large family homes.

By 2004 he can report that a total outlay of just over €500,000 per unit buys him a highly saleable asset worth €1 million when finally presented to the market in early 2005. A fantastic profit margin which would have been difficult to match anywhere in the property world. However, his financial advisors are quick to tell our developer that desirable high-end property values are forecast to rise by around 40% per annum for the foreseeable future. If he holds on to his new developments for a year or so, maybe getting some short-term rent into the bargain, these units costing half a million euros to build would zoom into the €1.5 million plus category during 2007, making him a millionaire (in theory). He could now borrow even greater sums and expand his property development empire.

When 2007 arrived, our developer was delighted to see similar-sized homes selling for as much as €2 million. He borrowed even more money and developed more sites, dazzled by his accountant’s reports of unexpected wealth. Almost undetected at first, the boom then faltered. A few sellers in the market needed quick cash and sold their assets at a little less than previous peak values. A trickle of cut-price offers became the market-place norm. Our “millionaire” developer had never actually sold a property in the boom years. His stock had to be re-valued at realistic 2008 rates, tax bills paid off and big loans repayments were eating away at his bank balance. He had no option but to dispose of a few units …… and quickly.

Not long ago, our developer and multiple property owner had been a typical key player in hiking up and relying on house valuations in a market of high demand. Now he is instrumental in seeking a much fairer price for his commodity. After a couple of sales, he is still a comfortably wealthy man. But he cannot afford any more investment in an uncertain market. So there will less building completions for a few years as he and his fellow boom-time developers cool off and invest in other places. When new home demand is high enough again in Ireland, the cycle will begin once more, only this time the pace of development will not be so hectic. Steady growth will lead to a much more stable and secure Irish housing market in years to come.

Residential building output in Ireland has fallen by one third in the last 12 months. That figure demonstrates how “over-developed” the property market had become, driven on by over-zealous financial investment. The market simply overheated in a fairly unique set of circumstances, so the corresponding cooling-off period will probably take a little longer than we all hoped. House sale price reductions have lessened on my website in the second half of 2008, so there is evidence that stability has commenced in the Irish property market. A sustained period of stable, sensibly priced Irish homes will help everyone in the longer term.

Written by

Susan Salkeld

Proprietor of Propertysteps.ie  -  where you can read more on property matters, or advertise property and related services located in Ireland or worldwide.

When many people hear the term ‘property investment’ they automatically think of what they have read in the papers: falling house prices, fluctuating interest rates and the failing economy.They see this press. Take it to its word. And forget that hidden beneath its outer exterior the property investment market has got a lot to offer. It is not inaccessible either. All it takes to access the true potential of the property market is the knowledge to know where to look and ‘know how’ to make it happen.  Remember, despite all the hype, property is still an investment vehicle. A vehicle that gives investors – we mean you – the flexibility to control your involvement and how much time you invest within them.Take a look at stocks. Do you really understand how they work? Not many of us do, but we still invest in them because we know there is profit.But imagine what you could achieve with an investment that you could completely control? No worries. No fear. But knowing exactly where you.Well with property you can. Your choices will be endless.Real Estate Stocks and Mortgage instrumentsNow if you wanted to be a passive investor this is the route to take. Here you can place funds into the stock market in the form of equities of major national homebuilder firms, and they will do the rest for you.Or alternatively you can follow another investment strategy: discounted notes.The rules to this investment are simple.  Sellers quite often are quite happy to accept a mortgage from a buyer to begin with but later want to convert it to cash. To do this they need to sell the note to an investor – you – at a discount. And the rest? Well. Whilst they are free of the mortgage, you will be receiving monthly repayments from the buyer – when you have never even seen the house. How simple is that?Appreciation of property valuesThis one is the more traditional routes and one we’d most recommend if you plan to sell your properties later on.Take the current financial climate. You can now invest in properties at 70-80% of their original value without a second thought. Giving you instant free equity.Now consider this. After investing you decide to either rent your property out or live in it yourself. Over time, your property investment will begin to appreciate in value, and if it is anything like what we have experienced before, you will have access to a property that is greater in value than the top properties of 2007.And if you do eventually sell, you will not only experience a return on your investment… you’ll have that initial extra equity to boot too.General Price inflation in the economyEven if your properties are not appreciating in value – as properties are doing now – this is not the end of your property investment. No. Their value can also be affected by economic inflation.So let’s just say for example that you are developing some properties. If the cost of labour and materials is continually rising, then the cost to build an identical property could be more than the original. And if each property you build in one area is costing a bit more each time, then in turn their value as a complete development site will have risen.Meaning at the end your property values will be higher than they were to begin with.Cash flow and mortgage repaymentsCompared to traditional investments that require some money on your part to maintain and pay for them, with rental properties you don’t have to deal with that. Your tenants will essentially pay your repayments for you, whilst giving you an additional positive cash flow each and every month too.With figures like these it is easy to see why property is considered a stronger investment than stocks and a bank account – the gains are much more profitable.And here is the best part. Even if your rental income covers only the mortgage repayments. No more. No less. You will still have the joy of watching the equity in your property grow over time.Buying below market valueLook in the papers and you’ll read many reports of investors who are selling up in the current financial climate in order to maintain their profits. This is a big mistake on their part, but one you can take advantage of. You see they will be so keen to access the equity from it, they will be happy to sell it to you for below value. Great!Then there are other cases when a property has gone into a foreclosure. To sell the property and get their money back, lenders will often take less than the market value so that they can avoid any further marketing expense and begin again with a clear slate.Now here is the advice you have been waiting for… Find one of these properties and you will immediately enter into an equity position, purely based on profits.So if you do spot one… gets investing and buys low. The long terms profits will be incredible.Converting the use of your propertyImagine investing in a run down 5 bed property and being able to convert it into student accommodation or 2 apartments. You could potentially increase your rental income and benefit from having multiple tenants all within one property. Meaning there will always be someone living in your rental property.This is what is so great about property investment. You can do a similar thing to any type of property. Take for example this concept. You have just invested in some apartments that currently have low rental yields.With a little remodelling, you can convert these said apartments into condominiums, and nearly double your rental yields.Create new valueEvery region or neighbourhood goes through a price fluctuation at some point. So spotting a potential hot spot – before its property prices have increased – can be quite profitable.In this one area you can build up your property portfolio and sit back and watch as your properties appreciate in value. Perfect!Get the picture – property investment can offer you consistent ‘positive’ cash flows every single month, plus can come in all shapes and forms for you to choose from.So if you are looking to invest in rental properties consider your options for a moment. There is more to property investment than meets the eye.

To members of Congress, President Bush, President-Elect Obama, fellow Americans, and current and future residents of the Phoenix area, the state of the Phoenix residential real estate market is “weary but hopeful.”
Numerous challenges including an onslaught of short sales and foreclosed properties, deteriorating home values, and the onset of a global recession have rocked the Phoenix real estate market to its core. Indeed, recessionary concerns are large on people’s minds and add much uncertainty to the market. These challenges have yet to fully play out in the marketplace so that their full impact is felt and measured.
Government efforts are underway to resolve the current credit crisis though their target and implementation vary by the week. Some efforts are specific and being done by departments whose sole purpose has always been associated with the housing market while larger departments work on grander problems with much less clear and intentional aim. For these, it is too difficult to ascertain their net benefit to the Phoenix residential real estate market.
But there are bright spots in the local marketplace. Prices have adjusted substantially downward since the downturn began, buyer activity for 2008 showed strength, and the market shows some inclination that market forces are working to slowly evolve this housing market to a better state. In addition, the Phoenix real estate market is becoming more affordable once again, as affordability was the first casualty of the price appreciation the area experienced several years ago. Many buyers sense that there are deals in the marketplace whether a purchase is to be their primary residence, a second residence, or an investment property. And the Phoenix area’s population continues to grow as more out-of-state residents and companies decide to call the Valley of the Sun home.
In summary, the Phoenix housing market has been “beaten down but is not to be beaten” and holds hope for improvement in the coming year.
Times Have Been Difficult for the Phoenix Housing Market
The Phoenix housing market is moving into its fourth year of the downturn. As such, it is important to look back on its causes briefly in order to look forward.
The Phoenix housing market was victim to excessive speculation and false assumptions that fueled a frenzied pitch in home and real estate demand. This demand spurred rapid appreciation of homes in the greater Phoenix metropolitan area and in other parts of Arizona. This rapid appreciation culminated in as much as a 47% rise in home property values over a 12-month period.
The acceleration of appreciation took hold in the latter half of 2004 though the necessary drop in inventory to support this market change could be seen as early as March 2004. Pricing likely peaked in September 2005. By that time, inventory had begun to swing the other way again but how far it would rise was not known. Though sales prices peaked in 2005, by no means had prices declined substantially until well into 2006.
Inventory rose dramatically with more than 50,000 properties available for sale by 2007, a staggering figure. Arizona was designated a “Declining Market” by Fannie Mae in 2007 as well. This designation had the near-immediate impact that borrowers using conventional loan products would have be required to put significantly more money down (typically, from 5% to at least 10%) to purchase a new home. Due to this increase, borrowers quickly moved to take advantage of FHA loans whereby borrowers only had to put 3% down on a new home. As for foreclosures and short sales, these finally took full hold in the market toward the end of 2007.
In 2008, FHA loans have been a significant lending source for activity in the housing market here. Down Payment Assistance usage took off as well though this program was eliminated October 1st. Sales activity has shown some strength with a peak in activity in September (likely due to the rush to use down payment assistance before the cutoff). In addition, the sales activity has been weighted more heavily at the lower bands of the market consistent with the raised FHA limit of $346,250.
Since September, activity has been slowing. This is due to that month being a peak associated with down payment assistance usage, due to broader economic concerns, and due to the onset of the holiday season.
The Extremes of the Local Market
Parts of the Valley are experiencing the worst-case scenario in terms of the impact from the downturn.
Short sales and foreclosures have hit towns on the outskirts of the Valley the hardest. These are towns such as Queen Creek, Buckeye, Surprise, and Maricopa to name a few. These areas share a common thread – high speculative investor activity concentrated in new build communities.
These towns grew exponentially as homebuilders sold homes as quickly as they could produce them. In fact, new build development saw such prolific investor activity so that many areas that were largely built in the 2004-2006 timeframe have been subjected to a heavy turnover activity and a heavy decline in valuations.
Today, in some communities such as Maricopa, foreclosures and short sales fuel more foreclosures and short sales. Because home values have dropped to 40-55% of their 2006 values, any homeowner who is suddenly faced with a need to move, i.e. a job relocation or loss, medical hardship or other reason, there is no choice but to pursue a short sale or walk away from the property altogether. Of course, these actions will have a severe consequence to the homeowner’s credit.
Separately, Scottsdale, known as a favorite destination for its resorts, golfing, and shopping among out-of-state visitors, is trending at a low 7% of listed properties being under contract for purchase. This is likely due to average home prices in Scottsdale being much higher in general while much of the current buyer activity is taking place well below this point.
From a different point of view, properties priced above $400,000 in value account for just 12% of the closed transactions in 2008, though they make up 23% of available properties. From a “Pending” or under contract status perspective, only 4.2% of properties priced above $400,000 are currently in escrow to be purchased. Drilling lower into the market, available properties priced below $200,000 account for 51% of closed transactions in 2008.
Clearly, the heavy concentration of sales is at the lower bands of the market which means that home owners with homes priced above $400,000 will require different selling strategies than those priced well below $400,000. Based on this, one can see why the more affluent communities like Scottsdale and Fountain Hills are struggling in comparison to other parts of the Phoenix area.
The Bright Spots
Ironically, some of the most active sub-markets of the Phoenix housing market is in those very areas where short sales and foreclosures are the most prominent. The precipitous drop in prices is fueling stronger buyer activity in places like Queen Creek and Maricopa.
Queen Creek currently has nearly 23% of listed homes under contract which is the highest rate for the Valley. Maricopa currently has 19% of listed homes under contract. Avondale, in the West Valley, currently has 18.5% of listed homes under contract.
In terms of the more central Valley areas, Chandler and Gilbert are doing relatively well also. Chandler, located between Tempe and Gilbert in the Southeast Valley, is currently at 16% of available properties being under contract. Gilbert is trending at 17.7% of listed homes currently being under contract.
Where the Deals Are and How They Are Won
The deals in the Phoenix marketplace come from three different sources: foreclosures, short sales, and well-positioned sellers.
Foreclosures currently make up approximately 38% of homes currently under contract in the Phoenix area. These properties are often priced very low from the start as the lender that owns them is truly trying to liquidate these properties from their books.
Foreclosures are easier than short sales in that the buyer is dealing with a single owner that has ready decision-making power to approve or reject an offer to purchase. The downside is that the lenders can be harder to deal with than a common homeowner, can’t be emotionally negotiated with and are in fact single-mindedly focused on the bottom line, and will require ‘As-Is’ and other contract documentation that tries to eliminate any future liability.
Short sales likely account for 10-18% of properties currently under contract for purchase in the housing market here. Short sales are the most difficult transactions as often they involve the buyer, the homeowner, the first mortgage lender, a second mortgage lender or other lien holder on the property. There could also be HOA liens and tax liens associated with the property. Though the homeowner may sign off on an offer, it is really the lender(s) that have to approve the transaction and provide lien releases as they will be shorted some amount of money through the process.
Like foreclosures, there are great deals that can be obtained, but a short sale has additional downside risks. Namely, the process could take several months before any approval from the lender(s) is obtained if it is obtained at all. As a result, many home buyers will be left disappointed through this scenario.
Lastly, the deals in the Phoenix area are found with the traditional committed seller who has appropriately positioned their property based on its condition, location, and competition. These represent the best transactions in that the buyer often has more power to negotiate, full property disclosures are often made available, and sellers may be more reasonable to cover the cost of repairs or other items that come up during the inspection process.
An adage in the Phoenix market for sellers is this,”There are reasonable buyers for reasonable sellers,” meaning that a seller can find a buyer if they position their property well and treat the transaction flexibly and earnestly.
To win a strong value, the name of the game isn’t the lowball. The right strategy is knowing what makes a “great deal” and positioning accordingly to get it. That positioning may include the low ball but not necessarily. Buyers who expect to lop off an additional 10%+ off the price for any property and win the home will find this strategy doesn’t work well and they will often lose out on great values as other buyers step in to purchase them.
Separately, for the pure investor who has a strong cash reserve, the Trustee’s Sale or Maricopa County foreclosure auction could present an excellent opportunity to obtain properties more cheaply than on the open market.
Market Outlook for 2009
The Phoenix residential real estate market will continue to see serious challenges and changes moving into 2009. Indeed, properties that do not compose one of the three areas mentioned above – foreclosures, short sales, and well-positioned sellers – can expect to experience additional price declines as their positioning is not in keeping with current market conditions. Foreclosures and short sales will continue though many will be watching for some level of abatement and how this may spread across the Phoenix real estate market. The current recessionary climate poses additional risks and its influence could dampen real estate activity.
Property owners for homes priced above $400,000 will carry additional risk and may experience sharper price declines to adjust to the changing market. All home sellers will continue to face stiff competition to sell their homes. Opportunities for buyers to obtain strong values in the marketplace will continue.
Finally, the impact and potential benefit of the current federal government bailout will be more visible over the next six months. If successful, these programs could help to stabilize credit markets, ease economic concerns, which in turn would benefit the housing markets.
Overall, the Phoenix housing market will continue to slowly work through the issues it currently faces.
The Phoenix residential real estate market is “weary but hopeful” for the coming year.

How exactly does your city come up with your property tax value?  Are you concerned that your property taxes might be unfairly high and want to see if you are eligible for a property tax reduction?   That is what we discuss here. 

First of all, no matter how confusing your property tax statement is, with all of the various terms, ratios, millage rates, etc calculating property tax really boils down to only a few factors:  the market value of your property, your cities assessment ratio and the tax rate. 

The market value is what your property would sell for on the open market, without any “undue influences,” like being in a state of foreclosure, structural issues with the property, short sales time frame, etc.  Again it’s what your property sells for under a normal sale.

The assessment ratio is very important to calculating your property taxes and is what is sometimes referred to as your “property tax value”.  What cities do is multiple your market value, by the assessment ratio, the resulting number is the property tax value. 

For example if your properties market value is $500,000 and your cities assessment ratio is 80% your property tax value would be: $500,000 x .80= $400,000 property tax value.

Assessment ratios vary from state to state and from jurisdictions.  Your assessment rate could be totaling different than your neighboring town.   

The tax rate is also known as a millage rate and is the actual rate that property owners pay in their given town.  Like the assessment ratio the tax rate varies from town to town and also from property types.  For example a commercial property will be taxed at a different rate than a single family home.   In addition, a single family home used as a rental property will normally be taxed at a high rate than a single family home that is occupied by the owner. 

To figure out your annual taxes you multiple the tax rate by the assessed value.  For example take the assessed value of $400,000 x .020 (tax rate/millage rate) = $8,000 in annual property taxes. 

On a property tax appeal you can only debate the fair market value of your property.  You cannot argue the tax rate or the assessment ratio (unless they made a mistake and recorded your property in the wrong category).  But again, you can only argue the assessors opinion of your properties value.  Keep in mind that most cities assessors are over worked and or under qualified, so they very often make outright mistakes.  If you know of other similar properties in your area that sold for less than what they have recorded your property at, than you most likely have a case and could save a lot of money. 

Don’t be like the 98% of property owners that don’t bother to appeal their taxes.  They are leaving thousands of dollars on the table for no reason.  The process to appeal is really not complex and won’t eat that much of your time.  Hope this answers your questions regarding property tax value. 

Buying of real estate property is a very tricky and risky investment to make, especially if you are not knowledgeable enough about the market, or about the value of your real estate property.

A lot of people do not know exactly how to determine the value of their property, and end up either pricing it too high or too low, something that you would not want to do, especially if you want to be able to make the most out of your investment. People who price their real estate property too high will not be able to sell the property for obvious reasons.

The price of the property should be reflective of its value, which should be determined not according to your personal assessment, but to the assessment of the real estate market. If you do price your real estate property too low, on the other hand, you only end up getting the shorter end of the stick since you are getting less than what you should be getting from your investment.

In order to be able to put the right value over your real estate property, you will need to have a better understanding of the real estate market in order to get the most out of your real estate property.

One basis for determining the value of your real estate property is called the cost or summation approach. This method determines the value of the real estate property by reducing the cost of any improvements that needs to be done on the property from the value of the land of the property. Basically, what this method does is it makes a person decide if whether the cost of modifying the existing home would be cheaper as compared to buying another home which already has those features. This approach, however, may not be the best way to determine the market value of any real estate property since this method has non-market based components, which is most noticeable when their exists a limited demand of a property in the market.

Another way of determining the value of your real estate property is by comparing the price of similar properties that are being sold in the market with your own existing property. You get the sales prices of the properties that are similar to your own, and you take into considerations the differences that are comparable between the two properties in order to determine the fair market value of your property. However, this type of method is only effective if there are good comparable sales that exist.

If the property’s current rental value and passing income are known, then the property value would be easily determined as well, just as long as the market-determined equivalent yield of the property is present. Also, certain factors, such as the revitalization or rehabilitation of a particular area can also affect the sales prices of such properties.

Determining the value of your real estate property can be very difficult to do, especially if you have very limited to no knowledge and experience about the real estate market. One good way of being able to make sure that you give the appropriate value to your real estate property is by hiring the expertise of professionals.

Vanessa Arellano Doctorhttp://realestatepress.org

Property laws in India are comparable to many developed countries with some flexibility for community specific needs. A Government agency, usually a Registrar Office, acts as an intermediary for property registration and transfer of rights.

While Property registration process has evolved over recent years, especially with digitization of property registration process in many states, implementation of these laws have left a lot to be desired.

The biggest challenge in property registration is the valuation of the property itself. Currently, this is governed with a set of boundary policies like guideline value for a location. However, these policies usually lag the market significantly both in terms of time to effect and valuation itself. Quite often they are not efficient market indicators.

The gap in property valuation allows a serious misappropriation which result in huge revenue loss to the government. In addition, this also generates black money that fuels grey economy.

A person selling property misusing these laws would accumulate black money and it can only be used against another such transaction that requires it. We can imagine how this has led to a huge grey market economy in India. We also know that this grey market is both inefficient in use of resources and also harmful to the society. It is inefficient because the money, when not deployed, usually stays in the form of cash which has least efficient economic utility. It is harmful since this cash may be deployed in socially unacceptable opportunities.

The main issue in property regulations is RIGHT valuation of the property. This will not only generate more income to the government, but also decreases the motives for grey market transactions.

Immediate question that arise is ‘can valuations be market driven as in stocks?’ Stock market regulations have evolved significantly and there is little, if not none, doubt about valuation of a stock.

This begs the question. Can we solve property valuation issue by making property an instrument similar to a stock?

While idea of making property similar to a stock is noble, at least for now, it is farfetched. However, we can take strings from stock market governance and apply the same to property market. One such thought is presented here.

Financial Intermediary as a property regulator

We introduce the concept of intermediary for a property. All properties must be associated with an intermediary. This is similar to demat account for stocks.

According to the new process:

(a)  A property is always associated with an intermediary. It can be banks or such financial institutions that have the expertise to valuate properties. For example, banks those offer property loans.

(b)  Transaction begins with Seller (who is also the current owner or an entity authorized by the owner) initiating the process. Seller has to intimate the intermediary about the possible deal along with requisite details like buyer identity, sale price, etc.

(c)  Intermediary would then apply a fair valuation on the property. In this process, intermediary attempts to define a fair market value for the property based on current market conditions.

(d)  If the fair value significantly differs from the deal value, intermediary informs the seller of the same and requests authorization with reasons.

(e)  Seller may discard the transaction if fair price is significantly above deal price. Seller may also choose to go ahead with the deal in spite of difference in value by providing reasons for the same.

(f)  Seller can choose to go ahead with the transaction by surrendering original titles to intermediary along with payment of transaction fees.

(g)  Intermediary would then process the change at their end and also inform the government agencies about old title and buyer information.

(h)  The government agency would then send new title records to the intermediary.

(i)   Intermediary sends the title to the new buyer after collecting transaction fees.

(j)   Transaction fees are periodically deposited to the government agencies by the intermediary after deducting their share in these transactions.

Market value is governed by many factors and it is understood that the actual transactional value might depend on these and many others that influence it. In any case, this process change will significantly reduce misuse of property valuations.

One important assumption in this approach is that the financial intermediary will be honest in identifying fair market value and hence act as a guard against misuse. It can also be noted that it is relatively easy to enforce strict laws of compliance against an institution than an individual.

Further reforms can be evolved over a period. For example, we could restrict transactions that significantly differ in valuation. This can be achieved by allowing seller to borrow money on the property instead of selling for lower price. Alternately, intermediary can auction the property to fetch a better market price. However, property rights laws will need amendments to allow such possibilities.

Apart from the valuation itself, there are other benefits from this process:

(a)  Every property is associated with an intermediary. The same intermediary would continue for the life time of the property or till such a time the intermediary chose to transfer accounts to another intermediary. This ensures better accountability.

(b)  Because intermediaries are competent with knowledge of the market, tax collections can be automated. For example, intermediary pays tax on time to the government by debiting the property account which is then settled by the owner with a payment. This is similar to a normal utility credit transaction.

(c)  Revenue collection on properties can be streamlined with innovative reforms. For example, property tax collected can follow a standard indexation (to account for inflation) for five years followed by a market valuation. Another option would be to apply a percentage on current market value.

(d)  Data accuracy of ownership enables fair distribution of social expenses to each property. This can be assigned as a variable cost to a property – just like utility bills – which is then collected as part of regular tax cycle. For example, maintenance cost of local parks can be distributed in proportion to property owned in that location.

(e)  Over a period of time, this system can evolve as property stocks that can also be traded online thereby discovering true market price for every transaction.

(f)  Existing properties and ownership would be identified and recorded by the intermediary. This establishes a clear asset ownership data that helps in reduction of property ownership disputes.

(g)  Financial Intermediary can extend loans and other such credits against the property account. For example, taxes and other debits can be accumulated against the property and collected annually. If owner wishes to do so, these debits can be carried as mortgage loans for an extended period. This reduces overhead of continues cash flow requirements for the owner apart from reducing the number of such transactions.

There are few challenges in the implementation of proposed approach.

(a)  First and foremost in the cost of intermediary itself. Since this change is expected to increase government revenue substantially, intermediaries can be compensated from the government revenues.

(b)  Processing time may increase due to additional layer. However, this can be addressed by aligning additional incentives for speedy processing.

(c)  Resistance to change from government agencies might be a huge challenge to deal with. This has to be addressed by arranging public knowledge sessions to highlight the benefit of this change to the entire society.

(d)  Disagreement on property valuation between intermediary and seller can obscure the data collected. However, aligning intermediary benefits to accuracy of this data can help reduce such calls.

(e)  Intermediary has to maintain and process transactions for many sellers and buyers. This imposes additional data maintenance burden on the intermediary. However, this can evolve into a repository of one or two regulators (like BSE / NSE) thereby reducing the associated cost. One such option is to just use PAN numbers for identity of sellers and buyers.

(f)  Digitizing existing records is a huge challenge. Existing data is very huge. Initial stages of data upload and subsequent maintenance will have few challenges. In addition to this, some of these records may be in various local languages and hence requires additional effort to translate, store images of original documents, etc.

(g)  Property transfers for reasons other than an outright sale, such as inherited property, is complex and involves legal overheads. Role of intermediary in such cases should be clearly defined. For example, when property ownership is under dispute, property can be put on a hold status and intermediary takes responsibility of maintaining financial health of the property (like payment of taxes, etc.) till a clear ownership is established by a legal entity.