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Determining Property Value the Right Way



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hi Phil offski here with freedom

mentor.com

I'm a full-time real estate investor

coach and mentor and in this video I'm

going to share with you how to determine

property value it is a very

misunderstood topic a lot of real estate

investors get this wrong which is the

audience I'm talking to but if you're a

homeowner and you just want to know what

your property's worth watch this video

you're gonna learn a whole lot about

that and I'm going to share with you

where the confusion comes from and then

how to get clarity alright now there is

three main parts to this we're going to

talk about first is how you value

property how's that work so number one

how is real estate valued and here's the

great thing this is really simple

because you already do it picture buying

an iPhone on eBay before you would buy

that wouldn't you try to look and see

what other iPhones were selling for

identical the one you want to buy right

if you go to a grocery store and you

want to buy bread and you can try to

compare which one is the best deal you

are looking at different breads right to

try to compare so that process of

looking at comparable sales is how you

compare most items you buy to figure out

if it's a good deal or if it's

overpriced Real Estate's the same way

you look at comparable properties and

you look at what they sold for in

comparison to the property that you want

to know the value of and that's how you

figure out what the value is it's really

that simple so if it's so easy how come

everybody get it wrong right not

everybody but a lot of people well there

are there are two main reasons when that

happens the first is where they're

getting their information from okay

information source so I'll put on this

Boris it's easy to fit where is the

information coming from all right

there's two places where it actually

comes from and the first one is county

records and county records is what can

cause a lot of confusion let me talk

about that County records okay so in

every county in America what you have is

you have different departments and two

of the departments that we deal with for

planning records is going to be the tax

assessor's office as well as the

recorders office or the Register of

Deeds so we'll start with the Register

of Deeds the Register of Deeds is the

group that records deeds and other such

documents and so that can tell you some

interesting information such as what the

property was what liens are on the

property who the owner is how long

they've been the owner when that deed

was recorded so when they became the

owner those sorts of things in some

areas the county records and

specifically the recorders office has

sales information but not all of them

now this is where this is where it gets

a little squirrely okay some states are

non disclosure states like Texas whereby

they are not required to disclose the

sales price on the deed that gets

recorded in other areas it is disclosure

so they will show it so states like

Tennessee is the disclosure state so

they always have a line on the deed

where you're supposed to put in the

sales price okay but there's more of

that and I'll come back in a second

there is other states that are called a

strict non-disclosure states like New

Mexico where there is no way it's

required that there is no sales price on

the deed there you go so certain states

reveal sales prices at the recorders

office level and some don't and that can

be a huge huge hornet's nest and we'll

get more into that in just a second okay

so that's the recorders office the

second is the tax assessor's office

now the tax assessor their job is to

figure out the the relative value of

each property in their County so they

can tax it and they can tax it as a

percentage of the value as long as what

type it is as well say if it's a duplex

which could be considered commercial

versus a single-family home that sort of

thing so Tax Assessors are literally

putting a tax appraisal on every

property every single one so some look

at that and say oh the tax appraisal

that must be a good source of value and

no let me tell you what happens to tax

our prey the first thing is most

homeowners are not willing to share

every bit of news with Tax Assessors in

other words if they add 900 square feet

in the form of an extra bedroom and

bathroom they may conveniently not tell

the tax assessor why so they can keep

their tax assessment lower so they can

pay less taxes also in certain states

there are homesteads or other kinds of

policies which as you own the property

you can elect that the tax appraisal can

only go by up by a certain amount each

year as a maximum and what happens is

over the course of many years that tax

appraisal can lag way behind the real

value that makes sense

so tax appraisals can be way off and

then also the tax assessor is supposed

to put the number of bedrooms bathrooms

square footage and that sort of

information as part of their assessment

but they get that wrong all the time

because they rarely get access inside a

property and like I said before most

property owners try to push down how

many bedrooms and bathrooms they have

because it'll reduce their overall tax

appraisal so County Recorder's offices

then both the recorders to the Register

of Deeds and then the tax assessor these

two you know comprise county records and

county records can be way off that makes

sense okay so if they're way off where

do I get you know where do you get the

rest the information from good question

the MLS the MLS is the Multiple Listing

Service it's controlled by the

the realtors and more specifically each

MLS is independently owned and they're

literally there can be more than one in

the same geographic area I live in

Volusia County Florida there are three

MLS systems in Volusia County

so the MLS I'm going to just say

collectively the MLS here but each one

is actually localized and independently

owned and it is the informations put in

there by real estate agents and the

great thing about the MLS is that real

estate agents have this natural checks

and balances system so that insures that

the listing information of each property

is accurate here's how it works let's

say you're a listing agent you list the

property if you put in the wrong bedroom

bought wrong bathroom wrong square

footage wrong anything someone's going

to find out about it when they go show

the property and they're looking at the

listing sheet and they say hey there's

not three bedrooms in this house there's

only two and they're going to get upset

with that listing agent and then that

listing agent either is going to make

the changes or get a fine from the MLS

so what happens is you have this natural

checks and balances this accountability

system with the MLS so the data is just

flat good it's real good now the MLS has

other features that are wonderful it

will tell you not only the exact sales

price that occurred but also if there

are seller concessions maybe if the

seller paid for closing cost and that

sort of thing because that really does

play a role in the overall sales price

so the MLS is where the data needs to

come from in order to make these

accurate comparisons but the MLS does

have a couple of drawbacks it doesn't

tell you what leans around the property

it doesn't tell you who the owner is

that's where the county recorders office

can help you so really a great real

estate investor who wants to truly

understand the property is going to use

the best or the the strengths of the

county records in the strengths of the

MLS I'm going to bring that information

together to make the right decision but

even if you have the right information

you can still completely screw up

determining property values so this is

where the next part comes in and that is

who is making the comparison

who is comparing you know in this day

and age there's a lot of people that

love computers and computers can do a

lot of great things they can calculate

very efficiently very consistently a

massive number crunching but computers

don't see the bigger picture computers

don't know when they have been

programmed with a bug because they don't

know how to look outside themselves and

say hey there's a bug they can't tell if

the numbers look wrong after they've

calculated something and so what happens

is we have a lot of people who want

computers to make decisions for them

when technically the best role of a

computer is to help you be more informed

so you can make great decisions

humans are not computers we have this

wonderful ability to do all sorts of

things that at this point especially in

the real-estate investing world

technology is not available yet to to

duplicate the human brain and so what

happens is this the things like Zillow

Trulia and so many other of these

systems you know they've made a lot of

headway and they're doing better and

better all the time

but they have massive weaknesses and one

of those weaknesses is they're drawing

all their information from the county

records tax assessor is whether getting

the bedrooms bathroom square footage

which could all be wrong and then not

only they're using that but they're then

trying to figure out which properties

are comparable and they're doing a

circle around the property say a two

mile radius but you and I both know that

every part of the US there are pockets

where if you go two miles apart they're

completely different worlds right you

can go from absolute the nicest part of

town the complete ghetto in two miles

and so but the computer doesn't know

that Zillow Trulia I mean in fact

there's a lot of other you can pay for

some expensive stuff sightings data real

quest that they're all getting their

data from the recorders of the county

route records and then they don't really

have a good way to be able to match up

neighborhoods and houses right so what

if you're what if you get a bunch of new

subdivisions interspersed with some

really

old subdivisions well you don't want to

compare those brand-new homes with those

super old homes it's just a 90 minute

comparison what if there is brand-new

built homes being dropped in the same

neighborhood as an older neighborhood so

the computer can't be the comparing

mechanism the computer can't be the one

to choose which are comparables true

comparables that's what you're looking

for that's what the MLS gives you some

true comparables so again let's go back

to our iPhone example if you're trying

to figure out if the iPhone is a good

deal or not you need to look at the

identical iPhones that you're looking to

buy and be able to compare what those

sales were and so to get that apples to

apples comparison in real estate you

need to find accurate comparable sales

and computers just can't do it

I mean Zillow Trulia they can be an

absolute disaster on values now that can

actually work for and against you if the

homeowner seized it and they think the

property value say 20,000 and it's

really worth a hundred thousand and

that's what Zillow said it was twenty

you know that may actually help you in

making an offer but it can also work

completely against you as well so these

systems right here I see it all the time

real estate investors they they don't

know how to get access to the MLS they

they don't know all this and so they

just try to take shortcuts and they'll

use Zillow Trulia they may even compare

like three or four different online free

systems to see what the property value

is they may even throw in the tax

appraisal it's real and they'll all

average them together bad idea because

all of these systems are all using the

same bad data and they're also using the

same bad circle radius comps in some

cases and so they're all giving you

numbers that are all bad really and

that's the best way to describe it say

what you want to do differently how you

want to determine property values is

this you want to get access to the MLS

by the way I have an entire video on how

to get access to the MLS for investors

you can search that in youtube or go to

my website check it out I'm and then you

want to use these comps and

in conjunction with what you learned in

the county records again that won't help

you necessary with value but it'll help

you know like who the owner is and what

liens they have against a property and

then what you'll do is you're just like

you would do if you were buying an

iPhone if you're buying bread the

grocery store get the most comparable

properties picture you were going to buy

that property and start to look at the

comparables how do they compare with the

subject property that you're that you

want know the value of you know if it's

a $300,000 was one of the comparables

why was that one 300 and the other one

was 275 what what made it different did

this one have more square footage this

will have an extra bedroom and you don't

have to be scientific about it you don't

have to you know do a detailed price per

square foot because guess what buyers

aren't doing that values are really

determined by what properties sell for

and who determines what they sell for

the people buying the people making

offers that's why you don't need to be

scientific in many ways when it comes to

understanding when you compare these

things these comps together instead you

want to just look at them all and then

start to determine okay because you

already know how to do this you already

doing this in your daily life say okay

this one whistles over 265 this was sold

for three hundred and five hundred and

ten what's the tip of string these two

you know and then that way you can kind

of come into a range of what it's really

going to sell for in the real world and

that's how you determine property values

your Rd you already have the skill you

just need to get access to the right

information and make sure that you're

doing the choosing of the comps not

computers and if you do get lucky and

then Zillow actually calculates

correctly in your area from time to time

great but don't rely on it you need to

know on every deal as an investor

exactly what the value is and not to be

off ever I mean this is critical when

you know what property values are then

you can be a wise investor and you can

make wise decisions on whether or not to

invest alright one fill pussy-ass key

with freedom mentor calm you can learn

so much more about it by going to our

website this particular subject I also

have a blog article written so feel free

to read that as well that will give you

a lot more insight I even give likes to

Zillow or it shows you

where's mo talks about how bad their

accuracy is in certain states like Texas

they're like a one star out of five it's

terrible but nothing Zilla can do about

it and so I'm please check those out

those resources and again Phil

house feel free to mentor thanks for

watching