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Can You Rely on Zillow for an Estimate of Market Value?
Part of my job is to explain market value and how an appraiser will substantiate market value to a seller, none of which are remotely connected to the website Zillow. Most of the time I’m able to make sellers understand, but as a Sacramento real estate agent, I also get those who don’t care how long a home sits on the market (and loses its desirability with each passing day), and there’s not much I can do about those attitudes but go with the flow. After all, it’s not my home. It’s not my job to make that listing my home, even though I may care deeply about whether it sells.
One of my clients shared with me recently that his accountant told him Zillow is 10% underpriced with its Zestimates. I didn’t think anything of that statement — because it’s ridiculous — until I realized that there are people who actually believe it. Not anybody in my circle of real estate agents or appraisers or other real estate professionals, but the public thinks because Zillow notes an estimate on a website, it must be true. After all, they found it on the Internet.
The basis for that statement were two homes his accountant saw that had sold for 10% more. Therefore, my seller’s accountant must have automatically leaped to that conclusion, which doesn’t say much about his accounting skills now, does it? My own home is priced $150,000 more than its worth in Zillow. That’s certainly not 10% of its value. It’s widely known that Zillow estimates are all over the map and often there is no set correlation to value. That’s because it’s a computer-generated algorithm that isn’t even as reliable as something like Realist or Metrolist comparables, which still require a human touch because square footage isn’t enough. You can’t price a home on square footage alone just like you can’t live on cans of tuna fish.
Zillow is getting better but it’s just not there yet. It’s great for looking at maps and playing around but it doesn’t have all of the homes for sale much less an accurate value.
Zillow doesn’t know if that home sits on the edge of a cliff overlooking the ocean or if it’s nestled next door to a mobile home park. It doesn’t know if the floors are marble or dirt. It doesn’t know if planes fly overhead ten times a day. It doesn’t know if the guy next door fixes motorcycles in his front yard. It doesn’t know if the plumbing has been updated or if water trickles into the sink at the rate of two drops a minute. It doesn’t know if the home is close to a desirable school or a military base. It doesn’t know if the buyer will walk in the front door and fall in love or turn around and run. Quite frankly, Zillow doesn’t know crap.
Which is why a seller will always need a professional and experienced Sacramento real estate agent, and we’ll never go out of style.
Why Other Curtis Park Agents Gave This Seller a Higher Price
A seller in Curtis Park wants to put her home on the market next year and is looking for a Sacramento real estate agent now. She is calling agents to find out how how much her home is worth today. Listing now or waiting for spring is a hot discussion for many sellers at the moment, but the fact remains the price an agent names today is not the price the home will be worth next spring. That home in Curtis Park could be worth more or it could be worth less.
Plus, if it’s a Curtis Park home that few people want to buy due to location, condition or the seller insists on an over-the-top-of-market price, it could not sell at all. That’s always a very real possibility that few want to face.
I am always happy to talk with sellers who have future plans and are not ready to act right now. For one thing, if they are calling a bunch of other real estate agents, it’s probable many of those agents won’t still be in the real estate business by the time the seller is ready, which certainly decreases my competition — day after day I receive notifications via LinkedIn of agents who used to work in real estate and have since taken jobs in other industries. But I also want to remain in sellers’ minds when they are ready to list a home.
If they forget my last name, they can do something simple like go to Goggle and put in Elizabeth and Sacramento Real Estate, and out of the top 5 hits, four will be me. Or, they can just search on the keywords “Elizabeth Sacramento,” and in the middle of links for the incredibly delectable Ginger Elizabeth chocolate store in Midtown, they’ll find my website. It’s easy to find Elizabeth Weintraub on Google.
This particular seller remembered my name, though, because she contacted me a second time. By now, she has talked to other real estate agents, and she says two of them gave her a higher price than I did, and they both outbid each other. It’s so frustrating when this happens because I don’t want to say anything bad about another real estate agent, and I understand why they feel the need to falsify information to the seller, but to intentionally lie is considered unethical.
They don’t see it as lying. Because that would make them bad people. They see it as being overly optimistic. They hope if it doesn’t sell at the price they name, well, the seller will be willing to lower the price.
The seller doesn’t see it as lying because she just wants the top price and doesn’t really understand, I suspect, that she sets the price, not the agent. The price has to be based on something, though, such as comparable sales, what similar homes have sold at and not plucked from thin air simply to try to win a listing.
I suggested the seller call a couple more Curtis Park agents to see if she can’t push the price up. Get a couple more bidding against each other to try to win the listing. I was kidding with her, of course, because the price is really whatever the buyer will pay. I don’t choose the sales price. I give sellers enough information as to why I believe a certain home sales price will work, and I substantiate it by identifying homes within a 1/2 mile radius that are the same condition, location, type and age, and similar square footage.
The seller chooses the price and the market takes it from there. Buyers for a home in Curtis Park have the final word.
Remember, the seller has the first word, the agent second. The seller always picks the price. Sellers should choose an agent they like and trust and not the agent who pops up waving her bidding fan sporting the highest number, like at an auction.
Three Top Reasons Your Sacramento Home is Not Selling
If you’re wondering why your home in Sacramento is not selling, you’ve come to the right place. The likelihood is you are not one of my sellers but I imagine you could be. Just as you might imagine you could be. In fact, I had a seller yesterday who imagined just that, as he was NOT my seller but said he wanted to be. Well, he doesn’t really want to be a seller, you know, he wants to be a former owner. All sellers want to be a former owner.
Or, at least that’s what a Sacramento real estate agent would imagine. But some of us are capable of imagining all sorts of stuff because we’ve learned early in life that what one can imagine, one can probably create. It’s why we excel at marketing.
Yeah, out of the blue this guy calls as I’m driving back to my home office. Thank goodness my top wasn’t down (on my car). The guy was happy I answered my phone and said he was mad that his agent did not. Said he’s had his home listed for 3 months, the listing was expiring today, and his agent doesn’t return calls or emails and simply ignores him. I tell him I’m sorry; I don’t know his agent. Then he admits his agent is the brother of his sister-in-law, or some such, what we call a DNA agent. Would I puhhhhhlease help him?
OK, sure, I’ll take a look at his listing when I get to my office. In the meanwhile, I tell him there are 3 reasons typically why a home is not selling:
- Price
- Condition
- Marketing
I pull up the listing in MLS and spot one photo — a bad quality photo — and no interior photos. The confidential agent remarks say the seller will credit the buyer X amount of dollars for painting. Wow, that really makes this Sacramento real estate agent want to show the house. What great motivation.
Next, I examine the comparable sales. I can see how the agent determined the price. He priced it in line with the homes presently on the market, which all have long days on market, and all of which are significantly larger and appear to be in better condition. This home is not priced according to the comparable sales. It’s priced at least 10% too high.
Not to mention, it’s a small part-time broker who has the listing, who might not have much of a network at his disposal. At Lyon Real Estate, we have almost 1,000 agents with whom we network. I explain this to the seller when I call back and offer professional photography with my Nikon and wide-angle lens. In fact, I could take the key from the lockbox with his written permission.
Thanks, but no thanks, the guy says. He’s now talked with his agent and supplied him with all of my wonderful ideas, and he’s thinking about staying with him for a while. He doesn’t want me to do any more work for which I won’t get paid.
It’s nice that somebody is looking out for this Sacramento real estate agent. I didn’t get a chance to tell him there is a reason I am closing in on selling another 100 homes this year.
Today’s Risk in a Sacramento Short Sale
This fact seemed to come as a shock to a buyer’s agent the other day, but home buyers who are buying a short sale in Sacramento and waiting for short sale approval don’t get Brownie points for acting like a buyer. Buuuut my buyer waited, and he put his money in escrow, and that should count for something, the agent lamented. The agent was upset because the bank updated its BPO and now wanted more money. Sorry, behaving like a home buyer doesn’t earn anybody special favors.
Besides, that’s the risk of a short sale. With rising homes prices in Sacramento this spring, it’s even more of a risk as we move into summer. There is no guarantee that the price a buyer enters escrow with will be the same price a buyer will close escrow at. In fact, with the way some agents price short sales in Sacramento, there is no guarantee that the bank will even take that price. Unless there are extenuating circumstances, short sales ought to be priced in line with the comparable sales or where the comparable sales will rise, not below the comps.
I had explained to the agent when we received the counter offer that there are no renegotiations with this particular investor. There rarely is negotiation because the banks write the rules; and I’ve sold hundreds of short sales over the past 9 years — I’ve learned a thing or two from my closed short sales. It eats up more time to run around in circles with the bank, escalate the price issues and then be informed that the price is firm, like it was in the first place, than it does to replace the buyer. I’ve been working on this particular short sale for 9 months as buyer after buyer bailed as we watched BPOs bounce around. The buyer’s agent, however, still expected negotiations and didn’t appreciate the fact when I pointed out my advice seemed to have landed on deaf ears.
Sometimes I feel like I’m talking to a wall when I warn: no renegotiations. I’ve been to hell and back with this investor. It’s best to just give the investor what that particular investor demands and then close the deal. If that means issuing a Notice to the Buyer to Perform to sign an addendum increasing the price, then that’s what we do because we work for the seller. We treat all parties fairly, but my loyalty, as long as it’s not dual agency, lies with the seller.
If the buyer refuses to meet the investor’s demands, then the seller will find a buyer who will. Because those buyers are there.
I’ll tell you this, if you’re in a short sale situation right now as a buyer, thank your lucky stars if you get approval at the price you offered. I just closed another Elk Grove short sale this week that had dragged on since last fall. It was priced way below today’s prices. The bank did not increase the price. This lucky buyer was buying a home in Elk Grove at September 2012 prices. Which means when the vacant home was vandalized, and the buyer demanded a reduction, we chuckled. Hey, go out and see what you can buy at this price today. Nothing? Right! Now, let’s get this closed and stop whining about it.
The Highest Per-Square-Foot Home Sold in North Highlands
Holy toledo, I just closed the highest per-square-foot cost home in North Highlands over the past 6 months! This is a typical 1957 tract home, about 1,100 square feet, located in a quiet neighborhood of similar homes, in which the highest priced home sold at $140 per square foot. This home closed at $177. You think we didn’t struggle with the appraisal? You betcha we struggled.
When the appraiser called to make an appointment, I mentioned that if she needed additional comps, she could feel free to call me. That’s polite code for if the home won’t appraise, let me know and I will help. See, I think it’s very insulting for a Sacramento real estate agent to throw comparable sales at an appraiser. It’s telling the appraiser that the appraiser doesn’t know how to do her job. It sends an demeaning message, but agents don’t stop to think about how an appraiser interprets their “assistance.”
Some agents will meet appraisers at the property and hand the appraiser a list of comps. I imagine the appraiser throws them away in disgust. It’s like saying, “Hello, welcome to my neighborhood, you dumb cluck.” I didn’t tell the appraiser that I knew more than she did. I didn’t suggest that she couldn’t perform her job. I didn’t even say if she had a problem that I would help. Because I knew when she ran the comparable sales, she would not be able to justify the sales price.
Sure enough, she sent an email asking if I would send her additional comparable sales. I know the parameters for an appraisal. I know what’s acceptable, which is not exactly the parameters a Sacramento real estate agent might use. I found 3 comparable sales that supported the per-square-foot house with similar sized homes and condition, formatted those comps into a 3-up comparison and sent them.
The home appraised at value. We closed escrow on Wednesday. Sellers who initially thought their home might be underwater are now dancing for joy in their new home in Arizona!
