Up market, mortgage free, Open House real estate viewing

A very new real estate viewing phenomena started in California is the beginning of spread across the country. Up until very recently the concept of open house viewings was restricted to mere mortals and whose homes have had big mortgages and was valued only at a few hundred thousand dollars.

But now real estate valued at $5 million and over, which are very often mortgage free, are being given the same treatment. Problems in the real estate market, have forced agents and owners to reconsider their stance on letting the public view upscale real estate without an appointment.

Although there is an element of public ‘wishful thinking’ for many visitors who could never afford the mortgage payments, and could only dream of owning such properties, the success of making actual sales from this new high-end open house policy is making agents in other areas adopt the same strategy.

The risk involved in online real estate valuation

Calculating the value of your real estate through one of the many available online systems is a quick and easy way to get an estimate of the value potential home and monthly mortgage payments. However the systems operate on a method known as comparables or ‘comps’ which can have huge flaws at times.

The software compares ‘like-for-like’ homes in the area to estimate the value of your real estate, but many of these products will use basic information such as the ZIP code to calculate values, and not take into account such variables as popularity of one development over another. This may drastically affect the value of the property for mortgage purposes.

If you wish to use such real estate, valuing websites, it is best to obtain estimates from several sites to give you sufficient information to make a more educated assessment of the value of your home and mortgage costs.

The appropriate real estate valuation method

Real estate values, and thus mortgage costs are usually calculated on a cost per square foot basis, but this measurement must be a fully understood by the seller and the buyer.

The main problem with this method of measurement is that it does not include the size and immeasurable ‘curb appeal’ of the lot, the main reason that real estate increases in value is because the land that it sits on increases at a far faster rate than the house.

The best way to determine the true value of your house and mortgage cost, is to have the land and the building evaluated separately, to give you a total value of the whole real estate package not just the house. As the old management philosophy goes, the sum of the parts is greater than the total. The same holds true in real estate business.

Why leasing an asset is better than purchasing it ?

There’s a whole economic rationale behind leasing of real estate assets by most the companies. One of the foremost is the tax benefits accruing to those who take assets on lease. The companies, the financial institution and different individuals derive different forms of tax benefits out of this arrangement.

Although the marginally profitable organization might not be in a good position to squeeze out the tax benefits out of leasing real estate property, the highly profitable organizations and individuals are in a perfect position of take the maximum out of accelerated depreciation clause.

A large organization is in a position to secure a greater tax benefit by leasing an asset from an individual or an organization as against buying the property upfront. Also because of stiff competition, a part of the tax benefit might be passed out to the lessee in the form of lower lease payments than what would otherwise be the case.

Another disparity in the tax structure is the treatment of alternative minimum tax. For an organization under the AMT, the accelerated depreciation is a preferred tax item whereas the lease payment is not. Such organization would prefer to lease a real estate asset from a third party that is paying tax at a higher effective rate.

The greater is the divergence in the abilities of the interested parties to secure the tax benefits associated with leasing of real estate asset, the greater would be the attraction of lease financing of real estate.