Angie Rucker, Other/Just Looking in Russellville, TN

so the value of my home can drop if the homes for sale in my neighborhood drop their price for quick sale?

Asked by Angie Rucker, Russellville, TN Fri Dec 28, 2007

russellville, tn
my home is under 3 yrs old in a new subdivision

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The value of your house is based on the value of other nearby comparable houses. That's the way Realtors perform a CMA (competitive market analysis). That's the way appraisers judge the value of a house. And--most important--that's the way prospective buyers make purchasing decisions.

If your house was worth, say, $300,000, but two nearby similar properties are for sale for $275,000, then that's what your house is worth...approximately.

And, unfortunately, some of the biggest drops in some areas (for instance, in Northern Virginia there's a real nice area called Ashburn) have been for recently-constructed homes. That's, in part, because of the run-up in prices in 2003-2005. If someone bought a house in, say, 2000, maybe their house "on paper" went up, then dropped, so it's perhaps slightly above the purchase price in 2000. But if you bought at the top of the market in, say, 2005, values didn't go up much more before they started coming down. So someone who bought in 2000 may have had a "paper loss" if he/she sells. But someone who bought in 2005 could have an actual, out of pocket, loss.

Prices will recover, but it'll take time. So if you bought your house in 2005 and its value has dropped--maybe to below what you paid for it--you've now got a "paper loss." In a while--maybe 3 years, maybe 5 years--values will rise enough so that you're not facing a drop in price from when you bought.

Hope that helps.
1 vote Thank Flag Link Wed Aug 13, 2008
Don Tepper, Real Estate Pro in Burke, VA
Hi Angie......I'll try to explain. Let's say your home was built by a builder in his subdivision a couple of years ago for $400k. He continues to have lots available to build on and wants to convert to cash some of his money that's tied up in lots, so he continues to build. He puts up a couple of spec homes and one just happens to be identical to yours. Now in the new construction game times are tough, but he still wants to build and sell, so on the property that is identical to yours, he decides to price at $375k, hoping to sell it fast. This is relatively easy for builders to do today, as the price of lumber is down, subcontractors are hungry and have cut thier bids to nothing just to stay working, and the costs of many home building items is down as the market has softened. Anyway, he is effectively selling your home at $375k now, so what is your home worth? The simple and correct answer....$375k

Sorry to be the bearer of tough news, but it is the truth.....

Todd Norsted
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1 vote Thank Flag Link Fri Dec 28, 2007
The value of your home is determined by the sales of the "like" homes in your sub area. We usually only go back 6 months. If the homes around you are selling low for quick sales your home will go down in value as well. Hope this helps.
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1 vote Thank Flag Link Fri Dec 28, 2007

Yes, that could happen.

Appraisers, however, are supposed to use comparable sold priperties that sold via arms length transactions.

If the properties you are referencing were sold at arms length, then they would probably be used as a comparable sold if they qualify as a comp.
1 vote Thank Flag Link Fri Dec 28, 2007
Yes. Doing an apprasial your house will be compared to like or similar properties in that area, usually 3 sales and 3 solds. Houses are spread out here, so the area is within a few miles, unlike more populated areas where the area is more consolidated. We've been lucky so far here and haven't seen as much as many places. Similar properties in Russlleville might include Whitesburg and Morristown, depending upon your neighborhood, maybe ever St Clair.
0 votes Thank Flag Link Wed Aug 13, 2008
I'm glad that prices of building materials have dropped in the St. Paul area! In our area, we've just seen a lot of year-end increases from suppliers, most citing increased fuel and production costs. Tile has increased 7%, and vinyl siding has increased 7-10% from last year. Hopefully we will see some reductions in the near future, but until the cost of oil goes down significantly, I think it's more likely that as a whole, we'll keep seeing building material costs creep upward.
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0 votes Thank Flag Link Fri Dec 28, 2007
Hi Angie:

As agents, we advise our clients on neighborhood property values. We will normally do a comparable market analysis for them for similar properties in similar neighborhood to assess the value whether they ar buying or selling. We also go into the details to explain the price variances - relocation, short sales, forclosure, probate sale, condition of the homes, seller bought another house already, etc.

However, when the prices drop (esepcially since you use plural 'homes'), it does have an effect on the value of your home. If there is only one of two, the effect is smaller, but if the number of artificially low prices are significant, then the neighborhood value goes down.

Houses are just like other commodity, the values are determined by supply and demand. When there are a lot of lower priced similar houses in like locations out there, the demand for your hoome will be lower and the price people are willing to pay for yours will be lower also.

0 votes Thank Flag Link Fri Dec 28, 2007
Sylvia Barry,…, Real Estate Pro in Marin, CA
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