Mranon, Home Buyer in Truckee, CA

In a downward trending market, comps don’t seem the best measure of value for a house. Any good way to not get stuck holding the depreciation bag?

Asked by Mranon, Truckee, CA Thu Sep 30, 2010

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Rudi Hofmann, Mortgage Broker Or Lender, El Segundo, CA
Fri Oct 1, 2010
If you are seeking financing, it's the lower of the purchase price or appraised value. Appraisals are based on comps.

If you are a cash buyer, and what you stated is your primary concern, wait until the market bottoms out. You'll now when that occurs,as you watch the rising listing prices.
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Sandy Horn, Agent, Truckee, CA
Fri Oct 1, 2010
Jeanne's answer is very good, you want to look at the sale prices of properties that are a similar age, condition and size of the property you're interested in.

As to basing the offers on price per square foot, there are many variables here. The square footage of the house may be different depending on where the number came from (assessor's office, town or county number, blueprints, etc.). Once you really take hold of a confirmed number of square feet, the cost of a smaller home vs. a larger home will change that number as well. A smaller home will have a much higher price per square foot. I've always believed replacement cost (per an insurance company) to be lower than constuction cost, as a full replacement of a house will often not require the excavation or foundation work that a new build would.

Now that said, it sounds like you're looking for direction and safety in making an offer on a property. You don't want to pay too much and you don't want to see your investment decline. Each property is different, making it very difficult in any market to set a price per square foot; this even more so today. Work with a licensed realtor, they will have the education to help you find the property that will hold value for you, it is really a case by case matter rather than a price per square foot issue.

Today's market boasts amazing intest rates that make your mortgage dollars go farther and buy more house for the money. There is also a large inventory in Truckee, which is always good news for a buyer. Look at the investment over the period of time that you plan to own the property, also include the benefits of homeownership (tax write off, not paying rent that pays someone else's mortgage). This may give you a better feeling of security in making a home purchase.
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Dave Westall, Agent, Tahoe City, CA
Fri Oct 1, 2010
Mranon, Before I became a sales agent I was an appraiser in the Truckee/Tahoe area for 7 years and have great insight into the valuation of this market. Focusing on price per sqft is very dangerous as there are so many factors that go into price per sqft including neighborhood location, setting, topography, orientation, quality, condition, room count, floorplan, etc. Often times a smaller home will have a higher price per sqft than a larger home on a similar lot because the lot value is a constant and the size of the house is a variable thus the larger house will have a lower price per sqft.

Depending on what neighborhood you are looking at in Truckee pricing has fallen back to 2002 - 2004 numbers and some neighborhoods are showing more strength than others creating superior opportunities. As a Truckee-Tahoe Realtor I am well versed in pricing in all the neighborhoods, I know how to help you find the best deals in the market, and I know that I could help you figure out a pricing strategy that makes sense on many levels.

I feel that it would be in your best interest to talk with me in order to discuss your overall goals, a price range that you are comfortable, and the type of home that you would like to own. That way I can spend my time focusing on the factors that make a given property a good deal and I can consult with you in order to achieve your real estate goals.

Depending on the neighborhood pricing in the $250 -$300 per sqft range is not absurd at all.

Replacement value is very specific to a given property as the overall level of quality, size of house, and floorplan will significantly effect replacement value. In this area it is extremely hard to build a house for less than $200 per sqft unless you are building the house on your own. I am well versed in construction costs and have resources to figure out a reasonable range for replacement cost.

When dealing with foreclosure properties the banks will look at all reasonable offers. If a given home is priced significantly below the market and it is a descent home there is going to be competition which will most likely drive up the price. I am very experienced in dealing with REO properties, getting offers accepted, and watching out for my clients interests.

I would be happy to further discuss any of your questions or concerns so please do not hesitate to contact me. Have a great day and I look forward to helping you achieve your real estate goals.

Best regards, Dave

David Westall, Realtor
Tahoe Riverfront Realty, Inc.
DRE# 01796995
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Mranon, Home Buyer, Truckee, CA
Thu Sep 30, 2010
Thanks for the answers, guys - perhaps to further elaborate - I look at the local Truckee (on Trulia) trend and see a steady rise from 2000 of about $125-150/sq ft to Jan 2006, when the bubble burst. From there, we have a steady downward pattern which I'm sure is similar everywhere. Furthermore, with the number of foreclosures on the horizon, and Truckee being primarily a "second home" location, I can only see the values continuing their downward trend.

In a market like Truckee, if I'm interested in buying, would it make sense to make offer based upon the 2001ish prices?

Would an agent find placing offers on properties currently in the $250-300 /sq ft range absurd?

What about simply looking at a replacement value of between $125-150/ft - perhaps that is a reasonable number to peg to minimize potential loss? Would banks consider numbers like these on foreclosure inventory?
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Jeanne Feeni…, Agent, Basking Ridge, NJ
Thu Sep 30, 2010
Sure, the pricing analysis should factor in the trend of the market. In an appreciating market, a home may be listed and you as the buyer may pay more than the last sale. In a decreciating market the opposite is true. Your agent should assist you in building the pricing analysis to support your offer, and it should be based properties that are sold or under contract only (NO ACTIVES). The trend of the market, which is captured by incorporating days on the market, should be applied to the comps.

The listing agent should be counseling the seller that the best strategy is to lead, not follow, in a declining market. They will be wise to price below market so that they get the buyer and move on, while their neighbors work on price reductions and build days on market.

Jeanne Feenick
Unwavering Commitment to Service
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