Valuing Tax Sale Properties - Look Behind AND Ahead (Part 3)

We've been taking a painful look back at the recent history of the Detroit real estate market.

For all you Detroit residents, we're not trying to kick you when you're down...but this market illustrates best how to NOT value properties, and how to take a realistic look at a market you're thinking of working in.

This isn't a situation unique to Detroit - let's be fair and include a similar map from my hometown area - Lake County, Indiana (home of Gary):

Ready?

Before:

$30-$72k Sweet Spot?
$30-$72k Sweet Spot?

 

After:

Uhh, No.
Uhhh, no.

 

Quite an amazing shot there of Gary's East-Midtown area.  Not only are the sale prices atrociously low...there aren't even any sales at all!  At least Detroit has a brisk market in the sub-$2000 house arena!

Back to Detroit One Last Time

Remember how I mentioned that the "sold" prices that we find don't tell us the value of our property? Only the amount that it could sell for? Now it's time to "look forward" and put that statement into perspective.

Let's return to the Detroit neighborhood we were looking at and tick a couple more buttons on the Zillow dropdown menu to let the other competition enter the picture (foreclosed houses that are likely to be similar to what we'll be selling):

addfs

Open the Floodgates...

foreclosures

Another breathtaking shot. Yes, each of those blue dots is a foreclosure that's in stock in the neighborhood. They dwarf the yellow "sold" dots, don't they?

This tells us that the banks aren't even bothering to list them because they're not selling at any price. In fact it looks like there are about 30 listings on the market in this view, and about 430 foreclosures that are just sitting without enough selling potential to warrant putting them on the market.

We've Covered How NOT to Value Properties and Where NOT to Buy and Sell Houses...

Don't get depressed! The first step to making money DeedGrabbing, is knowing what NOT to pursue. It's actually pretty easy - type a few zip codes in to Zillow where you're going to contact owners in tax sale, and just make sure you don't see anything resembling what I've just shown you!

When you've seen the extremes, you'll know what to look out for.

Next time...let's get down to business and look at some bread and butter areas that probably make up 50% of all markets in the country (including one near you) - and what our thought process is when evaluating properties there.

I'll Leave You With Something Exciting...

I subscribe to a real estate price-tracking service offered by a colleague and friend of mine, Ken Wade (Harvard MBA, CPA, you name it - let's just say this guy is good with charts...)

The information Ken has been collecting clearly shows that the markets I just showed you are NOT typical of what's going on in most of the country right now. In fact, property has been quietly appreciating at 20-25% the last couple years in some areas.

Are we going to "buy and hold"? I couldn't argue with that - at 25% appreciation even I might even be convinced to "buy and hold" for a while. But this generally isn't a wise thing to do with houses unless you become a landlord...and I'm retired from that.

This appreciation itself, while always welcome when we own property, isn't why the latest market activity is exciting to me though. I'll share with you why it's so exciting next time and we'll look at some of the markets that are more typical for us to work in.

Here are a few areas that Ken covers with his price charting product that show what prices have been doing this year in one particular area in the U.S. - notice the gains are approaching the "good old days" of the 2000's.  Soon I'll show you how this will blow our market wide open once again - it's already happening.

2014-2

{ 2 comments… read them below or add one }

julia November 4, 2014 at 3:47 am

So where those appreciations what area?

Reply

Rick Dawson November 4, 2014 at 4:22 am

THis screenshot is Florida - but many other areas are having the same rebound from the low prices to which properties sank after 2007.

Reply

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