[StBernard] Home Values

[Westley Annis]

John,

Since your day job is figuring out the value of homes, I'm asking you this
question.

I was reading several different articles on this massive bailout plan. The
number one thing I see mentioned is that "no one knows the value of the
homes being foreclosed" so banks are having a hard time recording it as an
"asset".

In my mind, every home has a minimum book value. Start with the price of the
lot and the foundation then add the square footage of the house multiplied
by the current construction costs for that neighborhood. 

This is probably similar to what assessors do on their four-year
reassessments, but it gives you a base figure.

This is not taking into account any fancy marble tiles, appliances, etc. It
is just a core, basic value for the house.

In theory, a home should never drop below this price. In practice, it could,
but it should only be because of something like a couple getting divorced,
relocating unexpectedly, etc.

Using this theory, my home is worth way more than what it assessed for when
I bought it three years ago (simply because of construction costs), but may
not be the case in someplace like the lower 9th ward.

Why can't banks use this to value these homes that are in foreclosure? Also,
I realize they are not in the "business", but if they can't sell the home at
its floor value, why not try to rent it? In a bad market, rental income
would be better than no income and just boarding the place up.

Westley