Home values hard to figure
EAGLE COUNTY, Colorado – Just about everyone knows local property values have dropped in the last year. But by how much?The quickest answer is no one really knows. The reason, in large part, is that there haven’t been enough sales this year to determine just how deeply the market has dropped.There were 286 real estate transactions in June of 2007. There were 78 in June of this year. Through the end of June, there were fewer than half the sales recorded in the first six months of last year.Appraisers make their livings, in large part, evaluating home values based on the sales of comparable property in the same neighborhood. When sales drop off at the same time values do, it’s hard to get a really clear idea of what’s happening in the market.Tim Savage has been an appraiser in the valley for the last 18 years, and in the local real estate business for 25. He’s seen both rises and dips in home values, but he’s never seen anything like the current slump.Savage said the current slump has left him with few sales to compare, and plenty of homes on the market. So he uses the tools at his disposal, as well as a good dollop of common sense.”Anybody who bought in 2007 or 2008 can’t sell that property for what they paid,” Savage said. “But how much less is the million-dollar question.”
In most cases, property value – and perceived value – is in the eyes of buyers and sellers. Both Savage and some local brokers believe that many sellers may still be seeing pie in the sky when it comes to what their property’s worth. Brad Tjossem, a broker with Slifer, Smith & Frampton, was the listing broker on a sale set to close Aug. 17. That sale will be for 45 acres near Dotsero. Eagle County is ready to pick up the property – most of which is in the Eagle River’s flood plain – for $450,000.The county bought the property from a bank, which foreclosed on it from the previous owner. Tjossem first talked to the owner a little more than a year ago, and was asked to put the land on the market for more than $3 million. Tjossem, who’s been in the local real estate business for more than 15 years, told the landowner that wasn’t a realistic price. The eventual listing price was dropped to about $1.5 million, and there were no takers.The property eventually went into foreclosure and wound up in the hands of a bank that thought getting out from under the land at $450,000 was a fair deal. Even then, the lender took a loss of roughly $200,000.That’s an extreme example of a seller with dollar signs in his eyes, Tjossem said, but it’s not the only one.When Beaver Creek Landing, a condo project at the top of the gondola coming up from the Westin Riverfront Resort & Spa, went on the market two years ago, the roughly 60 units there were all under contract in about two weeks. All the units closed, and then the bottom fell out of the market.”These people have great properties,” Tjossem said. “But most of them bought with the idea of flipping them.”Most buyers got in for between $800 and $900 per square foot, Tjossem said, the promptly turned around and put them on the market for $1,000 per square foot or more. Now, the prices are dropping, bit by bit.”Every day I see an e-mail with another decline,” he said. “You’ll see $50,000 here, or $100,000 there.”But those drops aren’t going to be enough to lure buyers right now, Tjossem said. To really see some action, sellers are going to have to break down and drop their prices, significantly.
To a large extent, that’s been the point of a handful of real estate auctions in the valley this year.A home on Buffehr Creek in East Vail recently sold at auction $2.58 million after once being listed for $5 million-plus. Slifer Smith & Frampton is taking its first foray into the auction business Aug. 26, when the company tries to sell one of two brand-new homes on Streamside Circle in East Vail.The winning bidder, if there is one, can pick between the two houses. But that bidder will have to put up at least $1.6 million to win the auction. That could be a bargain, considering the last listing price for the homes was around $2.7 million, and the last sale at the small development – in October of 2007 – was for more than $3 million. People in the auction business say auctions are the only way to establish the “true” value of something. Ric Souto, who’s running Slifer, Smith & Frampton’s new auction division, doesn’t go quite that far. An auction, he said, sets the value for one piece of property on the day it sells.So why go to auction?”The seller wants to make something happen,” Souto said. And, Souto added, he believes the seller has set the minimum bid low enough to attract an opening offer.”What determines whether it works after that is the buying public,” Souto said. “The minimum bid is a significant discount on what the perceived value is. If someone believes he can buy it for that price, he’ll bid.”Savage believes in the validity of auction sales, if there’s a willing seller and buyer and there aren’t any complicating factors such as divorce, death in the family or financial hardship. But he isn’t sure how auction sales will affect his work over the next several months, because auction sales are different than standard real estate deals.What he does know is that it will take more than a handful of sales at a discount to kick-start the current market.”I don’t think anyone knows what it will take for that to happen,” Savage said. “Nobody’s seen this market before.”But, Savage said, he suspects that sellers will have to drop their prices more than they have already to bring buyers to the table.”I think we’re a long way from recovery,” Savage said. “The market has to stabilize before we can even think about rising values.”But Tjossem said he’s seen some good signs over the last several weeks.”As prices keep dropping, our online volume is way up,” Tjossem said. “We’ve got lots of people looking now, and we didn’t even have that earlier this year.”Business Editor Scott N. Miller can be reached at 970-748-2930 or firstname.lastname@example.org.
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