Joe's Corner  

Joe White - Real Estate Broker
Northern California Real Estate
Northwest Sonoma County and Southern Mendocino County
Recreational And Estate Properties
We have been doing this since 1976

Judging Value

February 5, 2010

We could stop there because that covers most of it.

Is extremely difficult to value fairly. Commercial properties worth the value created by the income stream it can produce and is relatively easy. Since country properties are so different, we are constantly balancing apples, oranges and distance, time as well as ambiance and improvements to come up with a logical value. As an example; we are continually comparing similar sized properties in Cloverdale or Yorkville or anywhere within an hour and a half of Healdsburg. These are the things we look at.

Are only of value to the Buyer if they can use them. Their condition, obsolescent, appearance, location on the property and ambiance are all a factor. I have a client who designs houses for people with serious money and he firmly believes you cannot do a proper job of building a house under $1,000 per sq.ft. Ninety-five percent of the properties will run from 5 to 20% of that. There are several rules of thumb. A building without permits is worth about half of what it would be with permits. Naturally there are exceptions. There is a nice non-permitted house for sale now, which I give no value. It is a misplaced, non-usable improvement. Dated kitchens are usually more of a concern in houses over 10 years old. It is amazing how many new nice houses are built without decent master bedroom closets.

To more remote properties falls into broad classifications. First of all, can you get there in 99% of the weather conditions, even if it takes a 4x4? If yes, it has the potential to be lived on. The next stage is if it is accessible by a passenger car. Then is it dirt or gravel road and, if yes, then how long do you drive on non-paved roads. Many people will not live on a gravel road. High banks or cliffs are a hindrance to many people. The closer a property is to town, the higher it's value due to the time taken to drive to it.

Can be just as bad if you have 160 acres or live in a subdivision. Talk to the neighbors during the contingency period if you did not do so before. Look at them, their house and their cars. Listen to them and ask about the other neighbors. People will tell you amazing things if you ask. Obviously, we eliminate properties where the neighbor loves every car he has ever owned and has them in his front yard.

Defines what you can do with it. There are many wonderful older houses that are, by today's standards, much too close to a busy road. Anybody can say his or her property can be a B&B, but if Highway 101 is 120 yards away, who will come a second time? To live in the country typically means you are outdoor oriented. My rule of thumb is you need at least one good acre of gentle land. Lots of 40 acre and even larger properties just do not have it. Privacy is virtually always a goal. Building below a road can be a serious negative. Who wants every car that drives by looking into your yard or house?

You can clear the fuel supply away from your house. You can use non-combustionable materials on your roof. Stucco is great but expensive. If you are in a dead end canyon and a fire comes up the canyon, what can you do? If there are no solutions, do you want to be there?

The feeling the property gives you as you come to it. Hard to quantify, but possibly the most important single factor. Most people views. Some like to be in the redwoods. One is not better than the other. Just different.

It is time. We balance out the distance from things like Safeway, restaurants, Highway 101, the Golden Gate Bridge, etc. We also take into consideration the type of road.

Has some impact. Healdsburg is a better name than Cloverdale. However, there are some spectacular properties in the hills overlooking Cloverdale. The Russian River area is still spotty, but there are also some great properties there. There are 6 subdivisions in rural Western Sonoma County. Their CC&R's effect value.

I cannot think of any time it is a negative. Even pigs are fun to watch.

Are used by bankers. They are not very bright. They are a clue and they help us check what we think against reality. What is more important to me is what is available. The law of supply and demand is KING. Ask my wife what she would have paid for a parachute when our engine quit in my helicopter.

By death, divorce, job transfer and change in needs. My guess is in a healthy market about 10% of the inventory is on the market. The cycles in real estate are influenced by an incredible number of things, most are obvious. The country inventory for sale normally is probably closer to 5%. Change in use and job transfer is less of a factor in deciding to sell. Remember, supply and demand is KING. As the supply shrinks, more agents take unrealistic listings.

Primarily electricity. Without it, I reduce the value by $50,000. Our rule of thumb has been it costs about $60,000 per mile to bring in electricity. Most banks will not lend unless you are hooked up to PG&E. The wonderful shortage in California may affect that. The alternatives are solar, wind, water and generator. Usually a combination of these gives the most effective solution. For $50,000, you can have an extremely effective, virtually automatic system. For information, try Hard line telephone is important, but there are other alternatives than cellular. For about $7,000 you can have your own repeater system is you can see a telephone pole from your property. Propane can be delivered almost anywhere you do not need a 4x4. Percolation can be critical. Some properties are not capable of meeting today's requirements. Systems can vary in price by as much as $12,000 to $50,000.

And Sellers are often not familiar with other similar properties unless they are very close to their listing. Buyers typically become very familiar with the market and inventory. This is why you should never fall in love with the first property you look at unless you are with us. The number of times we see similar properties within a mile of each other that vary greatly in price, is amusing. It is difficult to judge your own children, but that is why we are here. The Internet is a wonderful tool, but it will never replace us. It is only as helpful as the information we feed it.

has to have some substance. Some effort must be made to prove the capability of the ground to produce a desirable crop. It takes money and time to evaluate the dirt, slope, area, and future market. I could not justify $100,000 per acre for bare ground to plant a vineyard. Some have paid that much in the past. The water supply will become more and more important. The costs to plant it and the care and harvesting of the crop are substantial. Once you reach a return on investment that is less than you can get by leaving your cash in the bank, you have lost any sound investment profile. There are now a few producing vineyards that realistically have a value over $85,000 per acre range. Very few. The old saying in farming was to find out what all your neighbors were going to do and do the opposite. Farming is a gamble with many things capable of hurting you. When people are trying to value the ambiance of being in the wine culture, they are not concerned with the thought of making money. We cannot base values on those very few instances. If you are an experienced farmer and you have your own equipment, you can plant a good vineyard for about $25,000 on gentle ground. If you are hiring it done, the dollar range is from $35,000 to $45,000 on gentle ground. $65,000 on difficult ground. Farming costs can run as high as $4,500 per acre. . Basically, when we value a vineyard, we are valuing a commercial operation and we work backwards from the income stream. The goal is typically a 15% to 20%return.

Lou and Bills property in the Wildwood Subdivision, Annapolis was originally listed by another agent for $975,000. After a year they came back to me. I had estimated $650,000. I listed it for $649,937 and sold it shortly for exactly that for cash.

27801 Skaggs Springs Stewarts Point Road was a house perched above the road by Junior Olsen's Quary. It started at $1,999,000. It sold 19 months later by the third agent for $850,000. I had estimated $800,000.

1501 Felta Road Healdsburg was listed in 5/07 for $3.3 mil. It sold in 1/10 for $1.95. I had estimated $1.9.

Joe White