appreciation question..

I've heard it said that the appreciated value is used to determine the end purchase price on a lease option deal. For example if RE is appreciating 5% in your area you would take the mkt value today and add 5% per year and then determine the price that will be paid in the future when it comes time for your buyer to exercise his option. My question is, where would you find the appreciation rate for a given area? I know different areas of the country are drastically different, where is a good source to find the appreciation rate in a given area? Is 3% a pretty safe number no matter where you are? I mean, as long as it's not Flint, Michigan 20 years ago. smile Given normal circumstances.

Comments(5)

  • DavidBrowne13th June, 2003

    maybe 3% is safe . We are 8% here. What happened to that 5%???

    R. brokers know and some agents. you could disclose your location on the board maybe your niebor is a member Or the camber of commerce may have advice

  • sisayako13th June, 2003

    I've heard 5% also as a general rule, but as a general rule I like to be a lot more pessimisitc so as to be sure I'm not overvaluing. I'm in Utah, around the Salt Lake City area. The market is pretty stable but there doesn't seem to be huge appreciation. Anyone from Utah got a perspecitve for me? 3%? 5%? I'm basically wondering what % I should add on to a purchase price for a lease option deal I'm working on. It's in Davis county, Centerville to be more exact. Thanks again..

  • rajwarrior13th June, 2003

    If you really want to know the rate, do what David said and call up some brokers and agents and ask. You'll probably get a few different answers, but it should give you a good average.

    It's really not the important, though. If a house is priced close to what an appraiser thinks the FMV should be, they will usually try to make it work. If you did overprice the home, the worst case is you've probably gotten the highest appraisal you're gonna get on the home. Simply agree to adjust your selling price and go with it.

    If you happen to undervalue the house a little, you've just made your tenant/buyer really happy and probably created tons of leads from all the people he'll tell about you.

    If you're buying them right (below FMV), the bump up on the appreciation is just icing on the cake for the investor anyway.

    Roger

  • UncleJaz22nd June, 2003

    I have developed a relationship with an appraiser who has extensive data on sales and property value increases. As a part of my due diligence for every lease/option deal, I give the address to my appraiser and he prepares a report showing comps and property value growth rates. If he dosen't have to visit the property he charges $75; If he does visit the property he charges $150. To me, this is a small price to pay for knowing this information and you have the data you need when you're negotiating with sellers and buyers. You might also check with brokers in your area and see what they charge for a BPO (Brokers Price Opinion) for a given property.

  • sisayako22nd June, 2003

    So he's an appraiser and a broker? Which should I talk to about it? I have a lot of agent friends, and a few appraiser friends. which would have the best idea with hard facts to back it up?

    Andy

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