Maybe you noticed on Wednesday that we started a series called Wayback Wednesday… In it we are showcasing a post from two years ago. Well, we are doing something with posts from a year ago as well… FlashBack Friday.
Category Archives: market report
The November Gwinnett County Market Report is Posted
- Thursday, 03 December 2009 13:28
- Written by Lane Bailey
- 0 Comments
We have just put up the Preliminary Market Report for Gwinnett County, GA in the new market reports page. It is interesting to see the disparity between the upper reaches and the entry level portions of the real estate market in Gwinnett.
(Get a) Home for the Holidays (?)
- Friday, 20 November 2009 16:43
- Written by Lane Bailey
- 0 Comments
I was talking with one of my mortgage guys a few days ago, and the subject of mortgage timelines came up… and there is still time to get your dream home for the holidays… OK, not Thanksgiving… but Christmas is still possible for a few days… New Year’s is possible for about a week.
But Zillow says…
- Saturday, 09 May 2009 23:55
- Written by Lane Bailey
- 1 Comment
- Image by law_keven via Flickr
I know… most sellers at some point take a look at the ‘Zestimate’ that Zillow produces for their property. And there is almost always one of two reactions…
- “Those people are on crack, my house is worth way more than that” (if the Zestimate is lower than expected)
- “Wow, I didn’t know it was worth THAT much… Cool” (if the Zestimate comes in higher than expected)
The bottom line is that if it is low, it must be wrong, and if it is high, then it must be right. It is pretty rare for someone to see a low valuation and think it could be right, or see a high valuation and think it could be wrong…
But let me tell you a truism… the Zestimate is wrong. Blanket statement. It could be high. It could be low. It isn’t dead on.
Here are the current levels of accuracy for the Atlanta Statistical Area…
Within 5% of the true value, 25% of the time.
Within 10% of the true value, 45% of the time.
Within 20% of the true value, 66% of the time.
Median error, 11.6%.
This is lifted straight from Zillow’s accuracy. For the Atlanta MSA, you are within 5% once out of 4 times… So, are you telling people that the just gave them a $400,000 valuation, and they have a 25% chance of the house being worth $380k – $420k? And a 10% chance of it being worth either $$360k – $380k or $420k – $440k? Or that there is a 10.5% chance of it being worth either $320k – $360k or $440k – $480k? Or a 34% chance that it is worth less than $320k or more than $480k?
Maybe you will let them know that about half of the time your $400,000 valuation is worth $446,400 or $353,600… since the median error is 11.6%
The thing is that the Zestimate could rise or fall by a significant percentage and still be within the range of error..
So, the thing is that 75% of the time, Zestimates are off by more than 5%.
Now, I am not going to argue with Zillow’s national or regional data. It is likely to be much closer than the data for a specific property. The folks there argue (and I can’t refute them in any way) that Zestimates are as likely to be high as low and therefore cancel each other out and that for larger samples, they are quite accurate.
in fact, everyone that gives you an estimate of market value is doing exactly that… giving you an estimate of market value. Market value can’t be determined until there is a buyer… That was the previous post…
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My home is worth what?
- Friday, 08 May 2009 23:57
- Written by Lane Bailey
- 2 Comments
- Image via Wikipedia
I can’t think of a question that I am asked more…
What is my home worth?
And there as many answers as there are times the question is asked. There are a lot of sources for the information…
- Appraisers
- Real Estate Agents
- Automated Valuation Models
And the results come in many flavors…
- Appraisal
- Comparative Market Analysis (CMA)
- Broker Price Opinion (BPO)
- Zestimates
There is one thing that they all share in common. They are all opinions. And they are all flawed. That’s right… all flawed. They might hit the right value… but if they do, it purely a fortuitous accident.
Keep in mind, I work very hard on the accuracy of my CMAs. I go over the data and try to stake out the trends as well as the differences between the subject and the comparable properties.
I know agents that do BPOs, and appraisers. I have studied Zillow’s data that they use to get Zestimates. In each case, they produce the best estimate of value that they can with the data available.
But they are all missing something…
What each opinion is missing is the buyer. When it comes down to it, the person that is actually going to determine the market value of a property is going to be someone that may not have any training at all…
What is ironic is that the moment the closing is over and the sale is complete, the market value becomes a vaporous moving target again.
The market value is what a buyer is willing to pay and a seller is willing to sell for. We can study the neighborhood values, floor plan, amenities and square footage. We can crunch numbers and compare. We can make spreadsheets and track trends. But, a buyer gets to determine what the value is to them… and then see if the seller will go for it.
The point is…
It isn’t magic. It is science… and an inexact science at that… and a bit of art. And pricing is actually a strategy. The idea is to price it right to get it in front of the right potential buyers. And that is the difference between a real estate agent, a BPO, an appraiser and an automated valuation model. Only the real estate agent is working towards finding a willing buyer.
The other methods are important, and have a place… And all should be in the same neighborhood. Finally, make sure your real estate agent knows that pricing is a strategy, not a contest.
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