The real estate growth assumption that cost billions. Real estate by its own nature has a huge amount of opinions, since we all live somewhere. But one core real estate assumption is at the core of the housing boom-bust, risk-reward, and the reason why so many go to the web to find answers. The next big real estate false assumption is that what matters is the property, while in reality the house does not change in value, the land does, and what affect land prices is typically not the house but local variables, local leading economic indicators are what matter and have the biggest effect on risk and reward.
This false real estate assumption is discussed in an earlier post. The False Real Estate Assumption that Appraisals and MLS information are adequate to assess local risk and make a buying decision. Home buyers and investors often make their home purchase and property investment decisions based solely on appraisals and MLS-based information about housing prices. They make the real estate assumption, and assume that those sources provide accurate and reliable information that reflects the true market value of the properties they intend to buy, and all relevant current local information.
However, this assumption is very incorrect.
Appraisers are under pressures from buyers, sellers, and banks, to overstate home values. These pressures were especially evident during the past decade. As appraisers receive over 95 per cent of requests for their services from brokers and banks, it is obvious that many succumb to the pressures and artificially inflate housing prices. Moreover, appraiser can inflate home values by ignoring problems or comparing appraised homes with inappropriate comps.
As a result, if they rely on appraisals alone, home buyers may actually pay more for a home than what a home is actually worth. And in fact, many buyers actually do. With the Growth Maps technology and the correct real estate assumption, is a breeze to make the right investment choice.
With only MLS and IDX data, on the other hand, risk is high, unless you get lucky. MLS offer information about home prices that is based on multiple realtor feeds that enter into the database as properties become available on the market and sold properties.
The data represent a fairly irrelevant; of ANY current market conditions, or local growth data, at the time when the data are entered into the database, so two or more reports about home prices in the same local market may actually be markedly different. Moreover, MLS information about home prices is based on perceptions of home values, which may be biased toward a particular type of property or market segment. And remember, agents and brokers make their income from commissions and sales, not by examining the data, or entering in data or information.
Most importantly, neither appraisals nor MLS information takes into account ANY real estate growth data – the latest monthly updated, factors such as the latest demographics changes, or economic supply and demand factors, or economic growth factors needed to make quantifiable predictions about future movements in prices at any local level.
The Growth Maps which looks at current local social-economic, demographic, and financial forces behind the changes in home values at the block level, is thus a more reliable indicator of actual values of homes at any particular time in any specific local market. It is also more useful as a decision-making tool than the information provided from appraisers or MLS sources because it offers a perspective into future trends in housing prices.
For more information, watch our free demo video on our homepage, and download your FREE eBook titled: “What’s Next for Commercial Real Estate Technology: Leveraging Technology and Local Analytics to Grow Your Commercial Real Estate Business” at /free-ebook/
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