Some first time home buyers in the San Jose or Silicon Valley area get confused by the “assessed property value” of houses, condos, or townhouses: they mistakenly think that this number has some bearing on the real estate market value.  It doesn’t.  The assessed value is used only for determining the amount of property tax being paid.

Residential real estate in California is reassessed upon transfer of title, or change of ownership, in most cases (there are some exemptions). From there, the assessed value can only go up 2% per year at most (thanks to the passage of Proposition 13 in the 1970s).  When property values decline, as they have recently, owners of properties with higher than market value assessments can appeal and get a temporary rollback in valuation for the purposes of having property taxes lowered.  This is very very common (and even so, the assessed value is usually still off as it’s based loosely on the January values of that year – the values are often higher than market value for these petitioned properties).  The tax assessor’s office has a lot of latitude in determining the assessed values; it is nothing at all like an appraisal, which should use strict comparisons.

Let’s look at a few hypothetical examples, taking tract housing with the same square footage, layout etc:

1 – If a couple purchased a Cambrian Park house in 1960 to 1970 and paid $20,000 for that property, but today’s value is approximately $500,000, the property tax being paid will reflect the long term ownership and won’t be based on the current market value.  That couple might be paying $600 to $800 per year in property taxes with a corresponding “assessed value” of about $52,000. (more…)

Sometimes it’s not too hard to find the likely market value of a property: it might be a San Jose tract home where several similar homes, in similar conditions, on similar lot sizes, has sold recently.  Or, if not such a cookie-cutter property, it could be a “typical” type of house for a given part of Silicon Valley – a typical Cambrian area 3 bedroom, 2 bath house, for instance.

But sometimes, you have residential real estate that really is not too similar to others nearby.  It may have been custom built or remodeled to an extreme.  It might have an exceptional location or view.  Or perhaps it’s in a region where there is very low turnover, so no recent sales.

Estimating the probable buyer’s value with a unique home for sale in Silicon Valley is tricky but not impossible.  There may be no “good comps” within a mile, but there are homes that fill similar needs and that’s where you look.  We must put ourselves into the buyer’s shoes as much as possible. (more…)

When a parent, spouse or loved one dies and he or she owned a home, there’s a lot for the survivors to do in addition to the very real and painful process of mourning.  I have been through this with my own parents (and their house in Saratoga), a great aunt in Willow Glen and many clients in San Jose, Los Gatos and elsewhere in Silicon Valley.

Where to begin?  in terms of settling the estate, it is wise to first speak with an attorney and tax professional about the property (will, trust etc. if applicable) and what they advise and require to help in doing what is required and adviseable. (I have some wonderful people I can suggest if you would like a referral.)  They will try to help you to legally minimize capital gains and estate taxes and can advise you on topics such as when might be the best time to sell vis a vis the tax liability.  This is extremely important and it can be very expensive to not take into account their guidance on this point, so I strongly recommend that you or other beneficiaries discuss everything with the attorney or accountant prior to electing whether the home will be sold, rented etc. in the short term.

How can a real estate professional help?

Most often, something you’ll need for the lawyer and CPA or other tax professional is a valuation of the home as of the date of death (whether or not there is a surviving spouse or co-owner).  You can obtain this by hiring a licensed residential real estate appraiser who will do an appraisal for you.  Alternatively, you may be able to engage a real estate licensee (salesperson) to do a competitive market analysis or comparative market analysis (CMA), which would provide the probable buyer’s value for the property.      (more…)

Today I was chatting with my lender friend, Shashank Shekhar, who’s also a very active blogger and social media maven. We discussed a variety of topics, including how to price a home for sale and establishing the real estate market value of Silicon Valley homes.

Sometimes it can be tricky to estimate what a home might sell for or its market value.  I usually talk with my seller clients about trying to find the probable buyer’s value.  The seller may have a range of prices that he or she anticipates and would accept.  So too with the buyer, whose range will likely be lower than the seller’s.  The key is finding where the buyer and seller price ranges overlap. If it’s unlikely that their ranges overlap at all, we’ll have a listing that is difficult or impossible to sell.

Let’s take a hypothetical case of a home worth about a million dollars (see image above). The seller would love for the property to sell close to $1,040,000.  The buyer would like to purchase it for $960,000.  The agent’s competitive market analysis indicates that similar homes have sold or are selling at around a million dollars, give or take a percent or two.  If the buyer and seller can come to a meeting of the minds, and there’s no undue pressure on either one of them, we have (hopefully) a sale and we have market value.

But as we know, sometimes homes sell for much more than they would seem to be worth, and other times much less.

What causes property values to go above or below what would seem to be the probable value?  Undue pressure can certainly cause values to rise (desperate buyer who just has to get into a house, even if overpaying or desperate seller who has got to unload a property, even if selling too low).
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