pro pricing 02 09

Francois K. Gregoire, IFA, Francois K. Gregoire, IFA, RAARAA

State Certified Residential Appraiser #142State Certified Residential Appraiser #142

Distressed PropertiesDistressed Properties

PRO - © 2009 Frank Gregoire 2

PREPARED FOR:PREPARED FOR:


about about Frank………...Frank………...

• Licensed since 1976Licensed since 1976• Realtor® since 1977Realtor® since 1977• Appraising since 1977Appraising since 1977• State-Certified Residential State-Certified Residential

Appraiser since 1989Appraiser since 1989


about about Frank………...Frank………...

• Real Estate License Law and Appraisal Real Estate License Law and Appraisal Instructor since 1977Instructor since 1977

• Member Florida Real Estate Appraisal Member Florida Real Estate Appraisal Board February, 2000 – February, 2008Board February, 2000 – February, 2008

• Qualified Expert Witness - Pinellas Qualified Expert Witness - Pinellas County Circuit Court, Florida Division of County Circuit Court, Florida Division of Administrative Hearings, United States Administrative Hearings, United States Bankruptcy CourtBankruptcy Court


TODAYTODAY• Price versus ValuePrice versus Value• Sales Comparison Approach Sales Comparison Approach

• Elements of ComparisonElements of Comparison• Selection of Comparable Selection of Comparable

Sales and ListingsSales and Listings• Adjustment TechniqueAdjustment Technique

• Communicating your pricing Communicating your pricing recommendationrecommendation


PRICEPRICE

• The quantity of one thing which is The quantity of one thing which is exchanged for anotherexchanged for another

• The amount of money paid, asked, or The amount of money paid, asked, or offered where sale is contemplatedoffered where sale is contemplated


MARKETMARKET PRICE PRICE

the price the price actuallyactually given in given in current market transactionscurrent market transactions


VALUEVALUE

• the quantity of one thing which can be the quantity of one thing which can be obtained in exchange for anotherobtained in exchange for another

• a fair return or equivalent in goods, a fair return or equivalent in goods, services, or money for something services, or money for something exchanged exchanged

• the monetary worth of some good, the monetary worth of some good, asset or serviceasset or service


MARKET VALUEMARKET VALUE

The most probable price which a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller, each acting prudently, knowledgeably and assuming the price is not affected by undue stimulus. Implicit in this definition is the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions whereby:


MARKET VALUEMARKET VALUE1. buyer and seller are typically motivated2. both parties are well informed or well advised, and

acting in what he considers his own best interest3. a reasonable time is allowed for exposure in the

open market4. payment is made in terms of cash in U.S. dollars or in

terms of financial arrangements comparable thereto5. the price represents the normal consideration for

the property sold unaffected by special or creative financing or sales concessions granted by anyone associated with the sale.

*Fannie Mae


SALES COMPARISON SALES COMPARISON APPROACHAPPROACH

• Value or Price derived by comparison of Value or Price derived by comparison of SALES and/or LISTINGS to SUBJECT SALES and/or LISTINGS to SUBJECT PROPERTYPROPERTY

• Assumes Value or Price is directly related Assumes Value or Price is directly related to prices of similar, competitive propertiesto prices of similar, competitive properties

• Focus is on similarities and differences Focus is on similarities and differences among properties that affect value or priceamong properties that affect value or price


UNDERLYING UNDERLYING PRINCIPLEPRINCIPLESUBSTITUTIONSUBSTITUTION

The value of a property tends to be set The value of a property tends to be set by the price that would be paid to by the price that would be paid to acquire a substitute property of acquire a substitute property of similar utility and desirability within a similar utility and desirability within a reasonable amount of timereasonable amount of time


ELEMENTS OF ELEMENTS OF COMPARISONCOMPARISON

Characteristics of Properties-Transactions Characteristics of Properties-Transactions that cause Prices Paid to Varythat cause Prices Paid to Vary

• Financing TermsFinancing Terms• Conditions of SaleConditions of Sale• Market ConditionsMarket Conditions• LocationLocation


ELEMENTS OF ELEMENTS OF COMPARISONCOMPARISON

Characteristics of Properties-Characteristics of Properties-Transactions that cause Prices Paid to Transactions that cause Prices Paid to

VaryVary• Physical CharacteristicsPhysical Characteristics

• SizeSize• Construction QualityConstruction Quality• ConditionCondition• Amenities and ExtrasAmenities and Extras


SELECTION OF SELECTION OF COMPARABLE SALES AND COMPARABLE SALES AND

LISTINGSLISTINGS• Worthy of ComparisonWorthy of Comparison• Competitive with SubjectCompetitive with Subject• Same Highest and Best useSame Highest and Best use• Similar to Subject in date of sale, Similar to Subject in date of sale,

location, size, design, construction, age, location, size, design, construction, age, condition, physical characteristicscondition, physical characteristics


ADJUSTMENT ADJUSTMENT TECHNIQUETECHNIQUE

• Adjustments made to ComparableAdjustments made to Comparable• Make the Comparable equal to SubjectMake the Comparable equal to Subject• Difference-Significant enough to Affect Difference-Significant enough to Affect

Market Behavior Market Behavior • MeasurableMeasurable• Superior Feature – Negative Superior Feature – Negative

AdjustmentAdjustment• Inferior Feature – Positive AdjustmentInferior Feature – Positive Adjustment


OUR TASKOUR TASK

• Broadmoor SubdivisionBroadmoor Subdivision• Built 1957Built 1957• Concrete Block ConstructionConcrete Block Construction• Two Bedrooms – One BathTwo Bedrooms – One Bath• One Attached GarageOne Attached Garage• 879 Square Feet879 Square Feet


SEARCH CRITERIASEARCH CRITERIA


SEARCH RESULTSSEARCH RESULTS


SALES PRICE PER SALES PRICE PER SQUARE FOOT OF SQUARE FOOT OF

LIVING AREALIVING AREA


• Price effectively.Price effectively. Unless you can arrive at a reasonable price Unless you can arrive at a reasonable price for the home, the listing will become a burden instead of an for the home, the listing will become a burden instead of an opportunity. opportunity. Have a price range in mind before you go to the Have a price range in mind before you go to the listing.listing.

• Don’t rely solely on comparables to develop a price Don’t rely solely on comparables to develop a price recommendation.recommendation. Consider supply and demand and the Consider supply and demand and the competition.competition.

• Do consider marketing time. Do consider marketing time. The seller or servicer may have The seller or servicer may have a limit on the time to market the property.a limit on the time to market the property.

• Do weigh the home’s condition.Do weigh the home’s condition. Pricing a short sale or Pricing a short sale or foreclosure is most often based on the AS IS condition of the foreclosure is most often based on the AS IS condition of the property. The condition of the property may limit the financing property. The condition of the property may limit the financing options and require a cash sale. options and require a cash sale.

PRICINGPRICING


• USE MLS Data to illustrate your USE MLS Data to illustrate your conclusions.conclusions. Show examples to Show examples to demonstrate the effect of pricing errors demonstrate the effect of pricing errors (price reductions, extended marketing (price reductions, extended marketing times, expired listings)times, expired listings)

• Explain your data and analysisExplain your data and analysis• Make a convincing case for your Make a convincing case for your

conclusion and recommendationconclusion and recommendation

COMMUNICATINGCOMMUNICATING


EXAMPLEEXAMPLEAs of the effective date of this Price Opinion the

Suncoast Multiple Listing Service reports there are 38 active listings of single family residences similar to the subject in age and size within the Neighborhood Boundaries described. Only two listings similar to the subject in size are listed as pending.

In the past twelve months, the Suncoast Multiple Listing Service reports there have been 36 sales of residences similar to the subject in age and size within these Neighborhood Boundaries. These range in price from $56,500 to $160,000 and average $105,200. Although the average time on the market for active listings in this area is over three months, some listings have been on the market for over one year.


EXAMPLEEXAMPLEPrice reductions are common, as are listings expiring

from the multiple listing service without sale. Over 40 listings of single family residences in this neighborhood similar to the subject in age and size expired from the multiple listing service in the past twelve months.

Supply exceeds demand in this area. Competition from short sales and lender owned properties is becoming more prevalent and has a negative effect on prices, values and marketability. Nearly one third of the active listings in direct competition with the subject are marketed as short sales or pre-foreclosures.

Value decline in this area averages to about 1% per month over the past twelve months.


SUGGESTED LIST SUGGESTED LIST PRICE?PRICE?


Francois K. Gregoire, IFA RAA

State Certified Residential Appraiser #142

Gregoire & Gregoire, Inc.

Realtor - Appraiser

727-344-3393

[email protected]


HOW MUCH TO HOW MUCH TO ADJUST?ADJUST?

MethodsMethods• Paired SalesPaired Sales• Cost AnalysisCost Analysis• Capitalization of Rent DifferencesCapitalization of Rent Differences


NOT PROVIDED NOT PROVIDED TODAYTODAY


PAIRED SALESPAIRED SALESGARAGEGARAGE

159016001550SIZE

4/24/23/2BR/BATH

?GARAGE VALUE

2 Car1 Car2 CarGARAGE

4/20084/20082/2008DATE OF SALE

$266,000$260,000$265,000SALES PRICE

SALE #3SALE #2SALE #1


PAIRED SALESPAIRED SALESPOOLPOOL

159016001550SIZE

4/24/23/2BR/BATH

??POOL VALUE

Above Ground

NoneIn GroundPOOL

4/20085/20083/2008DATE OF SALE

$262,000$260,000$277,500SALES PRICE

SALE #6SALE #5SALE #4


COST ANALYSISCOST ANALYSIS• Cost to CureCost to Cure

• PaintingPainting• FlooringFlooring• RepairsRepairs

• Depreciated CostDepreciated Cost• Amenities and ExtrasAmenities and Extras


DEPRECIATED COSTDEPRECIATED COST

=

=

X

X

$ 6,500

INDICATED VALUE OF ONE

GARAGE SPACE

$ 6,552DEPRECIATED COST

-$ 3,68536%25/70LESS DEPRECIATION

EFF.AGE/LIFE

$10,237$31.50325GARAGE

COST NEWCOST/SFSIZE


Capitalization of Capitalization of RentRent

137.84=$1,850∕$255,0002

136.22=$1,850∕$252,0001

GRM=Actual Rent

∕Sales Price

Sale #

GRM = 137GRM = 137

Develop Gross Rent MultiplierDevelop Gross Rent Multiplier


MARKET RENTMARKET RENT

159016001550SIZE

4/24/23/2BR/BATH

?RENT VALUE OF POOL

Above Ground

NoneIn GroundPOOL

4/20085/20083/2008LEASE DATE

$1800$1800$1925ACTUAL RENT

RENTAL #3RENTAL #2RENTAL #1


VALUE OF POOLVALUE OF POOL

$17,125=137X$125

VALUE

=GRMX

MARKET RENT


RESULTSRESULTS

• GarageGarage• $5,000, $6,500$5,000, $6,500

• PoolPool• $15,500, $17,125, $17,500$15,500, $17,125, $17,500


COMPARISON GRIDCOMPARISON GRID

+ 6,0001 CAR+ 6,0001 CAR2 CARGARAGE

3/24/23/2BR/BA

$283,500$283,000ADJUSTED PRICE

INGRND+17,000NONEINGRNDPOOL

3/20084/20086/2008DATE

$277,500$260,000SALES PRICE

ADJUSTCOMP #4ADJUSTCOMP #1SUBJECT


Francois K. Gregoire, IFA RAA

State Certified Residential Appraiser #142

Gregoire & Gregoire, Inc.

Realtor - Appraiser

727-344-3393

[email protected]

pro pricing 02 09

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