From time to time, I am asked to write articles on various topics relating to real estate.  The article below is a good example of how the value of homes will vary from location to location.  It explains a lot for the difference in home values.  Maintaining and improving the values of homes in District 3 will be one of my priorities when I am on the City Council.

Real Estate Ramblings

By Walt Hennessee, Managing Broker for Rise Real Estate Main Office, Real Estate Instructor, Certified Distance Education Instructor.

“Location, Location, Location.”  You have heard this many times when referring to the value of property.  This principle applies to residential properties and I am going to make an effort to explain the concept of location and how it affects the value of a home.

The first thing I need to do is explain how a CMA is used to estimate the market value of a property.  CMA is short for Comparative Market Analysis.  This will give the Realtor, and the home owner, an indication of what the market is actually paying for homes nearby that are similar to the one we are concerned with.  In most cases, nearby is defined by the subdivision the home is located in. The reason for this is that most of the homes in a subdivision were built about the same time, with the same covenants and restrictions, and in most cases, constructed by the same builder. It should be noted that neither the homeowner, the Realtor or even the appraiser sets the price for what a property will sell for.  A property is only worth what someone is willing to pay for it.

We first set up the subject property and then find what comparable properties to the subject have sold for within the past year or two.  The closer the sales are to the current date, the better the numbers are for analysis.  We try to find at least 3 comparable properties to come up with the price per square foot the market is paying for properties that are similar to ours.  Once we have these three numbers in price per square foot, we add them all together, and divide by three to come up with the average price per square foot.  This average will then be multiplied by the square footage of the subject property, and this gives an indication of the market value of the property.  This is very similar to what an appraiser does, only he will go into more depth with the analysis, however, it should be very close.

For demonstration purposes, we are going to consider an imaginary 2,000 square foot all brick rancher (one story) that has 3 bedrooms, 2 baths, and an attached 2 car garage.  The comparable homes we select should not be foreclosures, short sales, “as is”, or distressed sales of any kind, unless they are the only ones available to compare to.  The ones we consider should have been sold under “normal” market conditions.  Our imaginary home will be placed in three actual subdivisions in Huntsville, and we will see how the value of this home changes dramatically, depending on where it is located.  Nothing will change except where the subject property is located.  I am not going to indicate where the subdivisions are located, only that they are in south, middle and north Huntsville.

The first subdivision we will consider is located in south Huntsville.  We found 3 properties that were very comparable to our imaginary home.  The average price per square foot (psf) worked out to be $76.  Multiplying $76 times the 2,000 square feet (sf) gives us a market value of $152,000.  This is the estimated price we would expect the home to sell for.  Incidentally, this is very close to what an appraiser will assign a value to as well.

The next subdivision is located in a very desirable part of the city and the price per square foot for homes that are comparable to our example home is $133 psf.  Once again, multiplying this by our 2,000 sf subject property, results in an expected sales value of $266,000.

Finally, in a subdivision in north Huntsville, it is difficult to find properties that are not distress sales.  Most are foreclosures or “as is” properties.  This is what is referred to as the “new normal” sales condition for this area. The average price per square foot works out to be $31.  The math works out to an expected sales price value of $62,000.

It is remarkable that the same 2,000 sf rancher varies in price from $62,000 to $152,000 to $266,000 and the only variable is where it is located.  That is over a two hundred thousand dollar variance.

This value difference can also exist in subdivisions that are in the same proximity.  If a community has a very active and engaged group of homeowners that meet regularly to address issues, the values seem to be higher than those that just “exist.”  The pride of ownership shows in these areas and is reflected in higher property values.

Candidacy for Huntsville City Council, District 3

I am pleased and excited to announce my candidacy for Huntsville City Council, District 3.  The next decade is going to be a defining time for south Huntsville.  Many changes and challenges are on the way, and I have a vision of how these changes should be implemented and supported by the city.

The most exciting change is the opening of the new Grissom High School in a couple of years.  I envision a modern campus housing one of the academic flagship high schools, not just in the state, but in the country.  The high academic standards of Grissom are a legacy for Tom Drake, the outgoing principle, and a challenge for June Kalange, the incoming principle.

I  can see a revitalization of residential development that will lead to upgrading of existing homes, along with the construction of new ones, similar to what is going on in the Blossomwood area.  This will attract young families to our area and will result in an appreciation of property values in south Huntsville.  I will work with existing subdivisions in an effort to come up with ideas that will increase their home values.

I also want to be a watch dog for the activities that will have a negative effect on property values.  If low income housing is to be decentralized from one area of the city and recentralized in another part of the city, nothing will be gained other than devaluation of property in new location.  Huntsville Housing Authority needs to consider the existing Section 8 housing in the area when it is looking for new locations to build or buy properties.

I have a vision of a much improved quality of life for the south Huntsville area.  Green ways should be encouraged, enhanced and expanded.  Cooperation of the city and county governments has resulted in the new park on Chaney Thompson Road.  Commissioner Reddick is to be commended for his efforts and I look forward to working with him on this and other projects in the future.

In addition, I have a vision of the old Grissom High School campus being turning into a “go to” destination for library patrons.  This new ground up library will be a magnet for social and meeting activities.  The quality of life in the area will be enhanced when the sports facilities are turned over to the Parks and Recreation Department.  This new satellite municipal facility will serve the south Huntsville region very well.

My vision for south Huntsville also includes robust commercial and retail development.  Perhaps with some city help or incentives, Haysland Square could attract what I will call a “destination development” with high end entertainment, restaurants, shopping and other types of attractions.  Proper planning can result in another positive effect on property values.

What makes me qualified to run for City Council?  I am currently the Managing Broker for Rise Real Estate and a Certified Real Estate Instructor.  I know what makes property values appreciate, and more importantly, I know what makes them depreciate.

I have a very long history of civic involvement with the city.  Most recently however, I was a founder and president of the Southeast Huntsville Civic Assn. in 2004, a past board member of the South Huntsville Civic Assn. and currently serve as vice president of Huntsville South and a member of the city school system Capital Advisory Committee.  Dr. Wardynski has done an outstanding  job, and I have promised him I will be a friend of education while on the council.

The race for District 3 will be spirited and I am ready to have the conversation about what issues are important to south Huntsville and who is best qualified to serve as your next City Council representative.  I am looking forward to serving as the advocate for south Huntsville on the City Council.