A Griffith Listing

Real Estate Services by Jon Griffith

Property Appreciation Over the Past 14 Years

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We all know that we experienced what economists would call an “anomaly” between 2004 and 2011, and as a result, thousands of people who were adversely affected by it have developed a particular point of view concerning the value of real estate and it’s viability as an investment.  Remember that time?  Prices shot through the roof, then the whole market “crashed.”

Savvy investors understand that their wealth is built over time, and strange occurrences in the market can be averaged over time to reflect common, long-term patterns.

You may often hear from real estate agents that the average rate of appreciation in the Greater Phoenix Metro Area ranges between 4-7% annually.  That doesn’t apply in every area of the valley, but that’s why they call it an average.

Appreciation is calculated year over year using a rather complicated formula.  Determine a single year’s appreciation is simple, but in order to figure out a pattern of growth over a long period of time dating back many years, this formula must be applied.

A Sampling of One Area of Scottsdale

The area I’ve chosen to highlight lies between Hayden Road and Pima Road, South of McDonald, and North of Chaparral Road.  It contains approximately 2,636 parcels according to the tax records, which are public.

In this area, from the year 2000 through the end of 2014, there were 1,132 closed sales recorded in the Arizona MLS, starting with an average price per square foot in the year 2000 of $87.16 through a final average price per square foot of $172.13 in 2014.

Remember, individual home values should not be calculated based solely on price per square foot.  There are many variables that will improve or hurt the value of an individual home.

Through the mortgage crisis, the highest average $/Foot was in November of 2005 at $223.00, but despite the massive bubble that we all lived through, over the past 14 years, the average rate of real estate appreciation rounds out at 4.98% annually.

Despite the chaos, we have found a relatively normal appreciation rate based on past performance.  This is an important number because it is the number any investor would use to determine what the potential future value of a home might be worth (sans the crystal ball that we all have in our back pocket.)

This average can only be applied to the area that I’ve sampled.  It’s not general.  It’s specific.  It takes time to calculate this information, but it’s important to know what to expect when you compare the value of your home to the current rate of inflation.

Your investment in real estate starts with your equity in the property you own.  Whether you pay cash for a property and own 100% of the home or you make payments whereby a portion of your payment is added to your equity, you can apply an average rate of appreciation to that equity to forecast what it will be worth in the future.

If there’s an area you’d like to have analyzed, I’ll be happy to do that for you.  Contact me today.

Calculating Rate of Appreciation

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Real estate goes up in value, for the most part.  True, there are reasons that values can fall, as we’ve seen in the past, but overall, as long as the property is in an area that is not adversely affected by some sort of uncommon variable, then it will gradually increase in value at varying rates.

When you read about the rate of appreciation for a given area, make sure that the source of the information is properly calculating the numbers you’re looking at.  It’s very easy to paint a picture that doesn’t truly represent what’s happening.

I’ll give you an example.

Let’s say in the year 2015, you purchase a home for $100,000.  In 2016, you sell that home for $200,000.  It would be safe to say that year over year your home appreciated 100%.  It wouldn’t, however, be safe to say that month over month your home appreciated by 8.33% (100% divided by 12.)  Why?  Because appreciation is a compounding calculation.

If your home which you purchased in 2015 for $100,000 was worth $150,000 in 5 years, a 50% increase, it’s possible to make an error in calculation by saying that the average rate of return for the area over that 5 year period was 10% per year, but that’s not correct.

The actual rate of return is a much more complicated formula.  In fact, it looks something like this:

R = 100 × ((EndingValue ÷ StartingValue)(1/period) − 1)

…where Period = years, months, weeks, or whatever you choose.

So, for our calculation on this 5 year period for a huge guide on sharpening knives, we would find that the actual annual rate of appreciation is roughly 8.45%, not 10%.  Let’s proof the calculation, adding the 1 before the rate to include the starting value in each result.

$100,000 X 1.0845 = $108450.00 (Year 1)

$108450.00 X 1.0845 = $117614.03 (Year 2)

$117614.03 X 1.0845 = $127,552.41 (Year 3)

$127,552.41 X 1.0845 = $138,330.59 (Year 4)

$138,330.59 X 1.0845 = $150,019.52 (Year 5).

The variable that changes the rate of return is obviously the amount of time that you calculate, and what period you are calculating (yearly, monthly, weekly, etc.)

So you can see that someone could easily lead you astray in determining your annual appreciation rate.  Sure, estimating 10% per year in our example would only be 1.55% off, but when you’re talking about compounding values with real estate, there’s not much room for error when it comes down to the bottom line, especially when you’re considering a given area as a potential investment for your future.

 

 

New HOA Rules Change The Way a House is Sold

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On February 2nd, there will be new procedures when it comes to selling a home that is located within a Home Owner’s Association (HOA.)

Download the new HOA Form Here

Until then, we will continue to use the standard HOA Addendum that is part of the purchase contract when the property being transferred is part of an HOA.

In the past, this document was typically completed and submitted by the buyer as a part of the contract, defining such things as who would pay specific fees related to the transfer of property.  The problem with this is that without investigating the HOA, it’s difficult for a prospective buyer to determine how much those fees will be.

Consequently, buyers frequently submit their offer without knowledge of facts that would enable them to make an informed decision.

– Holly Esligner, ABR, CRB, CRS; Chair – 2014 HOA Workgroup; 2010 President of Arizona Association of REALTORS®.

Any buyer should know, before they submit the offer, what the true costs to join an association would be, whether there is one association, two, or in rare occasions, three governing associations on the subdivision (Grayhawk would be an example of this.)

The new form will change this.  The revised HOA Addendum will now be generated by the Seller, just like the Seller Property Disclosure Statement.  When someone offering a home for sale lists their home, it will be their responsibility to provide information about the governing agencies of the HOA as well as the costs associated with selling the home and include it with the listing on the MLS.  The buyer will still be able to propose which parties will be responsible for the fees, but now they’ll know what the true costs are before making the offer.

As a result of these changes, buyers will be informed in advance which will help alleviate the problem of unexpected fees prior to closing which often kill the sale of the home and cause headaches for everyone.

If you’d like to know more, a Frequently Asked Questions page has been posted as well as a Best Practices page.

E-mail and Websites for REALTORS, The Basics

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As a REALTOR, you need to maintain a digital presence.  At minimum, you need an e-mail address.  You could choose to use a free e-mail provider, or you could do it the right way, by registering your own domain name and making up your own e-mail address.  For example, you@yourdomain.com.  The only way you can achieve this is by thinking up and registering your own name.  Do this at Godaddy.com.  Register it for a year, so you don’t over commit to a longer period of time, in case your name doesn’t work out for you, and don’t privately register it.  You don’t need ANY other extras.  Just the name.

Once you have the name, you can do whatever you want with it, but the first thing you’ll need to do is establish your e-mail system.

Your best bet in our current internet climate, is to subscribe to Google Apps for Domains.  You can do this by visiting http://www.google.com/apps.  You get a 30 day trial, and after that, your cost is minimal.  It gives you a platform full of organizational and collaboration tools that are perfect for what you do.  Setup is a breeze, and the web interface works with every computing device and browser that exists, so you don’t need your own computer to manage the information, and the information remains updated, live, across every device you have, inherently.

The second task that is associated with your domain is establishing a website.  Find a hosting provider you trust, create your account there, then tell them that you already have Google Apps for Domains set up.  They’ll need to help you configure an account with them so your mail still goes to Google’s servers and not to theirs.  The last thing you want is a proprietary e-mail system hosted by a web-hosting provider, as they are sub-standard and do not play well with the rest of the online world.

You’ll want to lean towards WordPress as the framework upon which your site is built.  From there, you’ll choose from a host of free site themes, premium (paid) site themes, or custom designed themes.  Then, you’ll have your choice of free plug-ins to enhance your site, and/or paid plug-ins for features such as IDX property searches.

Once you have these two major components of your domain in place, you can forge ahead worrying about little more than providing good quality content regularly.

About Registering a Domain Name

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Thousands of professionals use e-mail every day under “free” e-mail providers such as Gmail, Yahoo, Hotmail, Outlook, and Juno.  If you’re in business, you owe it to yourself to create an identity.  Not only is this a good plan for branding your business, but it’s also a good plan for establishing a permanent “world address.”

Many years ago I registered my name, jongriffith.com because I wanted exclusive ownership of that name.  I wanted complete and total control over all of the traffic that the internet sent to that domain name.

Think of a domain name as your surname.  No matter where you go, no matter where you live, your name will always be the same.  Your numeric address over time will change, but your NAME will always be the same.

In the internet world, we don’t refer to destinations like we do in the world of the U.S. Postal Service, although the system is similar.  There’s the Griffith family household at 1234 Main Street, and there’s jongriffith.com at some arbitrary, hidden number that would be too hard to remember.

I bet, in fact, that even though you know where some of your friends and family live, by landmarks alone, you don’t know their address.  You also wouldn’t know if they moved unless they told you, and if they did move, they would have to tell you.

On the interwebs, if you move, if your “house” is burned down, (your house being the computer where your website and e-mail reside,) you never have to tell anyone that you’ve changed your address.

This is NOT the case if you use Yahoo.com, or Juno.com as your e-mail provider.  Imagine one day that Yahoo announces that they’re either a) ending free e-mail as you know it, or b) went out of business, or c) changed their name.  Now you’re stuck having to announce to everyone, yet again, that your “digital address” has changed.  In the process you lose connection with some people because there was an interruption in continuity between you and that person.

Establishing your own domain to handle your website –and– your e-mail traffic will eliminate this from EVER being a possibility.  You probably apply this logic already to your cell-phone, which should, unless the entire system changes one day, always be the same number, for the rest of your life.  Why not make your e-mail address behave the same way?

Using Google Apps for Domains (let’s just make the safe assumption that Google isn’t going anywhere) you can establish a domain name and a permanent online web-presence that will never change.

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Ditch the PC and Switch to a Mac

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As a former PC technician with over 20 years experience in distribution, retail, networking, and repair, I abandoned the world of Windows and PC’s in 2010 with the purchase of a new MacBook Pro and my efficiency has gone through the roof.  Short of a few hardware issues here and there, the most maintenance I’ve had to do on my Mac involved backing up my data and replacing the batteries in my Bluetooth wireless keyboard.

I don’t use a PC for anything, and I don’t print documents.  All of my business is done digitally between my MacBook Pro, my iPad, an Android Nexus 7 (non-Apple) mobile tablet, and my iPhone.  That’s it.  That’s all I need to conduct every form of business I encounter.

If you’re looking for someone to help you solve your PC problems, you may want to check out Data Doctors.  I’m in the efficiency business, and the most efficient and problem-free path to getting more homes sold and more business done, will be found on a MacBook.

There’s an initial investment, but count the cost of your time, and the initial start-up costs to owning a MacBook are well worth it.