Monday, March 15, 2010

Youngstown film points out real estate issues affecting Harrisburg properties.

I found the following nine minute film on Youtube. It was filmed in Youngstown (a short commute from Pennsylvania's western border) this winter. The narrator's comments should sound familiar to Harrisburg investors, as the film touches on many issues that we deal with here. I noted a few points while watching this:

  • Out-of-town investors usually pay too much for properties. New York real estate is far more expensive than real estate in Harrisburg or other smaller cities. Being unfamiliar with Harrisburg, a New York investor will have little basis to compare prices when he is confronted with a seemingly "good deal" at a price far below what the market would bring in a larger city. Experience with the local market is the important factor - not necessarily "touching" or "seeing" the property as the narrator stated.

  • I am guessing here, but I would bet that the second property in this film is so cheap because there is some title defect preventing its sale at market prices. The property has probably been through a tax sale at least once (the narrator made reference to a company that buys tax liens). Without spending the money necessary to resolve this title defect, the owner cannot get a loan to make needed repairs. Properties that come with a sale price of "$1,000" usually also come with another price - unknown attorney fees necessary to clean up title defects.

  • Appraisals often mean nothing. The narrator mentioned an $82,000.00 appraisal for the house that was listed at $1,000.00. I haven't seen the appraisal, but I imagine that any such document relied on completely irrelevant comps and/or failed to account for the title defects.

When we see these issues out of the context of our own neighborhoods and properties, we can look at them with a more objective eye.

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