I'm new & ignorant to buying and currently live in a town of 3000 in Arkansas.
I recently became interested in a property, 2228 sf house built in 1985, on a normal size lot, for $114,900.
Within a lot or two, there is an abandoned house, a foreclosure, a junk man's dream, a commercial store, as well as a couple well kept homes.
The entire town runs the gamut from totally worthless to million dollar estates.
There is no decent shopping within 30 miles and no hospital/emergency facilities any closer, yet the agent describes this town as a "hot" market. And, indeed, it is growing, unlike many small towns around.
New construction goes for about $60 to $70 sf.
With the housing market down, foreclosures rampant, financial institutions going under, loans tight, etc, etc, etc, how can I successfully argue that this property is priced too high at $114,900?
My first offer of $50,000 was turned down because, "they owe more than that on their mortgage."
With every property in town within a few blocks of junk property, how can I determine how much a property is worth?
Financing is not a problem for me, as I plan to pay cash, but I certainly want to keep the price as low as possible.

I forgot to mention, not that it really matters, but, the real estate agency agent I spoke to doesn't have an office in this "hot" market. Neither, does any real estate office have an office here.

The seller likely knows that the house is priced to high. They owe more than the 50K you offered and are unable to bring cash to the table at closing. That is where the problem lies. Unless you can offer enough to pay off the mortgage they can't sell.

Since you have no "local agent" you will have to find an agent that services your area. Asked some of the Town folk for recomendations, or perhaps there is agent here that can help? I'd help you but im in Ohio.

Thank you for your reply!

The question was, how can I determine how much the property is worth?

I don't want to pay more than its worth simply because they owe more.

Sure, if they owe more than $50,000, it's probably worth more than $50,000, but, in today's market, how can I convince them of its true worth vs what they think it's worth or what they simply want to get out of it? I'm willing to pay more than $50,000 if it's worth more than $50,000, but if it is worth less than they owe, they will have to take the loss or make a profit at someone else's expense.

I can't really tell from the outside, but I believe they may have moved already.

Have you looked up that Tax Appraisal Value on the CAD website? If not I would start there, but remember that is not the actual Appraisal Value that a lender would use, just the taxation value - but its a start.

Thank you for your reply!
I have not been to the court house yet, but I located this information through an online search company (bad decision, I know).

Assessed Value: $15,260
Land Value: $1,580
Improvement Value: $13,680

Does this information have any real meaning?

I missed "Who" the Respondent was in this. Is the property Listed, or is it a FSBO ? How did you become aware of it. Who set the Asking Price ?

How motivated to sell are the Owners ? Would a Formal Appraisal be persuasive ? . . . . If you paid for it ?

Clearly, they want some "Walking away Money". If you knew what they still owed, you might offer $5000 plus the balance on their Mortgage (or all monetary encumbrances); provided that the Property appraises for at least that Sum . Where is there an Objective Appraiser who knows the area ? Thirty miles away, and he's their Second Cousin ? Jimmy Bob over in White Water.

Someone is the Assessors Office might be able to tell you what the current Assessment Ratio is in that Town; so that you can calculate the aggregate relationship between Assessed Values and recent Fair Market Sales in the area; if they have such a calculation. An A/R is dynamically calculated so that every Sale is compared against its Assessment to ascertain how far off Assessments are from Fair Market. Its a good number when looking at properties overall; but lacks validity when applied to just one in a Township.

If your Target Property is Assessed at $15,260 (as you discovered), and let's say the A/R is 25%, then theoretically, the Property has a FMV of $61040. It sounds like this Territory has let their Assessments get way behind. Ask the Assessor when the last time the Target Property was Inspected or Assessed. If it's more than 10 years ago, the numbers are worthless.

And, Thank you for your reply!
Their real estate agent told me that.
She told me the property appraised above the $114,900 they are asking.
I figure appraisals, like tax assessments, can vary depending on who it's done for and whether they are "personable" people, rather than strict objectivity.

Any guess on their motivation is just that, a guess.

Right! In this county, the population is so small, everybody is related to or knows somebody who is related to somebody, or some close proximity to that.

It's not the old inter-marriage fallacy, but it is a farm community thing. Even I have many relatives here. (None of which were related before marriage, unless born into it.) I'm not making a joke. Just heading it off before it goes in that direction.

Did that Real Estate Agent by chance tell you how long ago that "Appraisal" was performed ? If it was more than 3 years ago, that too is worthless. The Market was on a positive incline. That has changed. It is now a declining curve.

If you know who the Appraiser was, you might be able to make a telephone call and simply ask what he thinks has happened to property values in that area since MM/DD/YY (the date of his/her Appraisal). He may refuse to offer you a quick (free) opinion. Does he think a Summer, 2008 would produce remarkably different results ?

What was the purpose of the prior Appraisal ?

I hope this isn't the only property that you might consider in this Local. Most of what you learn will have applicability to everything else !

How far away are these Current Owners moving ?

P.S. I just entered the Arkansas State Lottery. It pays $3,000,000 annualized over One Million years. I'll be getting $3.00 every year for a Million years !

She said the appraisal was done last year and I do not know the reason it was done.

I don't know who did the appraisal.

It isn't the only property I will consider. In fact, I may decide I don't want to live here at all, but it's in the realm of possibility, so, I look.

I'm not real sure who the actual owners are or where they might be moving to. The address is listed to one family in Reverse Lookup and another was listed on the form from the online search company (whom I do not trust, btw.)

On the ballot this November will be the Arkansas State Lottery :=)
I think most state lotteries go to funding public schools, but this one is purported to be used to fund scholarships only.
I wonder if it will work any better than other lotteries?

Thank you for you time!

Quarter- It seems you like doing things the hard way...

The easy answer is GET A BROKER to help you out. I did not say a NEWBIE/AGENT you need someone with experience.

My clients are always amazed at how much faster I get things accomplished then they will. That appraisal from last year means nothing! People that pay for appraisals the appraiser will just HIT a number to make the seller happy and collect there check.

Appraisals for loan lending purposes are totally different.

Experience and knowledge will help you achieve your goals faster. I have investors that I help make alot of money and then I have OTHERS who want to do everything themselves. I simply do not work with those people. They are usually still scratching there head months later trying to find a deal.

Is a broker an agent with experience?

How do I know a broker when I see one?

So why do you think that the property is over the market value? Have you ever run a comp based on recent sales? The will turn your offer down if they own more to the bank than you offer, because at this point hey have to go after short sale. So call the closest broker around to help you. This is my advice.

No, I haven't done a comp based on recent sales, but read the first post. I have done visual comparisons of adjacent properties, which is supposed to affect property values, I understand.

The house is empty and "They owe more than I offered" is a line told to me by the agent, as far as I know.
I'm dealing with real estate agents. How would one know what spoken word was true and what word was a lie?

But, why should the fact that they owe money concern me? Many people are selling at a loss or being foreclosed on, right?
I'll sell you my used car for $100,000 and I still owe money on it. That way, I can meet his price.

And, I still don't know how to tell a broker from an agent.

I don't expect any good information from this site.

It's for agents by agents, isn't it?