Thursday, May 8, 2008

RMV vs Sales Price

One of our readers sent in this guest post, thanks JS!

My wife and I bought a bungalow in NE Portland back in January 2001 and sold a year or so ago at a hefty profit. The "bubble fever" started out slowly but by 2004 it had started to infect several of my neighbors and by 2005 it had us all in its grip. If someone sold two streets over for well over their asking price we'd all know about it in about ten minutes. On the surface we passed such gossip over the back fence as business-like as possible so as not to appear greedy or otherwise unseemly. But as we related the news to each other our silly grins betrayed our true feelings: we're sitting on gold mines and getting rich by the minute! Many of us grew cautious and told ourselves not to get carried away by the wealth effect. Others tapped into their home equity for the most trivial of reasons.

During those seven years my wife and I had the Oregonian delivered daily to our home. My guilty pleasure during the bubble years was to read the weekly Bought + Sold column in the Thursday InPortland section. The column organizes home sales by zip code and shows both the sales price and the real market value (RMV) of the home. A firm called First American Real Estate Solutions provides the data to the Oregonian. Week after week the sales price would greatly exceed the RMV of homes throughout the metro area. What is the RMV? That's the estimate of the home's market value that Multnomah County's Assessment and Taxation Division calculates. They use it to help determine property taxes. If you have the street address of any property in the metro area you can find out its RMV by going to PortlandMaps and looking for its property value in the Summary section. Realtors will tell you that the figure is practically worthless and is far too low. And they have a point. The only way to know the true market value of a house is to put it up for sale and see what a buyer will pay for it. And yet, the estimate will put you in the ballpark at least.

So as I said, for all the years that I read the Bought + Sold column it always showed sales prices exceeding RMV estimates. And as I already mentioned, we sold our bungalow at the height of the bubble market. For a year now we've been renting, watching, and waiting. And it's a strange feeling. Now I'm on the buying side again and so I look at the Bought + Sold column from the perspective of a buyer. I want to see the trends. I need to know how much certain houses in certain zip codes sold for and whether they are over or under the RMV.

But I can no longer do that. Several weeks ago, without editorial comment, the Bought + Sold column dropped the RMV figure. Now they list only the sales price. Did the Oregonian's editors make this decision? Or do they farm it out to First American and they were the ones who made the decision? There is someone who does know and that's Michelle Brence, the InPortland Editor. I've e-mailed her twice to inquire about the change. But I've never received a reply. (If you're interested in giving it a try she can be reached at 503-412-7059 or by e-mail at michellebrence@news.oregonian.com.) It's a real hassle that the RMV is no longer printed. I've taken several street addresses from the column over the past few weeks and plugged them into portlandmaps.com to find the RMV. A surprising number of them are higher than the sales price. That means that a lot of sellers are willing to accept offers below the county's estimate, an estimate that realtors have said is too low to represent the real market value. But the average reader wouldn't know that because that information is no longer available. And that's a shame.

- JS

38 comments:

AllanF said...

Nice guest post. Thanks.

I suspect the newspaper men & women rationalize their decision that they don't want to feed all the "negative hype".

And yet no one ever worries about "positive hype" or the bubbles it contributes.

Anonymous said...

A bit more about RMV. The county does a property valuation in January that is based upon sales statistics for the surrounding neighborhood. There is no physical inspection of the property and no consideration of condition. This valuation is made public 10 months later, in November, and is used for an entire year. So the RMV you see today reflects calculations, that may have been incorrectly done, from 16 months ago. RMV is a joke. For a long while it was frequently low and it appears today that it will be frequently high. The "R" should be changed to "O" for Old. And, yes, I am a Realtor. And, yes, Realtors have easy access to RMV in the database of the RMLS.

Perplexed said...

The RMV is the result of a statistical analysis based on sales that is validated periodically by physical inspections of property. It is a way of distributing the cost of government services.

I think it is important for the taxpayers to be able to see actual sales and RMV to assure that the Assessor's office doing a good job. It is just as important to see these figures in an up market as in a down market.

If the RMLS makes the data easily available to Realtors it must be pertinent to your business. If the data is 16 months old and the real state market is stable then few homes should sell below the RMV, right. So why are you blowing off the RMV?

Anonymous said...

The RMV is a joke. It is rarely close to the value and even during boom times it was often too high and even now is often too low. Since taxes and RMV have little or no relationship since measure 50 no one has any real vested interest in accuracy (with the exception of new construction or people coming off of tax abatements). People just care that the value is above the Assessed Value which is what the taxes are calculated on.

Perplexed said...

Well RMV may be a joke to you but I doubt that potential buyers think so. With information on PortlandMaps available it may well be an important factor in an offer. Laugh away at your peril...

Anonymous said...

Perplexed,

I'm with you on this. I'm not saying that the RMV is the only factor I'm taking into account when considering making an offer right now. But is IS a factor I look at and balance into myoverall offer.

What's with realtors and brokers and the pissy defensive attitudes? Be honest, you have had a relatively easy time making a living over the last few years. No need to get upset with buyers that aren't willing to overpay on overpriced properties in a declining market. It's just time to roll up your sleeves and work a little harder to attract buyers like myself. Chin up, the sun will come up tommorrow

Tyler said...

Perplexed,

I'm with you on this. I'm not saying that the RMV is the only factor I'm taking into account when considering making an offer right now. But is IS a factor I look at and balance into myoverall offer.

What's with realtors and brokers and the pissy defensive attitudes? Be honest, you have had a relatively easy time making a living over the last few years. No need to get upset with buyers that aren't willing to overpay on overpriced properties in a declining market. It's just time to roll up your sleeves and work a little harder to attract buyers like myself. Chin up, the sun will come up tommorrow

DS said...

OK you guys, here's the deal. It's about having accurate information. First, if RMV is going to be a statistic that is used by buyers to determine value, then there must be a better source that will keep the informaiton current enough to be relavent. Second, a good Realtor will not rely on statistics generated by the tax assessor. Being a Realtor is a service busniness. As a buyer you should expect to receive a full comparative market analysis on any home you are considering making an offer on. This will show you what is happening right now. What are the surrounding houses selling for? What are the CURRENT market conditions? This is the info you need. And, I"m sorry, but I have never, in 23 years of home ownership ever had a tax assessor darken my door. Perhaps they have driven by, but that is not going to give an accurate valuation.

Anonymous said...

If you were selling your house, would you use the RMV in your tax record to determine its value? Remember buyers, someday you will be a seller. Will you be satisfied with what the tax records say your house is worth when your neighbor’s homes are selling for more? I've sold real estate in NY and OR - tax record "RMV" is always lower than actual selling price or appraised value.

The examples you cited where sales prices were lower could be short sales, foreclosures, houses that were fixers… there could all kinds of explanations. You can’t infer that these sellers were willing to sell for less than RMV. Also, some sellers may choose to sell their home below market value to a family member or friend!

bearlee said...

So let's get back to the original question...why did the O stop printing this info?

Why now?

Tyler said...

excellent question bearlee, why indeed? I'm a little weary of agents asking me, how would you feel if you were selling? It's not my fault that the market is adjusting backwards. I've had chances to buy over the last two years but have continued renting and waited for the tide to ebb. They screwed up and bought overvalued property. As a buyer I can use whatever criteria I feel like to determine the value of your property. If we disagree then we disagree and I'll find somebody else who is tired of paying double mortgages and taxes.

PDXOutsider said...

Great post JS, lots of comments.

Personally I believe that the RMV was removed due to pressure from advertisers. I have less and less faith in our media companies the more I get involved with blogging.

DS said...

I think that YOU, who post incessantly with such a negative attitude, have lost the consept of HOME. Those of us who buy to have the joy of tearing out our yard as we so choose, and painting our house any color that we love, you can not do that as a renter. A homeowner can do that in spades, and weather the market, highs and lows. Given time , real estate will go up. There is no period in history, short of a specific-location desaster such as Cherenobyl, in which that has not happened. All you renters out there, suck it up

PDXOutsider said...

ds, suck what up? All of us here who are renters at the moment choose to be renters. I'd love to own a home, and I have in the past. But I believe I can get a better deal by waiting, and frankly I'm thrilled that when my yard needs mulch, I call my landlord.

And this house is very much our home. You don't need to own it for it to be your home.

When we lived in Germany I wasn't sure it would ever feel like home. But after a trip back to the States, it really felt good to be back in Stuttgart, because that was home.

DS said...

I guess I just see a difference between choosing to make a modificaiton (remodeling) and having to get permission to make a modification. I like being in charge of my own life. I am a cancer survier. Life is so precious. I too have lived over seeas, in France, It is the same world-wide. There are the "haves" and the "have nots". I guess each and every one of us finds our place on the planet. I am hoping that we find our space to be first, peaceful. After that, lucrative. I think that as a renter, you are paying someone else's mortgage, and living under someone else's rules. That's pretty uncool, to me. So you are paying someone else's mortgage? How cool for you. Yoi must me so proud. Your're landlord does your yard work? Hmmmm... to me...lame. Anyway, we all find are place on the planet: even people who are not up to being home owners.

Anonymous said...

Unless your house is paid for, you don't own shit ds.

PS. I can paint my place any color I want and actually have more freedom to live as I want as a renter than most homeborrowers saddled with endless chores and expenses.

Anonymous said...

Hey Anon 7:17,

""RMV" is always lower than actual selling price or appraised value."

I am buying a house (in escrow) for $500,000 that has a RMV of almost $950,000.

The "asking" price on this house is $436K and the RMV is $543,000.
http://www.portlandmaps.com/detail.cfm?action=Assessor&propertyid=R585526&state_id=1N1E33AB%20%2080021&address_id=1048294&intersection_id=&dynamic_point=0&x=7640420.563&y=688023.525&place=1420%20NW%2020TH%20AVE&city=PORTLAND&neighborhood=NORTHWEST%20DISTRICT&seg_id=136165


So much for "always"

Anon 2:54

bearlee said...

While my landlord, or in my situation, the hired landscapers, are doing the yard work, my family and I are at the beach, or at Saturday Market, or the farmers market, or skiing on Hood. I owned for 8 years, you can have your maintainence, yard work and remodelling! I like my freedom. We are even considering living 6 months in Hawaii and 6 months in Portland. Try to pull that off as a homeowner and a hefty mortgage hanging over your head.

We all have different priorities. I have a wonderful rental, good location. Stress free at half the cost of my old mortgage, utilities, taxes, etc...and NO maintainence!

BTW, I could never afford to live in this hood (well, I see a few condos in foreclosure, I could pick one of those up, I guess) but anyway, I am in the best school district in Portland. Another bennie of renting for us average folks.

bearlee said...

I am buying a house (in escrow) for $500,000 that has a RMV of almost $950,000.


Dang, do you know the sales history via Portland Maps? Is it a foreclosure? Shortsale? Do you think it was ever worth $950K.

How did you score that deal?!?

Congrats and I hope the financing goes through.

bearlee said...

Ahhhh, the ol' argument of paying someone else's mortgage...how much interest have you paid thus far on your home loan (and HELOC, etc). I think it's fair to say that you are paying those 6 figure bonuses for the bank executives! Doesn't it just piss you off when the banks post losses and the executives still take home their 6 figure bonuses?!?!

Since my housing expenses are so low I am able to maximize my 401K and other savings to take advantage of the slump later in a year or so. Not only will my retirement savings be bulked up but my down payment will grow to the point of possibly putting 50% down depending how much house I want to be if we decide to go that route.

I know too many folks relying on their home equity to fund their retirement. I think that is foolish. How many out there are saving at least 10%? Kind of hard if your mortgage is so steep.

Anonymous said...

bearlee, you changed your tune awfully fast there. You love the freedom of renting, but I guess the burden of homewnership is worth it if you can score a great deal or afford a house in your school district of choice?

I don't understand why so many "happy" renters here are so preoccupied with the state of the current housing market. It looks a lot like sour grapes to me.

Now you think there's a conspiracy going on involving "RMV" - whatever that is. Can't you all find better things to do with your abundant free time than over-analyze something that can't be quantified in black and white?

Yes, housing prices in Portland will drop, just as they have in past recessions - then they will rise again - this economic scenario repeats itself over and over - always has, always will. Some homeowners will loose, most will be fine.

bearlee said...

I will buy if it makes financial sense. Right now, it doesn't make financial sense to me. Things I consider: How big will my mortgage be? Can I still save 10% for retirement? Can I leave for a few months and still cover my mortgage? Houses are over priced now and rent is cheap. We wait and see. We are eye-ing townhomes, condos, you know, the low-no maintainence kind of living. Yet, we are also comfortable with renting long term. Sure, I sound indecisive but there is a lot to consider and who knows where the market will be in a year or three. Bottom line, houses are overpriced and dropping. We wouldn't be having this conversation if I was still in Iowa were you can buy a house for 60K!

Anonymous said...

-So much for "always"-

I said: The examples you cited where sales prices were lower could be short sales, foreclosures, houses that were fixers… there could all kinds of explanations. You can’t infer that these sellers were willing to sell for less than RMV. Also, some sellers may choose to sell their home below market value to a family member or friend!

My point is that the RMV in the tax records is meaningless in regards to current market value. CMV changes constantly due to property condition, market conditions, etc. If a house is in foreclosure or has been damaged by fire or is in bad condition due to neglect, the RMV in the tax records isn't going to reflect that.

Also, selling price does not automatically reflect CMV, for the same reasons just mentioned.

Perplexed said...

To the Realtor who says s/he never had an assessor knock on their door.. lucky you. We lived in our Westover neighborhood home for about 25 years, they attempted home visits at least 3 times that I can recall. Husband shooed them away or the baby sitter forgot how to speak English. ;)

bearlee said...

Another reason us "happy renters' are worried about the state of the housing market is that it effects the entire economy...have you noticed?

Think of it this way, at a local level...say I get in over my head to buy a house in a hipster area. Gee, now I can't afford to do the hipster things, ie, go out to eat, by coffee and bagels, buy locally designed and made clothes. I am eating top ramen. You think those shops are gonna survive when I can barely make my motgage, and gee, it resets in 12 months since I am in a IO?

Another thought, gee, say I bought 5 years ago and now my home has a ton of untapped equity, let's go buy new cars and take some trips and remodel, etc. you know where I am goin' with this...equity is tapped out now I start using my credit cards, now I stop buying, etc and the economy takes a hit.

This housing boom and bust/credit crunch is effecting the entire world, literally. It's not just about me being a renter vs home owner and what suits me and my situation.

Anonymous said...

“They screwed up and bought overvalued property.”

How did they know it was “overvalued” at the time? Hindsight is 20-20; no one has a crystal ball. The media was hyping the rising real estate market just like it’s now hyping the falling market. And why did they screw up? Unless they were buying solely as a way to make money, they bought a home and have a long term investment, security and pride of ownership. In the meantime they’ll loose money on paper – in the long run they’ll have financial security. I’m speaking from experience as a 50-something homeowner.

“As a buyer I can use whatever criteria I feel like to determine the value of your property. If we disagree then we disagree and I'll find somebody else who is tired of paying double mortgages and taxes”

Good luck playing your own game! I guess that’s a good approach if you’re looking for a pure investment rather than a home. But if your looking for a home, a house you love and want to live in, you’re strategy isn’t going to work.

A home isn’t a commodity – I’m amazed that so many on these blogs are looking at the housing market exactly like the speculators who helped cause the run up in prices.

Bottom line – you can’t use tax accessor RMV to gage current market value or as a negotiating tool when making an offer.

Anonymous said...

...as in 50 year old - I onll own one home!

Perplexed said...

"Bottom line – you can’t use tax accessor RMV to gage current market value or as a negotiating tool when making an offer."

I can if I want too.

bearlee said...

"...they bought a home and have a long term investment, security and pride of ownership..."

I think I would remove the word security but I agree with the rest. If you are in over your head, ie, unable to save for rainy day, retirement, kids' braces, car repairs etc because you have a huge mortgage how can you be secure. What if one loses a job or needs to make a career change can you get by on one income?

Housing prices are way out of line w/ Portland incomes...IMHO

Anonymous said...

Perplexed: Yes, you can do whatever you want; that doesn’t make it right or rational. Do you have an actual point to make?

Bearlee: I meant security in that you have more control over your own living situation and you have an asset on your balance sheet. There are no guarantees in life, including for renters. How do you know your landlord won’t end up in foreclosure, or will have the money to fix your furnace when it breaks down?

It sounds like you’re projecting your own fears onto all homeowners. The majority of homeowners will be fine – they’re “losing” money right now on paper only. If you don’t have an ARM and if you don’t have to sell in the near future (having bought in the last year or two with zero down), then you’ll weather the current downturn and continue to build equity.

Most homeowners buy, not to make money, but for all the other benefits of ownership. I bought my first home in CA in 1990. Shortly afterwards prices dropped. I didn’t care because I wasn’t planning on selling and I knew prices would go back up. I did very well with that home on many levels.

I also might add that I had to compromise to get into the market. I couldn’t afford to buy anything in SF, so I settled for a one bedroom condo in Oakland. I made the best of it and had no regrets. Unfortunately in desirable cities real estate prices are generally out of reach for the average person, forcing them to compromise to get into the market or be happy with renting - everyone has a choice. You could choose to live in a rust belt city and buy a great house for $100K.

Portland is now one of those cities – you can be angry all you want about that but it’s not going to change. Many of you first time buyers will have to lower your expectations and accept the fact that you can’t start out in your dream home in your dream neighborhood or even dream city.

Portland has lots of great programs for first time buyers. If you’re serious about buying you can become a homeowner – maybe not on your terms – but being angry about the current market situation and trying to place blame all over the place isn’t going to get you there!

Perplexed said...

Anno Realtor's attitude is interesting. He isn't internalizing the change in value dynamics. What he has said about SFO is true but the economics of that metro are are quite different than the Portland MSA. I know because a member of my family recently sold a home in Sunnyvale after buying, and essentially building, a home in Los Altos.

'Special' mortgage programs are what got us in to this jam. Some mortgage programs are good deals but they are not an excuse to throw dollars in the wind.

A residence is worth only what people are willing to pay for it and what a seller is willing to accept. Cost of construction is the floor in the overall market - builders will not build if buyers will not buy for at least what it cost them to do the job.

The RMV is only a piece of information. Buyers include all kinds of factors in determining what they are willing to pay. My brother is looking for a home, he thinks the RMD is as high as he would go. He doesn't need a mortgage so if he finds a suitable property he is in a position to "insult the seller" with an all cash offer. "No" is a complete sentence. There are lots of others to look at and he is in no hurry.

skeptictank said...

Portland is now one of those cities – you can be angry all you want about that but it’s not going to change.

Yeah, yeah, we've heard it a thousand times from your ilk. "It's special here" "There's London, Paris, San Francisco and ... Portland! Yeah, I just read it in the Oregonian, Portland is the new San Fran!" Nevermind that our economy is in the last few years was being supported primarily by selling houses, mortgages, granite countertops, coffee and trendy food to each other. Oh, gee, looks like most of those sectors of the PDX economy are kind'a shaky now, eh? All those hipsters who went out and bought a condo on Burnside on part-time barrista wages don't have much disposable income left, it would seem - gee, I wonder why? So what's going to prop up our fragile economy next? Oh, I see, it's going to be rich people moving here from all over the world because this is now the new happiest place on earth. I suppose that if this were to actually happen that most of the rest of the "regular" middle class folk would be forced to live in the exurbs and work to service these rich folk - sounds like a lovely vision of the future you have there.

Nevermind that in-migration to Phoenix is at least double what it is here. Nevermind that prices in CA are falling so much and so fast that if it keeps up at this rate some fairly desireable places down there will be more affordable than PDX this time next year (assuming PDX doesn't go into the same kind of freefall).

Nevermind that the mortgage insurers like MGIC have PDX (and Bend) included on their "watch list" areas (we're in good company with the likes of CA, FL, NV, and MI) - those folks sort of need to be on top of where markets are going, don't you think? Yeah, they got kind'a burned by not paying enough attention earlier in the cycle, but now they're being a lot more careful. I wonder what they're thinking is going to happen in this market? Apparently they don't think it's all coming up roses here.

bearlee said...

Oh, I am not angry. I am actually laughing, painfully laughing about the current housing situation. I have family throughout the country and every place is so special that the housing bust wouldn't affect them. Well, my sis in Boston won't talk housing any more and my brother in Greeley 'lost' his 20% down and laughs at Denver cuz they thought they were special, too. My flipper uncle in Phoenix is pissed though. He's tired of all the scare tactics the media is portraying. Like the media needs to exaggerate Phoenix's problems!

I didn't start out laughing. I started out very concerned. I unloaded my house of 8 years, sold at the peak, since we might of had to relocate for school in a year or two and now we are renters in a complex in Forest Heights with no worries of my corporate landlord not making the mortgage. Though I would be concerned if I rented a house or condo.

Did folks really think this was sustainable?!?!

Our foreclosure rate is up 125%! And I expect it to continue to rise throughout the next 18 months. A lot of people are in over their heads. Did you see consumer debt spike: from the O

'Distressed' consumers' borrowing increases in March

Consumer borrowing rose in March at the fastest pace in four months, more than double the increase of the previous month, in what was seen as a sign of rising economic stress.

The Federal Reserve reported Wednesday that consumers increased their borrowing at an annual rate of 7.2 percent, compared with 3.1 percent in February.

The gain was much larger than economists had been expecting and reflected strong borrowing on credit cards and auto loans. The increase in consumer debt totaled $15.3 billion at an annual rate in March, much bigger than the $6 billion increase that economists had been expecting.

Sure, many folks are fine but our economy is in for a ride...

bearlee, the realtor said...

BUY NOW OR BE PRICED OUT FOREVER!!!

bearlee said...

As to the thought of buying a house as a home and not an investment one cannot ignore the fact that it is the biggest purchase of one's life. You cannot downplay the financials of home ownership. To the 50 yr w/ one home, I am sure you are well aware of today's prices. A starter that needs minimal work is around $225K. Sure you can find homes for under 200K but they need about 50K of work to make them habitable. Just out of curiosity, could you afford a 225K mortgage, PITI and utilities coming in around $2K a month to live in a house if you were to buy today? And if you are using an FHA or VA you might as well add one percentage point to the interest rate you think you will get.

WillJongIll said...

Without the qualifiers of what we've all got and how rich we are --- some people would like to buy a place but, right now, that would be a bad move. And since we're bad moves are something people try to avoid, we have to wait. And waiting is ok but not always fun for everyone.

BTW, renting is super and great but that's a different subject.

But if I've got a down payment and I'd like to make an investment in something I can live, call my own and maybe get more pleasure out of than owning a 3.5% CD.

But it's a bad time to do so. During normal times, it wouldn't be, or so I'm told. You could just buy a place and it wouldn't make you rich but you know you wouldn't be burning equity for a year or two waiting for things to turn around.

So if you're all warmed up, cash in hand and ready to go -- you have to say "slow down there, turbo.. that would be unwise. Just be patient for a year."

And you kick some little pebbles, groan and say, "ok. I guess I can wait." and then find amusement in the commotion of the housing market while you're waiting and keeping an eye on things for the moment to come.

That's cool, just would be nicer if there weren't this weird mess of weirdness and all the greed, oddities and tv shows that came with it.

squeezed said...

but being angry about the current market situation and trying to place blame all over the place isn’t going to get you there!

Huh? There? What there?

The assumption that we are bitter renters secretly pining away for mold-infested 1200 sq ft bungalows is hilarious.

Watching the destruction of fictitious wealth is entertainment whether you own or not. For a short-seller like myself it is also very lucrative.


"Bottom line – you can’t use tax accessor RMV to gage current market value or as a negotiating tool when making an offer."

Of course not. You should trust your realitter and the RMLS. They are not selling a commodity but a "home".

*sigh*

Anonymous said...

"but being angry about the current market situation and trying to place blame all over the place isn’t going to get you there!

Huh? There? What there?"

If you read the FIRST part of that sentence, you'll have the answer to your question: IF YOU'RE SERIOUS ABOUT BUYING YOU CAN BECOME A HOMEOWNER...

The rest of your remarks do indeed make you sound like a bitter person...