How Much Can You Rely on Automated Home Value Widgets?

Have you looked for a new car lately?  If you're like me, you checked out everything you could find on the internet before you ever went to a dealership for a test drive. 

The websites have interior and exterior 360 degree photos, closeups, zoom capability, video, and even the actual car price, which we equate with value. That's something we love, knowing the price, not the one we have to haggle over. You get everything on the internet except the new car smell--minus one more thing, the actual driving experience.

It's the same with house listings, there's so much available information on numerous sites, and the photos often make them look so attractive that you might think you want that one .  But unlike a car, a house price reflects many more "moving parts", condition, location, upgrades, additions, deferred maintenance, permits or lack thereof, remodel, the immediate surroundings, earthquake zones, flood zones, and much more.  And like buying a car, you really have to be there to see for yourself. The asking price could be very different from value when all is said and done with negotiations and the appraisal.

So what does this mean for AVMs (automated valuation models) such as Zillow and its "Zestimates", and other valuation widgets found on many home search sites?  It means that they are tools, rather general tools, but like driving the car and seeing the house, you have to be there. AVMs can't judge the condition of the house, or know how many prior water damage claims were submitted on it, or check the unpermitted rooms, or see if there are title defects which will prevent mortgage financing.  Zillow values are calculated on public records (strictly data oriented) and user submitted data points (selective pool of information).  By the time a given property is negotiated through buyer/seller agreements, the value may be off by as much as 30% from a Zillow estimate.   Zillow's CEO recently sold his house:

     To see a Zestimate at work, consider the fact that in July of this year Zillow Group CEO Spencer Rascoff listed his four-bedroom home in Seattle, Washington, for $1.295 million. At the time, the Zillow Zestimate valued the home at about $1.39 million. That’s over 7% higher than the list price, but within the Zillow median margin of error.
     Gordon Stephenson, the listing agent for Rascoff, told industry publication Inman that Zillow probably overestimated the value of Rascoff’s home because “its algorithm might not have accounted for the home’s unique floor plan.”  Christian Science Monitor, November 14, 2015.

When an appraiser performs his/her job during escrow, an AVM is not a part of the process. When a Realtor helps a seller or buyer established listing or offer price, knowledge of appraisal parameters may be used along with knowledge of recent sales and individualized comparisons to other properties. 
Algorithms and weights assigned to data can be educational up to a point, depending on what properties get caught in the AVM's net, but when a buyer sees multiple houses combined with knowledge of area sales, the reasons for the final result become known. 
So automated robotic prices are fun to look at and may help educate on overall price range for a given area, but they are not a substitute for a complete home price determination.

See the complete Christian Science Monitor article.

Signal Hill's Skyline Estates Dream Home with World-Class Views!

Home on Sea Ridge

This desirable highly sought after home is located in the Signal Hill development of Skyline Estates. Situated on a unique promontory in the highly coveted “Sea Ridge” with sweeping and explosive views from Palos Verdes to the Pacific Ocean to Newport Beach. The views from this home are unparalleled. The three-level floor plan features a formal dining room, formal living room, spectacular ‘Chef’s’ kitchen with GE Monogram appliances, double ovens, center island and breakfast bar that opens up into the family room with expansive windows offering impressive views of downtown Long Beach. 

View towards San Pedro

Three bedrooms are located on the first floor with one being a second master en-suite. The spacious master retreat features lounge, massive walk-in closet. master bath with dual vanities and spectacular tub featuring city views. Wonderful backyard with fireplace and BBQ is perfect for entertaining year round. 

Excellent location close to the community walking trails, and pool. Just minutes to Belmont Shore, Downtown Long Beach and freeway access.
Association dues include community pool and paved road.
Information per MLS# PW15230654

View of downtown Long Beach

See the video and/or find out more about this home, please contact me at 562-896-2609. CA Lic. 01188996

Listing Broker:  Boardwalk Properties

Congress Still May Tax Mortgages to Pay for Highways

The real estate industry and those purchasing or selling residential properties are often the focus/target of politicians looking for a vehicle for passing a law. They don't always get passed, fortunately, so the general public is usually not aware. However, the following bill is still in the works, and is a good example of another attempt to get, in this case homeowners, to pay more money for something which should be funded by the entire public, assuming it is truly needed:

 Back in July the U.S. Senate passed a long-term Transportation funding bill that includes a tax on mortgages to pay for the construction of highways. To make it more palatable to Republican lawmakers, this tax has been disguised as a “fee.” This tax isn’t small potatoes either.

On a median priced home in California ($489,560), homeowners could pay over $8,000 for this tax.

While the Senate has passed its version of the long-term Transportation bill, the House has merely passed a short-term version to keep the federal Transportation Department open. The House plans to pass its own version sometime this fall, but there’s no guarantee that this new tax won’t be included in that version. The California Association of REALTORS® is actively opposing this approach to paying for the highway bill and is encouraging the public to get involved.

People are urged to visit www.nomortgagetax.org and go to the “Take Action” tab to send a personal message to Congress to oppose the tax. The public can also get updates on Facebook at www.facebook.com/no.mortgage.tax or follow the campaign on Twitter™ at @NoMortgTax.

Under current law, a portion of every conforming loan, (those backed by Fannie Mae and Freddie Mac) includes a fee used to offset losses from bad loans and to pay for the administrative costs of running these companies. These are called guarantee fees (or g-fees). In 2011 Congress added on an additional.1% increase on the interest rate of every Fannie and Freddie mortgage to fund a six month extension of unemployment benefits. That “add on” was due to expire in 2021 and loans originated after that date would not be subject to the additional fee.

The U.S. Senate’s highway bill extends the “add-on” fee until 2025 for all new mortgages in order to pay for transportation infrastructure. As an example using real numbers, buyers purchasing a median priced home of $489,560 using a typical conforming loan with a 20% down payment will pay an additional $8,100. This figure is sure to rise with an increase in sales prices.

You can contact your representative (go to the website above) to register your opinion on this.