What is My House Worth in Stockton?

You would think that between a Brokers Price Opinions (BPO’s) , Comparative Market Analysis (CMA’s) and Appraisals you could easily come up with the value of any house in Stockton, Sacramento, Manteca and Modesto.

The truth is that the real estate market is not one size fits all and yet the Real Estate Industry has convinced the public at large and its representatives that we can determine the value of any house via the critical sales data found within the Multiple Listing Service Databases exclusively. That somehow if we analyze the sales of  properties over a certain period of time generally comprising the past 3 months, for a specific geographic region (1/4 mile of the subject property) we can determine the value of any house regardless of size, configuration and condition.

I challenge anyone to ask a real Estate Agent to tell you what your house is worth and you will get pretty much the same answer… “let me run a comparable market analysis and we can review it”.

Even Appraisers, (which, in California are tested and certified the Bureau of Certified Appraisers  and are used by Banks, Credit Unions and mortgage companies)  generally agree that the a comparative market analysis is only a starting point and for lack of other things a pretty good estimate, but they will explain that the comparable sales information collected by the title companies and other database companies that also collect that type of data dont have everything and that cash is the best indicator of value.

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In fact, most of the value considerations are flawed because none deal with the true value of the house minus the financing. They are mere snapshots of what happened around the corner based on what a mortgage lender were willing to lend for those houses.

It is an important distinction, because in the real estate market, the availability of financing, changes the value of any house. It does because when buyers can pay over time they are willing to pay more based on a monthly payment.

If you are asking how can that be? How can the availability of financing really change the value of a house?

I’ll explain;

Forget that we have any sales data for a minute, let’s forget about a CMA and let’s forget that we see prices rising in a lot of real estate markets. You need to clear the memory banks of how you arrive at value defined by your real estate training and what were sold through real estate marketing.

For those of you that remember the housing bubble 9 years ago, do you remember using 3 months of sales data that continued to climb insanely monthly until the bubble burst and the free fall of housing prices began?  Do you remember that House values plummeted?  What was the free fall tied to? Every day was a new day and every sale that occurred even a week prior was no longer a valid comparable sale because values kept plummeting. Why? The banks were no longer lending and for the first time in a long time the real estate market did not know how to issue a CMA because of the lack of financing availability. It is really that simple.

So, if financing disappears for the express purpose of purchasing a home, what are you left with?

Maybe…  Cash Home Buyers?

Do You Understand it now?

So, is it now fair to say that the value of a house is worth what someone is willing to PAY CASH for it?

Not convinced?

Well, actually it is… ask yourself, if there were no banks and financing, how many buyers are you going to be showing homes to? You think the home buying population just shrank? Does that remind you of 2008 – 2012?

It’s ironic that we have such a poor understanding of economics in this country. It’s a shame that as a profession, real estate agents and investors, we believe that a home’s value comes from past sales with financing attached. In reality it comes from the real cost to build. Materials and labor plus the cost of the land and services.

The Value of any item is not tied to how similar items performed last month.  The value of the home is based on what it cost to build (and sometimes less) and only what someone else is willing to PAY CASH for it.

The conversation is that when you include financing into the equation, the numbers change across the board. Contrary to conventional wisdom, the advent of financing interjected into real estate did not cause houses to become more affordable.  The actual value of the house remained unchanged; but the availability of the house to the masses at a monthly price, allowed them to purchase it. The demand increased because the availability to finance it over time generated profits that allowed noteholders to duplicate the process.

So the next time a customer asks you what the value of their house is think for a moment and recognize that there outside factors that aiding the value of that house in the form of financing.

And the next time you review an all cash offer that is made by an investor, don’t rush to judgement. All things are not equal including the risk that the cash buyer makes in buying a property that banks won’t finance, real estate agents can’t sell and that are the blight of neighborhoods?

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So if you want to know what your house is worth in Stockton Call me at (209) 481-7780.

My Name is Peter Westbrook and I am a local real estate investor in Stockton, Sacramento, Manteca and Modesto, CA. and I would like to buy your house for cash.

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