Total assessed value vs. appraised value of a home

Having been in Real Estate for 10 years I can tell you that the Assessed Value doesn't necessarily mean much; it depends on how diligent the assessors are at keeping up with the home improvements. They are hit and miss stateside so I'm guessing they may be more behind there. Until recently I wouldn't have trusted the Appraised value either. We've all seen how banks inflated home prices. With the crash in the real estate market the appraised values may be more realistic. The best idea is to get a Realtor to check out recent sales of similar homes; ask for a market analysis which should give you a pretty good idea.

I don't understand what Banks have to do with inflated home prices? Real Estate is appraised by what ever the traffic will bear, most recent comps sold in the past 6 months. Appraised value is usually the fair market value of a house, that the market dictates. Single family homes are market driven. Commercial Investment property use and income approach with a cap rate. Industrial properties are valued at reproduction costs in today's market. The assessed value is what the evaluation company told the tax assessor what the property was worth at that point in time. Then based upon the ratio the town uses (50% 60% 70% of value against the market value you have your assessed value).

We are interested in a home we saw, however, it is a wood house and, having owned one back in the Southeastern US and knowing the maintenance as well as the insurance costs in a hurricane zone, we know the monthly costs can get out of hand (there is so much more to it than just what your mortgage payment is going to be!!). How can you comp a house of this sort when there aren't any other comps within the last six months? We ran into this same situation back in NC; we had a great house, 2 acres but were in the county, not city, limits. No other comps in the same county close to the same size, same acreage, etc, sold in the last year. Everybody just seemed to start guessing what we could get. We talked to 3 realtors and their prices were at least 25k apart...each one! We ended up going for the middle priced realtors suggestions and sold ourselves.

Just trying to understand some things; know it is different here...just trying to figure it all out...

Pilates, If I was buying as you are, I`d be (WISHING) for prices around assessed values,(these values are almost always much lower than actual sales prices, not just here,as the government wants you to feel GOOD about your property tax bill, it does not reflect what anyone would actually sell their home for).

If I were selling, or owned property(which I do own), I`d say the MLS reflects the market price, take it or leave it!
I searched from 1997-2002 to purchase a home below market, as I watched the price go up & up.
Finally, I gave in, I am a proud property owner, if you wish to be one, pay the price or rent!
The inventory isn`t high at our current prices, so these prices will stick, supply & demand!

Sorry to be harsh, but I`m getting tired of sugar-coating my answers around here to placate those whom Object to my this is how it is, DEAL with it style I have!
So, in the spirit of me being myself, I suggest...either pay market/retail, or rent!
It`s really up to you!

Wood house might be hard to get a mortgage for. They may require very expensive insurance that wipes out any saving on price. You could pay cash and get no insurance and get a good deal on a wood house. Most buyers need or want a mortgage that's why there hard to sell.

Hi Pilates
Actually in the VI neither of those are really important...and yes they are both important. As we are all aware real estate in America...the world...has taken a huge hit. The Virgin Islands are not exempt from the pain. The actual price you should be paying for a house in the USVI is maybe 30% less than it sold for one year ago. If you pay more, you will be the one who later must cover the loss. Most buyers and sellers in the VI are not yet ready to accept that fact. While there are still some sales going on, the market has basically shut down. The prudent buyer is running away from the overpriced properties in the VI.

The dynamic at play right now, fits in with the historically slow movement of VI properties. Buyers do not expect their listings to sell quickly, so they are more patient and less likely to lower their prices. If they can wait long enough they will, some time in the future, be able to recapture their buying price. For Recent VI buyers it will be years, maybe decades, before their property again becomes sell able at prices near what they paid.

None of your questions are dumb questions. They are very good questions. The value of a house on St Croix or St John or St Thomas has gone down over 30%, but the market does not reflect it because of the relative isolation and the fact that most sellers do not need to sell right now. However, the banks are beginning to look more critically at how much a property is worth. They are adjusting their loan offerings based on those hard but difficult truths. Not to say that they won't continue to make mistakes, but value to loan has become critical all over the map.

I might add that US Virgin Island tax assessments have almost nothing to do with the real value of the home. For various reasons they are years off of the true value. They were way behind the extreme up valuations and still haven't noticed the movement down. The funny thing is, that they might end up being right if they stay just the way they are now. Who knows? I would ignore local assessment.

Bottom line is that houses will be financed at levels much lower than during the last few bubble years. You will need to negotiate with the buyer to reflect that reality. If you pay the current seller more, you will be the one who accepts the loss in the near future.

We are interested in a home we saw, however, it is a wood house and, having owned one back in the Southeastern US and knowing the maintenance as well as the insurance costs in a hurricane zone, we know the monthly costs can get out of hand (there is so much more to it than just what your mortgage payment is going to be!!). How can you comp a house of this sort when there aren't any other comps within the last six months? We ran into this same situation back in NC; we had a great house, 2 acres but were in the county, not city, limits. No other comps in the same county close to the same size, same acreage, etc, sold in the last year. Everybody just seemed to start guessing what we could get. We talked to 3 realtors and their prices were at least 25k apart...each one! We ended up going for the middle priced realtors suggestions and sold ourselves.

Just trying to understand some things; know it is different here...just trying to figure it all out...

Hi again Pilatesgal
You already know that a wood house in a moist or tropical climate is more vulnerable to bugs, rot and hurricanes. That is true in the VI and my experience has been that concrete (poured or block) are usually priced higher than older wood homes. In fact my observation is that most wood homes here are older. Since hurricanes Hugo and Marilyn it seems that most new building here is concrete. That also has created a concrete shortage. lol

I noticed DUN 's comment that said ..."the MLS price is right...take it or leave it." There is some truth in that comment. But remember historically the USVI real estate prices are months to years behind the states, BUT they have always eventually adjusted. So if you are in love with a particular property ...buy it, but remember you are probably paying too much. If you live there for years and years it was a good buy, but if you must sell earlier you will take the loss.

Ms information there are lots of wood homes in the vi that are way older then Marliyan or Hugo. What the locals have usually done is build the bottom with concrete and the top with wood. Heck most of our concrete homes have wood roofs! They usually also build them in safer areas, valleys or areas that are usually not hit hard. Take a look at the little wooden cottages all over Cheney Hotel. All of them are wood and have never had serious damage. Their roofs are like puzzle pieces. And right on the beach.

Mortgages will be the same for a wood home, insurance will be around 30% higher. It all depends on how well your wood home was built. I would trust what a experienced agent tells you (10 to 20 yrs exp) over what you hear on the board. If you agent hints its not the best deal, walk away, but if they hint the other way think about it. Just make sure you're going to be around for awhile before you buy anything and that you've lived here at least a year.

Mortgages will be the same for a wood home, insurance will be around 30% higher.

When we were searching for a home we found one that had been a small concrete home with a large wooden addition. The mortgage company specifically said they would not write a mortgage on a home made all or in part of wood in the Virgin Islands. So while the mortgage amount might be the same the availablility is not. Also the insurance company indicated that the cost would be about 50-60% higher than a concrete home. This was about 3 years ago.

Availability many not be as high but we have very few companies to choose from in general. Haven't seen one that has better rates then the other. So why does it matter?

Indicated is not the same as what is. Maybe its more expensive on stt or stj but you'll be able to stay in the parameters I mentioned on stx. Now I'm not saying you're going to get that rate at Marshall and Sterling but you should be able to at the others. Get a real quote first. Also other things come into consideration also, does it have shutters, has it been damage before in a hurricane, etc...

Pilatesgal, For insurance you may be able to have the current owner transfer the existing policy to you. That's what we did back in 2003. If/when you finally find a place you're in love with not only in home, property, location but also in price/value, insurance is one of many tasks you'll have to manage. Good luck in your search!

Ms information there are lots of wood homes in the vi that are way older then Marliyan or Hugo. What the locals have usually done is build the bottom with concrete and the top with wood. Heck most of our concrete homes have wood roofs! They usually also build them in safer areas, valleys or areas that are usually not hit hard. Take a look at the little wooden cottages all over Cheney Hotel. All of them are wood and have never had serious damage. Their roofs are like puzzle pieces. And right on the beach.

Mortgages will be the same for a wood home, insurance will be around 30% higher. It all depends on how well your wood home was built. I would trust what a experienced agent tells you (10 to 20 yrs exp) over what you hear on the board. If you agent hints its not the best deal, walk away, but if they hint the other way think about it. Just make sure you're going to be around for awhile before you buy anything and that you've lived here at least a year.

I think that is what I said. I was just guessing that particularly on stx most buildings since Hugo have been concrete. One of our earlier homes was pre- Hugo wood and was very sound.

"The value of a house on St Croix or St John or St Thomas has gone down over 30%..."

It has not been my experience that the value of houses on STT and STX have dropped 30% in the past year. Florida, California and Nevada have taken hits that big, but most of the rest of the U.S., including STT and STX, have seen much smaller declines.

I don't know about stt or stj, but 30% sounds in the right ballpark for stx. House are not selling for their listing prices. Others are just staying on the market for years. There are quite a few here that have been on two years or longer. The ones that don't want to budge aren't. The ones that one to sell have more or less taken a price cut from what they were selling for in 2006.

Slow Sales do not equate to a 30% loss in property values! According to figures published by the MLS and reported by RE/Max of STX the prices have gone up a few percentage points. Slow or Flat sales are not the same as the Sub Prime Mortgages that had an effect on certain markets in the mainland as to value. Condo Units and single family homes sit on the market because the owners are testing the market with higher than market prices. One must consider a comp in value of what was sold and at what price in a year to year comparison. So, so far there has been no loss in value/price on STX.

Lizard - I agree with your assessment. The properties I have looked at have not dropped in price and some have still sold without sitting on the market for 2 or 3 years. What I think was happening is that property owners kept inflating their prices past what the market would bear and hoping it could continue to climb. Those are the people who have reduced their asking price. Some friends just bought a home at 80K less than asking but it was purchased for what the appraised value was. The EDC boom and influx of "Stanford" people caused a lot of people to bump up their prices - it worked for some and not for others.

MLS and reported by RE/Max of STX the prices have gone up a few percentage points"

Luxury homes were still selling thats why prices went up. The rich still have money. Middle class homes are not moving unless they are priced very well. Most of the real estate companies have been hit very hard before season. I sure hope it gets better this season.

As far as testing the market I see some that won't budge on price (and often take it off the market with one realtor and put it back on with another so it doesn't look like its been on the market so long) and others that just keep dropping their price till it sells.

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My favorite is people who relist their slow-moving houses for * more* than the original asking prices without apparently having made any improvements or offering anything additional.

Seems counter intuitive, but this strategy may work; it's all in the marketing sometimes. Reminds me of when a friend at a college bake sale took my slow-moving $1 per piece bread pudding and relabeled it gateau de pain at $2.50 per piece. It sold out quickly. 😀

Best,

Islandlola

Islandlola,
Now that's funny!

Yeah, it was pretty funny. My friend went on to be a successful scholar and author writing about incidents from his childhood that many of us probably wouldn't think to put to paper. Marketing, marketing.

Ilo

Thank you all for your honest input...don't need anything sugar coated, just trying to get a feel for this market as opposed to the ones back in the states. We are working on our second year here in STT (moved in June of 2007) so we know that we are ready to buy something if we can find the right something! Having lived on the NC coast and weathering storms in the past there (hubby is from FL and went through his share), I do understand the wood house "issues", and, I would imagine there may be more "issues" here than stateside with them..even barrier island stateside. It is a difficult thing for my husband to see his rent payment each month and not want to own something, hence, our home search! I have been a renter for most of my life, so not so much of a problem for me...he, on the other hand, feels like he is throwing his money into Magen's each month!

We will keep searching and hopefully will find something we are looking for soon. Keep me in mind if you know of anything in the 350,000 to 450,000 range (450,000 needs to have a rental with it). Any other advice/comments would be greatly appreciated...ALL of the info helps tremendously!!

pilatesgal

Best thing I ever did was buy even though it wasn't a buyer's market at the time. Just add up what you're spending on rent plus you get a deduction for your taxes on your mortgage. Keep looking. You'll find a place. Actually, find a good realtor who will really listen to what you want & not try to force you into something s/he is trying to get rid of. Good luck with the search.

My observations of the STT real estate market mirror Lizard's observations of the STX real estate market. Real estate has always sold slowly here, but houses continue to sell and, perhaps even more telling, new houses continue to be built.

Thanks, everyone... Trade, you are a wise sage on this board! All of what you say (always!) is awesome!

pilatesgal