How To Calculate Real Estate Values

The most important step when buying or selling property is to decide the real estate values. I recently observed two land purchases. The two parcels of land were almost identical. Both were 10 acres of vacant land next to one another. The first parcel sold for $5,000.00; the second for $47,000.00. Almost 10 times more!

What was the difference? The first buyer paid a fair price after calculating the real estate values, the second buyer paid ten times what the property was actually worth because he didn’t.

Every piece of real estate is different and prices vary in different areas. It is impossible to say exactly what a piece of land is worth at any given moment. The best definition is “real estate worth whatever someone is willing to pay”.

However, the following tips will give you an idea of what specific types of land in a specific area are worth.

These 5 tips explain methods to discover approximate value of a parcel of land. Following these methods you won’t pay 10 times what it’s worth. When you buy you can know you paid a fair price.

Look at Recorded Deed to calculate Land Value

In most states the seller is required to include the real estate prices on the deed. The deed transfers the property to the buyer when recorded at the local recorder of deeds. This is usually a County Recorder.

When recorded these deeds are public record. You can visit the county and see what the property values were at the time of sale. Remember values vary depending on the economy and other factors. If the property sold some time ago the value could have changed.

Look at County Assessed Value

Counties assess properties (determine property value) for taxation purposes. Property taxes are based on the property’s market value. This is also public information and can give you an estimate of the property value.

Keep in mind that county assessed values often lag real market value by several years so assessed values won’t be exactly the same as market value.

Ask a Realtor for Property Values

An experienced realtor knows the property values in his area better than anyone. If you are working with a realtor make sure you are shown multiple properties.

Remember the realtor may be working for the seller and has an obligation to get the highest price possible. You can also ask a real estate broker to give you an estimate of real estate values for a fee. This is often called a BPO (Broker’s Price Opinion).

Realtor.com, Zillow.com and Trulia.com

Realtor.com, Zillow.com, and Trulia.com are three of the most popular websites listing property for sale. Asking prices are listed so you can research properties in your chosen area.

Remember this is the price the seller is asking for the property, not necessarily the real estate values. Most sellers assume they will lower the sales price in negotiating the sale.

Realtor Company Websites

Similar to the tip above, is the real estate company’s website. The real estate company’s website may list the properties they have for sale and usually have more details and pictures than the sites above.

Property appraisal or determining real estate values is not an exact science. Even two appraisers will not calculate the exact market value of land or real estate. The above tips will give you an idea of its value, and help you avoid paying many times what it’s worth.

4 Biggest Mistakes when You Buy Property. Paying too much for the real estate is the biggest of land buying mistakes. Every parcel of land is unique. You can’t “look up” the value, making it difficult to know the right price. This especially applies in Utah Real Estate as the previous sales price is not disclosed in public records.

9 Questions to ask Before Buying Land. When Buying Land your are making a big decision and a big investment. Go slow, ask questions, and learn everything you can about the property before you buy. Below are some of the important questions to ask.

Using a Real Estate Agent. Buyers and Sellers should find an experienced, trustworthy Real Estate Agent and let them guide you through the land closing process in Utah. A Realtor is your best friend during this process and will walk you through it from beginning to end. They will help you avoid many of the pitfalls and problems that arise when buying land.

A Tale of Stolen Inheritance of Utah Real Estate

The following story is the best way to illustrate the importance of Utah real estate vesting.

Jim Duncan was a 70 year old widower with 3 grown children. His 2 daughters were married and lived out of state. His son Thomas, also married, lived next to him on the family farm, which had been in the family for 5 generations. His son now handled most of the work on the farm. The farm was on the edge of a mid-size city and was worth several million dollars. Neither Jim nor his son had any interest in selling the farm, to them it was a way of life.

Thomas Duncan would be the 6th generation to own and run the farm. He would pass it on to his children, as the family had done for over 100 years. Thomas was happy when his dad decided to remarry. His new step mom was a few years younger than his father, with two grown children, which he met at the wedding.

Just 2 years later his father, and his fathers wife, were killed in a car accident. His father died at the scene, the wife died 2 days later in the hospital, without regaining consciousness. The funeral was the second time he met her children. A week later they offered to sell him the farm – for 2 million dollars! Thomas thought it was a joke. After consulting with his attorney, he learned they owned everything. Thomas was unable to pay the price and the farm was sold to someone else.

How Did This Happen?

I have seen this type of scenario happen several times. Here is what happened. When Jim Duncan remarried he transferred the farm to himself and his new wife, as “joint tenants”. Joint Tenants is the vesting (type of ownership) which allows the property to go to the owner that lives the longest; in this case the new wife.

This is the most common way of transferring property, to a married couple, and is usually the correct way. Using “Joint Tenants’ when a spouse dies, the property goes to the surviving spouse without attorneys or courts involved. Upon the death of Jim Duncan, in the car accident, the property automatically transferred to his wife. On her death, the property transferred to her heirs, as she was now the sole owner. Her heirs were her 2 children, not Tom Duncan.

The Moral of Utah Real Estate Vesting

Make sure you know the correct way to have property transferred, or the correct real estate vesting. It really does matter!

Note: The names and some details have been changed to protect the privacy of the parties involved. In this case the property should have been tenants in common.

Joint Tenancy in Real Estate. Joint Tenancy allows the real estate to transfer to the surviving owner(s) on the death of one owner. It is most commonly used between spouses but is used in other situations and between more than two people.

Tenancy in Common in Real Estate. Tenancy in Common is the standard form of vesting, allowing real estate to pass to the owner’s heirs. When a owners dies their part of the land passes to their heirs instead of the remaining owners. In contrast, Joint Tenancy passes the property to the surviving owners.

The Family Trust and Real Estate. A Family Trust, also known as a Family Living Trust or a Revocable Family Trust, is a legal entity created by a Trust Agreement to hold ownership to your personal and real property. Your attorney will create the necessary documents to establish the trust. A Trust is created for estate planning purposes.

Tag: land