An integral part of understanding the value of a property is understanding the factors that may effect this value. The old adage of Supply vs Demand is no more relevant than in Real Estate. These market conditions ultimately affect how much someone is willing to pay for a property and how quickly it may sell. Most BPOs have a section asking for current market conditions. It is important to remember that they are looking for your professional opinion but it’s impossible to have a 100% accurate number as the market is changing daily. Do you believe the market conditions are slow or bullish, improving or excellent? What is the overall sentiment towards purchasing and selling homes. More importantly, what is the condition of the exact neighborhood where the subject property is located? How are property values doing as a whole?
Obviously each property and pocket neighborhood has varying answers but on a whole what is going on with prices and time on market. Are properties sitting on the market for longer periods of time and are prices decreasing as a result? How are the employment conditions in the area? Did the largest employer in town go out of business and was the local employment rate affected by the closure? It is important to use generalizations when completing the marketing condition section of a BPO as you are trying to paint a picture of the local market in its entirety. Not just a block or a gated community.
Sometimes a BPO requestor will want to know how many of the occupants are owners and how many are renters. While this is not an exact science, you should be able to estimate the percentage of each based on your professional knowledge of the area. Remember you have been hired to give your opinion as a market professional, whether they agree or not. Knowing who the occupants are and the estimated breakdown is important to understand who a potential purchaser may be. Is it likely an investor or an end user? This information may help in determining how to market the property and whether or not repairs should be made. Primary residents may expect or prefer a fully renovated house whereas investors would be willing to purchase a property with more work required.
How much supply is in the current market? Is there an excess amount of inven- tory for sale now or is inventory at a normal level for the area? In addition to over- all inventory, the BPO requestor may want to know how many of the homes are considered competition. If you are selling a single family home and there are only condominiums for sale then there isn’t much direct competition. This may be a good or bad thing but an important part of giving an idea of the overall market conditions for the subject property. Does the area have foreclosed homes on the market or homes that are boarded up? Are the competing homes institutional or bank sales or investor sales or other primary residents?
It is important to remember that you know your market innately and that many of the people reviewing your BPO are often based in other States. They have no idea of the area or the feel or the community. You need to paint the picture for them through your report. Do not assume that the requestor knows anything about the area. It is actually helpful to assume the opposite. Answering the market- ing condition questions helps give the requestor of a BPO an idea of the local area and other outside factors that may affect the value of the home.