Do Property Prices Tell The Whole Story?

Peter G. Miller
OurBroker®

Look around the Internet and you can find an increasing number of sites that report local home sale prices -- useful data as far as it goes, but how far does it go?

After all, if we know the recorded sale prices and assessed values for our community, can't we pretty much determine the value of a given property?

There's no doubt that we can take public information such as sale prices and assessed value and post such data online, in newspapers, or wherever. Many jurisdictions are moving to computerize such information so that it will be available to all without cost, obligation, or the requirement to surrender one's privacy.

But what does such information tell us about current home prices? Should we buy or sell on the basis of public records?

In the case of recorded sales, dollar prices may not reflect market values. In effect, what you see may not be what sellers got or buyers paid.

For example, Builder Jones has sold 50 townhouses at $200,000 each. But while all buyers seem to have paid the same price, not all buyers got the same deal. To induce early purchasers and create sales momentum, Jones provided a $5,000 cash credit at closing plus a finished basement -- in effect discounting the apparent sale price. To close out the development, Jones gave sun rooms to the last five buyers. Once again, the price was effectively discounted.

Or what happens if a home is sold at discount in divorce situations or when bankruptcy looms? There it is, in black and white, a low recorded price on the public record -- but no mention of the pending divorce, bankruptcy or a need to quickly sell. Should you lower the asking price of your home as a result?

And what about cases where the recorded sale price is more than the property's real value? Imagine that a home sold for a typical neighborhood price but the purchasers must now invest thousands of dollars to make the home comparable to neighboring properties. In this case, the buyers over-paid.

A related issue works like this: do past sale prices have any relevance to current valuations?

Suppose a buyer knows that a property sold for $150,000 in 1985. The owners now want $300,000 for the home. Should the price be discounted because of what the owners paid years ago? Or should the sale price relate to current market values -- say home sales in the past one to three months?

Assessed values are another measure which should be considered with care.

In many communities, assessors only visit homes every two or three years -- the data is useful and appropriate for taxation purposes but often too old to accurately reflect current sales.

For example, a new religious facility was just completed in my community. When word got out that a neighbor wanted to sell, several would-be buyers knocked on the door to make offers and the home was sold for substantially more than the initial asking price. Had the owner relied on past sales data or assessments, the selling price might have been far less than the final transaction value.

Buried in a typical sale agreement are a host of discounts, benefits, credits, premiums, costs, and concessions that make one transaction a great buy and in some cases a second transaction for a like property at the same price an utter rip-off.

Which is which?

You may not know from public data -- and that's reason enough to speak with neighborhood brokers to assure you don't overpay or under-sell.

Question Of The Week

Q I'm having a problem with the person who lives next to one of my homes. He has been harassing my tenant. I would like to find out the owner's address and send a letter stating what his tenant is doing, and if he continues to harass my tenant I would like to have him evicted.

A As a landlord you are responsible for providing safe and decent housing, but there are limits to your involvement and authority.

Is the neighboring tenant doing anything which requires police intervention? If yes, then your tenant should discuss the matter with the local police.

Are property rights being violated in terms of trespassing, encroachments, etc? If yes, see an attorney.

Is the problem that the tenants do not get along? If yes, they need to work out the matter among themselves.

As to contacting the neighboring owner, there may be substantial liability in seeking the eviction of someone who is not your tenant. Speak with your attorney for specifics.

Weekly Resource

Want to know the time? The exact time? The official, down-to-the-nanosecond, moment? Try the U.S. Naval Observatory, the nation's official timekeeper.