Home sales have fallen to a 5-year low with existing home sales falling for the 6th straight month. The average home is now on the market for more than 10-months before it is sold. Prices a still falling.
Often a home’s values are lower than the sales price since many concession are made. Before putting it on the market, they may install new carpets, new windows dressings, ceramic tile, new kitchen appliances, redo the kitchen, new ceiling fans, repaint the interior or replace window air conditioner units. If the home still doesn’t sell they may paint the exterior, do extensive landscaping, walkway changes or change entrance features etc.
If after six months on the market, a potential buyer may like some of the home but did not add on features and ask for a price concession. Sellers may have to make numerous financial concessions, not reflected in the sales price to unload their properties. This is a buyers market.
If you sold you a house for $550,000 but gave you $50,000 in concessions, then that house’s real value is $500,000. But, since only the sold price is recorded you can’t tell the Department of Revenue that home values is lower than the sales price when you use a comparable in your property tax appeal or appraisal unless you prove it with a study.
The housing glut, increases in property taxes and skyrocketing homeowners’ insurance rates are reflected
in the real estate market. Price concessions are hard to prove and a study to prove a lower sold value for the comparable homes due to price concessions is debatable.
Often a home’s actual value is lower than the sales price since many price concession are made. If you are using a comparable sales to determine market value, that figure may in reality be much lower than the actual recorded price indicated.
Where is competent efficient government? Local governments spend a small fortune to reappraise our homes every few years and then hold a gun to our head if the homeowner can’t afford to pay for their run away expenses. If the homeowner can’t pay they seize the home from under him and sell it. We have absolutely no control of how they spend our money.
There is a FORTUNE spent on collecting property taxes. When you add the expense to collect our property tax money (cost of blanket property tax appraisers, the town tax collector, tax assessor, the cost of the office space, town cars, legal fees to the town lawyer for property tax appeals…. etc. and add it all together, it makes more sense to simply raise taxes with in increase in sales tax and/or income tax.
Politicians nowadays have the mindset that they have to come up with a bill or law they want passed to get elected. Instead they should point with pride to all the unnecessary expenses, jobs and bureaucratic overhead they got rid of.
We need politicians of a culture that says "NO!" to extra-ordinary expenses. Obvious expenses and savings abound. And then there are the bureaucratic perks such as the 20-year service and retire on a pension civil service contracts while the average American has to work 40 or more years before they get the chance to kick back. Or the over-the-top health and welfare benefits that the private sector simply can not afford.
Last week in an article in the Wall Street Journal "Bear Sterns is Tip of an Iceberg" warns of significance of the Bear Stearns hedge fund bailout.
It warns of a possible future unraveling of sub-prime loans (that includes both credit cards as well as mortgages) which would cause higher mortgage rates. That coupled with the already dead-in-the-water real estate market would sink the ship lower. Property values will plunge more. The opportunity for property tax appeals increases because lower priced comparables abound! Take advantage of it.
Higher credit premiums can threaten other highly-leveraged instruments further shaking up financial stability. This could foretell a liquidity crunch that can effect your investments as well as your home’s market value.
