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0 Buyers = 0 Value?

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Artyman1200

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Sophomore Member
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Jun 21, 2004
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Certified General Appraiser
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Tennessee
Things are really slowing down in our market and vacancies are increasing. I'm sure this is the case with many of you. I feel like my data needs to be within the last 6 months or it isn't worth much. Many of the market participants I talk to feel that this downturn will last 2-3 years before growth slowly begins again. This is obviously happening in the residential side but also the commercial side. It's hard to feel confident in the values I estimate. How do we work through these down markets when there are so few buyers? If historical data doesn't seem relevant, how to you account for that?
 

Jungle Boy

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Oct 30, 2002
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Real Estate Agent or Broker
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Florida
There are others here who are better able to answer your question.

However, I'd like to take a stab at your heading: 0 buyers = 0 Value?

Values have reached 0 when sellers are giving away their properties for free, and buyers are still deliberating, whether if even then the 0 price is a good deal for them.
 

Artyman1200

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Sophomore Member
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Jun 21, 2004
Professional Status
Certified General Appraiser
State
Tennessee
There are others here who are better able to answer your question.

However, I'd like to take a stab at your heading: 0 buyers = 0 Value?

Values have reached 0 when sellers are giving away their properties for free, and buyers are still deliberating, whether if even then the 0 price is a good deal for them.

Ah, the first one to make a sarcastic comment on my heading. Good for you (sarcasm)
 

redfish

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Sep 2, 2007
Professional Status
Certified Residential Appraiser
State
Michigan
There are others here who are better able to answer your question.

However, I'd like to take a stab at your heading: 0 buyers = 0 Value?

Values have reached 0 when sellers are giving away their properties for free, and buyers are still deliberating, whether if even then the 0 price is a good deal for them.

Sellers paying someone to buy a property then would indicate a negative value? Calling Tim. This could be that negative value thread.
 

PropertyEconomics

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Jun 19, 2007
Professional Status
Certified General Appraiser
State
New Mexico
There are buyers at some price ... the question is what is that price? Right now with credit as tight as it is .. there are no sales at current asking prices.
I dont think zero is the answer though. Just my .02 worth.
 

Artyman1200

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Jun 21, 2004
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Certified General Appraiser
State
Tennessee
There are buyers at some price ... the question is what is that price? Right now with credit as tight as it is .. there are no sales at current asking prices.
I dont think zero is the answer though. Just my .02 worth.

Exactly, sooooooooo, do we pick an arbitrary market adjustment based on interviews with market participants? What is appropriate? We gotta have something to hang our hat on.

Also, do you have data to support that the value ISN'T zero, cause I don't...
 

Kali the Boston Terrier

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Jul 7, 2003
Professional Status
Certified General Appraiser
State
Michigan
Are you complaining or asking a question? Because I could explain what steps are neccessary to arrive at a credible opinion...however you seem to be hellbent on making a wise *** comment for every response.

So what do you want out of this post?
 

WAI

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Jan 23, 2007
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Certified General Appraiser
State
California
What you most likely have are no buyers at the current asking prices. As the market continues to soften, the prices will drop until buyers are ready to invest and have available credit to do so. The lack of buyers doesn't equate to no value. Buyers will come, when the prices are equal to what they want to pay.

I think everyone would like to have sales within six months. I know in my market, I rarely have a data set that is that perfect. You have to take what you can get, analyze the data and support a conclusion. Assignments such as this one will typically include several different analytical processes that support one conclusion.

With the state of the economy including the lack of financing, these assignments are becoming more and more difficult to complete in a manner that doesn't require a crystal ball and I broke mine a long time ago.

Jeffrey T. Warren, MAI, SRA
 

Terrel L. Shields

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May 2, 2002
Professional Status
Certified General Appraiser
State
Arkansas
...do we pick an arbitrary market adjustment ...We gotta have something to hang our hat on...Also, do you have data to support that the value ISN'T zero, cause I don't...
listen to Jeffrey, but the zero value notion...dump that. First, legalistically, the Supreme court has already ruled on it. Famous case where a large plant left a small town during the depression. The court ruled that no matter the lack of market activity the properties had some 'real' value.

If you have offers to sell, then you have market data and likely enough market data to suggest an adjustment to older sales. I mean I feel your pain but in the best of times, the small town to the north of me had about 1 commercial sale every other year. The range over the past 10 years? 20,000 to 6,000,000....trust me there are just things they didn't tell you about this job when you took it. The last sale there was a building that was appraised for $750,000 years ago, and I appraised at $300,000 a few years later when it was a foreclosure. It sold for $250,000 only to close again in a year or two and resold for about $250,000 again recently. The new owner has put over $1,000,000 in the property and combined 3 of his businesses under one roof. ...The abandoned buildings in town from his former locations are a drag on a market which is also burdened by a repo'd commercial building. But since this is so isolated a market, what can I do except to value them by the seat of my pants? What do bankers think about lending to them? What is the overall area's economy doing?

I can 'vet' a discount based on regional economics and then might suggest a further discount for my perception of what the marketing time will be (I suspect well over 1 year.)

In other words, I am going to use something called "Judgment and Skill"...experienced based, emperical evidence to support my opinion of value. If i foolishly attempt to reduce the problem to a math formula, I will "hit" the right number by accident only, and will learn nothing of value for the next such project. I will be totally clueless why my valuation was so far off.

The markets (all of them) are in chaos and few people choose to invest under that circumstance until pent up supply is forced to lower the price to bargain basement. Competing with those are the repo's. In the end you can end up with 2 different markets - short sales and REO's and "market value" as a longer exposure to market until the property 'fits' the needs of the buyer.

BTW, in my area, many commercial properties end up being auctioned or left on the market for extended times. In the best of times, there are auctioned or REOs sold for a discount. If I can compare the REO's, it may not lead me to the value, but it may give me a hint as to the % of change in REOs and I can relate that to my market.

For instance, a 2005 REO, that otherwise I haven't used as a comparable, sells at auction, maybe 10% below market. In the much worse REO market of 2008, one sells what appears to be 50% or more below market... The difference of 40% may suggest a discount to any 2005 sale I might use for current market conditions.

If the REOs are going lower at 12+% a year, then just perhaps the "market" sales would too..
 

Artyman1200

Thread Starter
Sophomore Member
Joined
Jun 21, 2004
Professional Status
Certified General Appraiser
State
Tennessee
I appreciate the serious responses to this thread as my questions were obviously serious. I began my appraisal career when the market was strong and I could always rely on recent sales, typically plenty in number within our market. I obviously don't believe that properties have zero value when there are no buyers. That was more of an intro to the concept of my thread. I guess I'm looking for specific data sources/ideas I can use to make adjustments for this market. Like Terrell mentioned using REO's, that's an excellent idea. I feel like we should be digging deeper than ever to determine values that will help the parties involved make a decision. What else are you guys putting in your reports to account for the current market?

And Brian, I would love your opinion...
 
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