The evaluation and pricing of properties in Fresno and Clovis
Our group consists of Cheyenne Ison, Jose Guzman, and Mathew Curtis.

Evaluating and pricing a property is the key factor to how fast and efficient a home will be sold. When a person decides to sell their property, they need to come up with a pricing strategy that will get their home off the market quickly and for the equivalence or more of what they are asking for. In order to successfully price a property without under pricing or overpricing their property, one might use the expertise of a Real Estate Agent. An experienced Realtor can direct a person in which way the market is flowing, but most importantly will have the knowledge and expertise on how the demographics of the neighborhood or area are working. Jennifer Mitchell explains this in her article entitled: “Above, Below and Between…” “Individual neighborhoods have their own microeconomic factors to consider as well. Changes such as a new manufacturing plant to be built or changes in local zoning regulations can occur at any time. The key is for the agent to stay on top of the changes and for the seller to remain flexible and open to changes in strategy. Ultimately, your pricing method will depend largely upon your personal goals and comfort level” (Mitchell). Most Realtors use what is called the competitive market analysis, which compares the property to similar property on the market or recently sold.

Tony Christian, local Realtor, had some interesting things to say about the central valley market.

Interview with Tony Christian:

How difficult is it to establish an asking price in today’s market?

Well, it depends on how bad the sellers want to sell their house and what type of price range their home falls within. In my experience, homes that are listed under $300,000 typically receive at least ten or more offers; while homes greater than $300,000 usually receive at most six offers. It also depends how bad a seller needs to sell their home. Some people have to sell their home while others merely want to. These sellers that want to sell, typically price their homes above market value in hopes of receiving more money. However, after a few weeks of little or no interest they are more reluctant to price their home accordingly or let the listing expire.

How are buyers and sellers reacting in today’s market?

It is definitely a buyers market! The amount of foreclosed homes being dumped into the market is helping to drive prices down as banks are desperate to get these homes off their books. As far as sellers are concerned, the foreclosures have been dragging their home values down. However, the recent home tax credit has helped to artificially sustain prices and bring new homebuyers into the market, but that demand will diminish when the tax credit expires.

What’s your forecast for the future on real estate here in Fresno and will prices return to the levels they once were?

If I were certain, I would be a rich man. But actually, I think we will see home values stabilize if the number of foreclosures diminishes; however, if unemployment continues to increase and new jobs fail materializes then I think we might see another flood of foreclosures. If people don’t have jobs, then they can’t afford their homes. Also, I have heard recently where some prime borrowers are beginning to walk away form their homes, this could potentially be disastrous for the market. As far as pricing is concerned, several factors will inhibit home values from returning to their 2005 highs. The lending requirements have become more stringent and this will affect the number of buyer’s in the market. You simply won’t have as many buyers chasing homes as you did back then; thus, the demand will not push prices higher. Interest rates are also at an all time low and can really only go up from where they are now. Also, when you look at the average annual income in Fresno County, very few people could realistically afford the high prices of 2005. Therefore, I don’t see home prices climbing back up anytime in the near future, I believe that it will take many years to reach those levels once again.


COMPETITIVE MARKET ANALYSIS

A Comparative Market Analysis (CMA) is an evaluation of comparable recently sold homes in the neighborhood where the subject property is. Comparables are recently sold homes that are similar in size and style to the subject property. Buyers, sellers and real estate agents use a CMA to establish a fair price range for a home. Although reports can vary, from a two-page list of comparable home sales to a 50-page comprehensive guide, the length and complexity of a CMA report depends on the agent's business practice. However, standard comparative market analysis reports contain the following data: current active listings, pending listings, sold listings, withdrawn listings, and expired listings. When examining comparables similar square footage, age of construction, amenities and upgrades, condition, and locations are used to arrive at an average listing price for the subject property. A competitive market analysis is most used by Realtors today, but; today’s economy makes it difficult to find homes that are of equivalence because the market is changing drastically over time. Since this analysis relies entirely on other homes on the market and those that have been sold previously, it makes it difficult to come up with a good price that satisfies the seller. The market in California and definitely in the central valley has made it difficult for sellers, due to the massive amount of foreclosures and short sales that they are competing with. “Future prices will depend of the number of foreclosures and interest rates. If the number of foreclosures falls and interest rates remain stable - we will see a rise in home prices. If we see a rise in interest rates this will lessen demand and prices may remain stable” (Hawkins). No matter the price of the original purchase, a competitive market analysis will not give the seller what they possibly are asking for but it can give them some positive cash outcome. Although this process is similar to an appraisal it has its distinctness, an appraiser uses his or her experience to estimate the property’s value while a Realtor uses the market and comparables to set a selling price.


Statistical market graphs report for Clovis according to the Fresno Multiple Listing Service:


Listings Per Status



Minimum, Average, Maximum



Days on Market Analysis



Listing Price/Selling Price



PRICING THE SELLER'S PROPERTY

According to the book California Real Estate Practices, a realtor should focus on the property’s neighborhood, the property itself and the improvements that have been made to the property to allow him/her to select comparables in the same range (Rockwell, 120). The neighborhood besides the property itself is what draws buyers to the home and gives a good estimate of the listing price. If there is vacant homes or lots in the neighborhood or if the home is next to warehouses or major highways, it could influence how the price is set. The California Real Estate Practices book mentions that a Realtor should look at several specific factors that can gain interest on the property. Such as: Percentage of homeownership, vacant homes and lots, conformity meaning similarities of the homes and age, Changing land use whether or not the home is in the middle of changing from residential to other uses, how the land is shaped on the property, streets if they curve or are narrow (Rockwell, 121). Although the property can be the nicest in the neighborhood, the factors listed above can affect how the price is set. Most homebuyers today look at this to see if there is a possible future in the neighborhood or if the neighborhood will soon be abandoned. A good example of how the neighborhoods are priced can be seen in Fresno where many homes are being sold but there is a significant amount of empty homes in the same neighborhood that changes the prices of the current property. Another example can be seen on the trulia.com website where it shows that in a community like Bullard, from July through September 2009 there were 209 homes for sale, and 846 foreclosures, which shows that the quantity of vacant homes in a neighborhood was massive.

The home's presentation is everything when a seller needs a fast and easy selling process. Homebuyers are attracted to clean, spacious and attractive homes. The seller’s goal should be to impress each and every one of the prospective buyers. A seller should perform some basic maintenance to ensure their home is in ideal selling condition. Fixing any outdated or dilapidated flooring, plumbing fixtures, lighting fixtures, heating and ventilation systems, doors and windows, interior paint, exterior pain, driveways and walkways, and roofs. In order for a seller to maximize their listing price they should also consider doing the following things to their homes before listing: making entryway to the home as inviting as possible, consider planting flowers in front yard for a memorable appearance, removing any items that might potentially take away from the room’s natural appearance, touching up kitchen and bathrooms, and making sure electrical features such as the doorbell, lights, and garage door are working. In this market it is also wise for the sellers to offer some sort of incentive to the buyer’s such as including a home warranty or paying for the buyer’s closing costs.


Rosemarie Barrera, a real estate broker for Century 21 M&M and Associates of Clovis, had some positive things to say about the current market in the interview I held with her. Below are her responses to my interview questions.

How would you explain the Fresno/Clovis real estate market at this time?
Response: The market is stable due to the fact that we are low on inventory. We are receiving multiple offers on all of our listings. Before the market crashed my client base consisted of 70% sellers and 30% buyers. With the change to a buyer's market and the flood of bank-owned homes, we have been able to assist many first time homebuyers and investors, which adjusted my client ratio to 40% seller and 60% buyers. There are over 1000 less homes on the market then in 2007. Yet, 30% more homes were sold in 2008 to date then last year. Demand has been building throughout 2008 and 2009.

What changes in the market have you seen in the last year?

Response: There is a flood of first time homebuyers due to the $8000.00 tax credit. There are fewer foreclosures available than last year and more short sales but that is soon to change, there should be a flood of foreclosures coming in at the beginning of the New Year.

What would you forecast the market to do in the next few years?

Response: I think we will still continue to be stable in our area due to the prices that have fallen so much.

What are the average sales prices for houses in Fresno? In Clovis?

Response: In Fresno the average sales prices I am seeing is $185,000. For Clovis the average home price is $235,000.

How are real sellers reacting to the current market? The buyers

Response: Real Sellers (not foreclosures) who can sell which are very few are selling very fast and the buyers are becoming very frustrated because they are not getting their offers accepted. There is not enough inventory for all of the buyers coming out of the woodwork.


NEIGHBORHOODS

Neighborhoods play a huge role on pricing, but after the neighborhood is studied the homes needs to be evaluated for a “ballpark” price. When examining the property a realtor needs to study a home carefully to get a price or to be able to set it with similar homes. A Realtor will look at the home in detail such as the age, size, and whether it was well structured when it was built. Most importantly the key factors of pricing is “Number of bedrooms and bathrooms, the size of the kitchen, the presence of a garage, the degree of updating, the total square footage and the overall condition of the property rank high on most buyers' list of important factors” (Mitchell). Most people that set out to purchase a home are interested in a home that they can live in for years and grow a family in, so most look for a spacious house that fits all their needs. This is why most Realtors examine the rooms, bathrooms and dining area to see if it is large enough to set a good price as in its comparables. In this market neighborhoods have a lot to do with pricing the subject property due to the massive amount of foreclosures. An abandoned foreclosed house is a prime target for vandals, vagrants and other criminal elements. Additionally, vacant foreclosed homes become eyesores that pushed down property values in neighborhoods and present danger to the public health. If there are many foreclosures in the subject property’s neighborhood it could be detrimental on the listing price.


Local appraiser Deana Wells also had some interesting things in our interview to say about the current Fresno/ Clovis market. Below are her responses to my interview questions.

How would you explain the Fresno/Clovis real estate market at this time?
Response: The market has really been improving! Realistic pricing and great interest rates are bringing the buyers in! Interest rates are currently at their lowest point since January 2009 and currently average between 5- 5 1/2 %

What changes in the market have you seen in the last year?
Response: The market has changed for the better, there are not as many foreclosures (although I believe they’re just holding onto them!) It is harder to obtain financing which is a GOOD THING, it now requires more than a beating heart, lots of buyers!!!!

How have appraisals changed in the last few months?

Response: When markets are changing quickly, up, down, or stabilizing, the good appraiser can "feel" when this is happening. The good appraiser doesn't rely on comps, which are the past, but researches listings and expireds. Appraisals over the past few months have gotten harder due to lender requirements; all of a sudden they have some! There are way more FHA appraisals rather than conventional or VA.

What is your forecast for the market in the next few years?

Response: Next few years.... I've lost my crystal ball, can I borrow yours???? :) I don't know.... Personal vs. professional - Personally, I believe we're dealing with a false market.... Let’s not get into political views..... Professional - I hope for the best!

What would you suggest to sellers wanting to get the best appraisal figure for their house in this market?

Response: Sellers - Have something a buyer would want! CONDITION, improvements, staging, be realistic!


COMPARABLE PROPERTIES

After examining the property, the next step for a Realtor is to look for other properties that are similar enough, so that a price can be set. “These properties are called Comparables because they have the same or nearly the same characteristics as the seller’s property.” (Rockwell, 128). The advantages of using comparables are that the Realtor and the seller can be aware of how the market is doing for homes in that similar category. It can allow them to see how fast or how long it might take the property to get attention. Everything that has to do with the current property may have similarities all around with other properties, which is why many homes in the same neighborhood have usually the same listing price, with the exception of short sales and foreclosures. The use of comparables can set financing terms and conditions that can help the seller find the perfect buyer. Evaluating and pricing a property is one of the toughest factors to selling a house. This why many people settle to find a well-known and respected Realtor that has experience far beyond others to set a price. Homeowners always want the most for their property and that is why there are little to no homes being sold by the owners on their own.

Fresno housing statistical graphs according to the Fresno Multiple Listing Service are below:


Listings per status



Minimum, Average, Maximum



Days on Market Analysis



Listing Price/Selling Price




Sources

Appraiser Interview: Deana Wells

Above, Below and In-Between: How Real Estate Agents Price Properties. Retrieved September 29, 2009, from Associated Content: http://www.associatedcontent.com/article/813873/above_below_and_inbetwe en_how_real_pg5.html?cat=3

California Building Industry Association-Housing starts, afford-ability index, and general statistic info.

California Real Estate Practices. Bellevue: Rockwell Publishing, 2009.

Fresno Association of Realtors- Multiple Listing Service Statistics- Including days on market, pricing, solds, and under contracts.

Fresno Real Estate Overview. (2009, September 29). Retrieved September 29, 2009, from Trulia: http://www.trulia.com/real_estate/Fresno-California/ Mitchell, J. (2008, June 26).

Hawkins, L. (2009). News Articles-Fresno/Clovis Real Estate Market. Retrieved September 29, 2009, from YourFresnoBroker.com: http://www.yourfresnobroker.com/news.html

Realtor Interview-Tony Christian

Realtor Interview- Rosemarie Barrera