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WHAT’S THE DIFFERENCE BETWEEN GRANT DEED AND QUIT CLAIM?A Grant Deed implies the following:
- The Grantor has not transferred ownership in this property to any person other than the Grantee.
- That the property is, at the time of conveyance, free from liens or encumbrances incurred by the Grantor.
A Quit Claim Deed transfers only any present title, right or interest that the Grantor may have. There are no warranties regarding liens or encumbrances and no representation of either past or future ownership. This is one of the reasons that a Spousal Quit Claim Deed is used to relinquish any potential interest of the spouse when a purchase is made.
An REO transaction is another example of when a Quit Claim Deed may be used. The REO Owner may or may not be aware of the preforeclosure history of the property. REO owners who have no such knowledge may be unwilling to give a new buyer the implied warranties provided by a Grant Deed. Without those implied warranties, the buyer accepts the risks that may have been covered by those implied warranties. Title insurance can help to play a vital role in protecting the buyer’s ownership interests and reduce those risks in certain circumstances
AGENTS HAVE OBLIGATIONS TO HONOR CLIENT CONFIDENCES
By Bob Hunt
Often, people tell their real estate agents things that they don’t want others to know. These confidences may range from a price that a seller is willing to take to the fact that the principal has recently lost his job, or that his wife has contracted a serious illness.What are the agent’s obligations in this regard? When we ask such a question we can be asking about legal obligations or ethical obligations. In this case, ethical obligations are both clearer and more stringent than those that are spelled out in the law. Moreover, the Code of Ethics of the National Association of REALTORS® spells out obligations for its members in real estate-related situations.
First, it is relevant to ask, “What is confidential information?” In California, you won’t find this defined or spelled out in the civil code. Although there may be specific laws, both state and federal, that contain restrictions on giving out someone’s social security number or medical records, there are no general statutes dealing with the subject. At best, one can look for precedent-setting cases and try to make inferences.
Suppose you tell me that you and your wife have filed for divorce, and you don’t want anyone to know about it. In one sense, it would seem too late for that; the toothpaste is already out of the tube. The court filing is a matter of public record; how can the information be confidential? In reality, though, we know that while the public record is accessible; it doesn’t mean that many people have knowledge of what’s in it.
For the most part, information is confidential, or to be treated as confidential, if the client says it is. When a seller tells his agent that he recently lost his job, that doesn’t mean that no one knows of the fact. The people at the former workplace know. Rather, if he wants the information to be confidential, it means that he doesn’t want it to go beyond the people who already know, or who might come to know by virtue of their particular role. At least he doesn’t want people to learn of it through his agent; he (the seller) can still tell anyone he wants. But the agent can’t.
Agents have both a legal and an ethical duty to promote their clients’ interests. Presumably, releasing information that the client wants kept confidential would be contrary to this duty. Most commonly, this has to do with a concern that possession of the information might give someone else a bargaining advantage; but there could be other reasons as well.
How long does the duty to maintain confidentiality last? Normally, agency obligations end when the agency is either terminated or its purpose is accomplished. If I represent a seller, my agency obligations end when escrow closes. (Although it may be good business practice, and common courtesy, to continue to serve those interests for some period of time.) However, for REALTORS® — those who are members of the national, state, and local Realtor® associations — that obligation extends somewhat longer. Standard of Practice 1-9 of the Realtor® Code says in part that the obligation to preserve confidential information provided by their clients “… continues after termination of agency relationships or any non-agency relationships recognized by law.”
There is an important exception to the general principles we have discussed that is spelled out in the Realtor® Code of Ethics. “Information concerning latent material defects is not considered confidential information under the Code of Ethics.”
In general, information is to be treated as confidential if the principal says so. But there are limits. The principal can’t make an agent be party to a cover-up just by insisting that something is confidential. For example, a seller might say, “In a heavy rain, the backyard floods and sometimes leaks into the family room; but I don’t want anyone to know. Keep this information confidential.” No.
REALTORS®have an obligation to honor a principal’s confidences. But they have other obligations too. Sometimes those will override the duty to maintain confidentiality.
Source: Realty Times
When to Cave: How Long Should You Wait Before Lowering Your Asking Price? By Craig DonofrioThere it is: your home! Just sitting on the market. It’s been like that for some time now, and it’s starting to look a little … desperate. Last-guy-at-the-bar desperate. You consider reducing the price, but then you might be robbing yourself of thousands of dollars. But if you don’t, you could end up missing out on eager buyers with a slightly lower price point. So when exactly should you cry “uncle” and lower that asking price? We asked some experts for advice. Keep tabs on-and listen to-house hunters. Are your open houses turning into a letdown? Are buyers visiting but walking away?”If 35 to 40 buyers have passed through your home and not a single one has placed an offer, it’s time to seriously consider a price improvement,” says New York City real estate agent Brad Malow. Translation: a reduction.
As a seller, you should be asking buyers and their brokers for feedback after private viewings.
Pay close attention and see if there are any common positives or negatives in their responses, so if a current theme is “It’s a bit expensive,” then you’ll know it’s time to start a price drop.
How long has it been?
The thing that can cost you the most money is having your home stagnate on the market. So unlike dating, you shouldn’t wait for the perfect suitor to come along. Perfect is a high bar.
Houses set at the right price will start getting offers “within the first few weeks,” Malow says.
Are comparable houses selling left and right, but you haven’t received an offer? If so, you may want to do more than just lower the price-you might want to delist it for a short while.
“Once you’ve been on the market for five weeks or so, you’re chasing the market,” says Mike King, an agent with the Partners Trust Realty in Brentwood, CA.
If you haven’t seen any action in a while, it might be time to take your house off the market, do some touch-ups, and relist.
King says he sold a house that had languished for six months on the market by removing the listing, having the sellers pull up the shag carpet-something their original seller’s agent didn’t make them do-and staging the place much better. It was relisted and sold within a couple of weeks at asking price.
‘It’s almost impossible to underprice’ a home
Here’s something you should consider when debating the great price chop: The market will probably decide it for you anyway.
“It’s almost impossible to underprice, because the market will bring it back up,” King says.
Think of it like eBay. You list an item for $1, but you know it’s worth somewhere in the $250 range. Eventually people start bidding, and some people might want that item so much they end up paying $275 for it. It’s actually a better move to slightly underprice your home than it is to overprice it, because you’ll have more offers to work with-and you can work the competition into a frenzy.
“It’s called leveraging power,” King says. “If I’m a [motivated] buyer and I know there’s only three offers, I’m going be less aggressive than if you had 10 offers.”
The golden rule: Know thy market
Above all else, you need to consider your market. There’s no universal timeline that will tell you when to reduce your price. But Malow says to consider these three key points:
- How are comparable properties faring in the market? Are they selling quickly or lingering on the market? If they’ve closed, what was their closing price?
- What is the average time a home stays on the market in your neighborhood? If you haven’t reached that point, don’t reduce it just yet. Likewise, if you’re well past your hood’s “sell-by date,” it’s time to start cutting prices and maybe even delisting your home.
- How many homes had a price reduction in your neighborhood, and how long did it take for the price cut? Did it help them sell? Again, what was the sale price?
In other words, do your homework and work with the market-don’t fight it.
5 Hidden Costs That Surprise First-Time Home Buyers Make sure your budget is big enough to handle these unexpected expenses.
By Andrea N. Browne,
Kiplinger Washington Editors
If you’re considering becoming a homeowner, even years from now, recognize that there’s a lot more to purchasing a house than saving enough for a down payment. Additional expenses come up throughout the home-buying process. Some of these are upfront, out-of-pocket coststhat are nonrefundable even if you end up not closing the deal. Others will hit your wallet after the home is in your possession. Experienced buyers probably are familiar with these charges, but first-time buyers can be caught off-guard.Knowing how much you need on top of your down payment will help you plan how long you must save. Remember, it could take years. Talk with a potential lender about six to 12 months before your desired purchase date. “The lender should be able to help you outline what you need to be doing within that time frame to get your finances in check,” says Mike Aubrey, a Gaithersburg, Md.-based Realtor, who’s also the host of HGTV’s “Power Broker.”We’ve identified five costs that can catch first-time home buyers by surprise and gathered expert advice on how to prepare your finances.
I. Home Inspection
After you’ve submitted an offer on a home and the seller has accepted, make sure the place you’re planning to buy isn’t a lemon. Hire a certified home inspector to examine the property from top to bottom before you go to closing. If you uncover hidden structural, mechanical or other issues, you can negotiate the repair terms with the seller before you finalize the deal. Otherwise, you will be solely responsible for any problems and the cost of fixing them.
Depending on your location, you can typically expect to pay between $200 and $600 for a home inspection — an upfront, out-of-pocket cost that’s nonrefundable if a deal falls through. While an inspection isn’t mandatory, it’s a precautionary measure that all home buyers should take. “When you weigh the potential tens of thousands of dollars an unknown problem could cost later down the line, it’s money well spent,” says Anthony Saunders, a Lorton, Va.-based Realtor with Exit Realty Associates.
II. Appraisal Fee
Your mortgage lender wants to be sure the home it’s about to loan you many thousands of dollars to buy is worth every penny. That is why you need a home appraisal before finalizing a mortgage loan agreement. The lender will hire an independent certified appraiser to assess the property value of the home for sale. This includes documenting the various features that make a home valuable, such as a deck, as well as researching the prices of comparable homes sold recently in neighboring areas.
Appraisal fees can vary by state and the size of the home, but on average they run $250 to $600, Saunders says. This is an upfront fee charged directly to the borrower by the lender.
III. Escrow Account
Some lenders require that an escrow account be set up in conjunction with a mortgage loan agreement. The money that goes into the account is used by the lender to pay certain ongoing property-related expenses on the homeowner’s behalf, such as homeowner’s
premiums, private mortgage insurance (PMI) premiums and property
You might be required to make an initial deposit into the escrow account at the closing table. From then on, in addition to a mortgage payment, the homeowner will pay a little extra to the lender each month — typically one-twelfth of the estimated annual bill for taxes and insurance, according to Nolo.com. Essentially, escrow accounts help protect the lender by ensuring that these critical homeownership expenses are paid in full and on time, Aubrey says.
First-time buyers might be taken aback when a lender mentions putting money into an escrow account. “Many younger buyers don’t fully understand what it is,” Aubrey says. Escrow accounts are mandatory for buyers who have a down payment of less than 20% and other types of loans, including an FHA loan. If you don’t have an escrow account with your mortgage, you are responsible for paying your insurance premiums and property taxes on your own. Typically, homeowner’s insurance premiums can be paid monthly or in a lump sum annually; property taxes usually come due once or twice a year, depending on where you live.
IV. Closing Costs
While having enough money saved up for a down payment is great, it’s not the only cash you’ll need to seal the deal on a home purchase. You also need an additional 2% to 5% of the home purchase price to cover so-called closing costs, which can include everything from a loan origination fee and attorney fees to prepaid homeowners association fees and taxes.
For example, the average sale price for a new home in May was $337,000, according to the U.S. Census Bureau. A 20% down payment on that sale price amounts to $67,400. On top of that $67,400 down payment, though, you would need between $6,740 and $16,850 to cover closing costs.
V. Home Maintenance and Repair
Certain costs can creep up on you once you have the keys to your new home in hand. Unlike renting, in which a landlord foots the bill for maintenance, as a homeowner you’re on the hook for any upkeep and repair costs.
For example, you may want to change the locks if you buy an existing home. In Washington, D.C., it costs $181 per lock to have a general contractor install a mid-grade entry door lockset, according to Homewyse.com, a Web site that estimates home-improvement costs by location. Or you might want a fresh coat of paint on your new home. Getting a professional to paint an average-size single-family home (2,598 square feet, according to the U.S. Census Bureau) will cost nearly $6,300, including labor and materials, in the nation’s capital. If you buy a home with a yard, you also need to factor in the cost of maintaining it yourself (including the purchase of a lawn mower and other lawn-care equipment) or paying a landscaper. In Dallas, for example, the cost of hiring a pro to maintain a 1,000-square-foot lawn, including labor and materials, starts at $66 for two hours of service, according to Homewyse.com. Plus, further down the road of homeownership, you will need to replace kitchen appliances, water heaters, furnaces and more.
Ready to Buy?
Now that you’re aware of some of the bigger costs associated with home buying, you may find that choosing a house priced comfortably lower than your maximum loan approval amount is the best route, Saunders notes. This strategy can help ensure that you have enough cash to cover any extras, if needed. Remember to ask your lender and real estate agent lots of questions throughout the entire buying process — especially regarding costs. You don’t want to get blindsided right before closing with unexpected expenses.
Busting some home-buying myths
JULY 5, 2015 LAST UPDATED: SUNDAY, JULY 5, 2015, 10:41 AM BY KATHLEEN LYNN STAFF WRITER |THE RECORDYou’ve probably heard that it’s a good idea to buy the worst house on the block. But that advice — like a lot of what you think you know about real estate — doesn’t hold up when you take a close look at the data, according to the folks at Zillow, the real estate website.Zillow’s CEO, Spencer Rascoff, and chief economist, Stan Humphries, have written a book, “The New Rules of Real Estate” (Grand Central Publishing, $28), that uses all the information Zillow has collected on home listings and sales to test real estate myths. Humphries spoke to The Record recently about why home sellers and buyers should rely on facts instead of “folklore and fable.” He also revealed what having a Starbucks nearby means for your home’s value. An edited transcript follows:
I. Your data call into question the old advice to buy “the worst house in the neighborhood.”
When we decided to write the book, Spencer and I spent a day listing 50 or 60 questions we wanted to tackle. This was one of the first ones on the list, because everybody’s heard this. The common thinking was that you would buy the worst house and, over time, it would become a more typical home in the neighborhood. If it was in the bottom 10 percent when you bought it, somehow, 10 years later it would be closer to the average.
What we found is this does not happen at all. If you buy the worst house in the neighborhood, when you go to sell it, it will still be the worst house in the neighborhood. We also found that generally it’s the worst house for a reason.
I. It’s smaller, or less well kept?
Or there’s something inferior about the location, which suggests there may be limits in your ability to change its ranking within the neighborhood.
If you want to be in the neighborhood and you can’t afford to buy a median house, buying the least expensive home is not a bad idea. Just don’t expect it to become something other than the least expensive home. Generally, our advice was to buy the best home you can afford, but not the house that’s the worst in the neighborhood.
I. A lot of people think that to get the best school districts, you have to buy in the most expensive neighborhoods. But you say that you can use data and information in ways that weren’t available before to find more affordable areas that have great schools.
There’s a wide variation of home prices within the same school boundaries. You can probably find homes you can afford within a good school boundary.
I. You have a chapter on how to pick the next hot location in cities; does it apply to suburban areas, as well?
We talked about things like the halo effect, where, rather than buy in the premium location, buy in the adjacent area. Instead of buying where the cool folks are, wait for the cool folks to come to you. You definitely see that pattern occur even in the suburbs; it’s not just an urban phenomenon.
We all know that it’s important for sellers to use really good photos in their listings because buyers start home shopping on the Internet, but you also have a chapter on the words you should and should not use in listings. Why is it so bad to say the house is nice, or in a nice neighborhood? Or that it’s unique?
“Nice” is a filler word, but the signal you’re sending is that you don’t have much else to say about the house. Buyers aren’t stupid. They’re reading that and saying, “Wow, if all you have to say is that it’s nice, that’s not much.”
A lot of sellers seem to like the word “unique,” but “unique” is sending the message that only you like the property, more than likely. The home is not broadly appealing. “Unique” homes sold for 36 percent less than you would expect otherwise.
Words that were really helpful were words that describe things that offer real differentiating value in your home. So “stainless steel,” “granite,” if you have a view or beautiful landscaping — any of those descriptive things were really powerful.
We also found that people should be verbose. We saw increases in home values for up to about 250 words [in a listing description]. The more you write, up to that limit, the better it is for the value of your house. You’re just giving more and more information to buyers, which is helpful. Try to write as much as you can.
You found that sellers do better pricing close to the market value, rather than trying for a higher price, and I’ve heard that from agents and other analysts. But it seems like sellers always want to test the market.
Our data show that if you overprice your home, often you end up having to chase the price down, because the longer it stays on the market, the more people think there’s something wrong with it.
We found that homes that were priced pretty correctly sold for about 2 percent more than you would expect.
On the topic of pricing, how accurate are Zillow’s home price estimates, or Zestimates? I’m sure you’ve heard the complaints from real estate agents who say that sellers come to them and say, “Zillow says my house is worth this much,” when they think the Zestimate is off.
Currently, our national accuracy rate is [within] about 8 percent [of the final sale price of the home]. It’s something we’re constantly improving. We’re about twice as accurate today as when we launched in 2006.
We think of the Zestimate as being a starting point for a conversation about value. You should also talk to real estate professionals, either agents or appraisers, who know your market in more detail and know the actual home.
I. There have been a lot of well-intentioned efforts to extend homeownership to poor families, because we know that for many households, homeownership is a major source of wealth. But your research shows that helping poor people buy homes in not-great neighborhoods actually may hurt them more than help them.
We looked at the return on housing for less affluent versus more affluent homeowners. What we found was that from a public policy perspective, we have to be careful because the returns are not equal. You see higher returns to real estate investments, and less volatility, in more affluent neighborhoods.
That puts you on a horns of a dilemma. How you resolve that is unclear. It’s also equally clear that homeownership can be a good mechanism for long-term wealth accumulation across a generation.
We think that people need to understand the differences in returns and volatility in less affluent and more affluent areas, before they blindly suggest that we ought to crowd everyone into homeownership. Homeownership is right in some circumstances and not right in others, and seeing it as a universal panacea can lead people to bad decisions.
I. Zillow recently reported that 15 percent of homeowners still owe more on the mortgages than the properties are worth. What does this mean for the housing market’s recovery?
Negative equity is a lasting and pernicious dynamic in the housing market. It basically locks a lot of people out of the market, and means that the number of people who are able to trade their homes with one another is lower, which leads to less inventory and more volatile home prices.
You mentioned the negative-equity number of 15 percent. Probably the more relevant number to look at is what we call the effective negative equity rate, which is the number of people who are either in negative equity or have less than 20 percent equity. That number is 33 percent nationally. That means one in three homeowners are not going to trade their homes, either because they have negative equity or because if they sell, they won’t have enough proceeds from the sale to afford the down payment in another home.
I. Finally, when you looked at the data for the book, was there anything that really surprised you?
The one that was actually pretty shocking was the Starbucks chapter and the [positive] impact of coffeehouses on home price appreciation nearby. I was surprised at the magnitude of the difference [in home value]. Some of it relates to walkability. To be close to a coffeehouse implies you’re in a walkable community.
BUT THERE’S CAUSE AND EFFECT GOING ON THERE. STARBUCKS IS NOT THROWING DARTS AT A MAP WHEN THEY PICK LOCATIONS. THEY ARE PICKING LOCATIONS THAT ARE ALREADY ON THE MOVE. AND THE ARRIVAL OF BRANDS LIKE A STARBUCKS OR TRADER JOE’S OR WHOLE FOODS IS PUTTING A STAMP OF APPROVAL ON A NEIGHBORHOOD THAT RESULTS IN A LOT OF DEVELOPMENT THAT WOULD NOT HAVE HAPPENED OTHERWISE.
THE ONE ITEM NEEDED TO SELL A HOME FOR TOP DOLLAR
March 20, 2015 By Jeff Gould
Accurate pricing leads to more sales
Naturally, all sellers want to get the most money possible for their homes when they sell them. There is one item that, if not perfect, will cause your home to sell for less than it should — that single item is the price.
Pricing your home properly to begin with is without question the single most important factor to selling your home for top dollar. It is a delicate balancing act that, when done properly, positions your home perfectly in the marketplace to sell for the absolute highest possible price. When the home is priced too low, it will sell quickly but for less money than it should. When the home is priced too high, it will sit on the market for a long period of time and ultimately sell for less money than it should.
The biggest mistake I see all the time by owners selling, as well as by real estate agents, is overpricing a home to start with and having to reduce the price multiple times. When a home is listed for sale, it reaches the highest number of potential buyers the first few days it is on the market. If a home is dismissed as being overpriced early on, you will lose potential buyers.
Typically, buyers will flip through listings online; they look at the main home photo first, then they look at the price. If the potential buyer does not like either of those items, they will move on to the next listing. Be honest: How many times have you done that? I do it all the time.
The challenge is pricing the home properly. You can use the Zillow Zestimate; you can see how much a neighbor’s home is listed for and price a home the same, or you can just price the home at the amount of money you “want” to get (or need to get) for it. I’m sorry to tell you that none of those methods work, and they certainly will not help you sell a home for top dollar. Let’s take a quick look at why these methods don’t work.
The Zillow Zestimate is a very popular, well-marketed tool. Zillow is in the business of generating leads for real estate agents, and it is very good at it. The Zillow Zestimate is an interesting tool, but it is not usually accurate. The entire system is computerized and based off of public records that are sometimes incorrect. There have been many occasions when I have come across public records in which the number of bedrooms, bathrooms or the square footage of a home has been incorrect. All of these errors lead to inaccurate Zestimate results.
In my opinion, the biggest issue with the Zestimate is its inability to take into account items such as home features, upgrades and the condition of a property. Those items require an actual human to take an in-depth look at your property and determine how it truly compares to another property. Once that determination is made, proper adjustments to the value are made.
I’m not here to bash the Zestimate. It works OK for general property value estimates, especially when the home is in a subdivision of similar homes. A home is most likely the single largest item you will sell in your lifetime. Do yourself a favor and do not use the Zestimate as a pricing tool for your home — it could end up costing you tens of thousands of dollars.
Looking at how much a neighbor’s home is listed for or seeing how much other properties currently for sale are listed for does not work because we want to know exactly what homes have sold for, not what they are attempting to sell for. The only thing a home still for sale or “active” tells us is that the home is probably overpriced. The most accurate way to predict what a home will sell for is by finding out what similar homes sold for.
Listing your home for how much you want or need to get is wrong. Truthfully, it does not matter what you want or need to get for a home. That is a poor pricing strategy. The fact is, a home is worth exactly what a qualified buyer is willing to pay for it. What you want or need has no bearing on that.
The key to selling a home for top dollar is to strategically price the home. To do that, you need to take a detailed look at similar homes that recently sold in the area. Hire a real estate agent who is an expert in the area where you are selling your home. Know the average current days on market for the homes that sold. Using this data, interview real estate agents and find out how many days on market their homes that are currently for sale and recently sold are averaging. Also find out how many price reductions were needed and how much those price reductions were. An agent who has an average days on market higher than the current sold average or multiple price reductions that total more than 10 percent is either not very good at marketing or is overpricing his listings.
A great real estate agent will know the local market and complete a comparative market analysis (CMA). This will allow the real estate agent to accurately compare a home to recently sold homes on the market. The trick is to price a home so it is considered to be the best value in the price range.
Remember that if a home is overpriced compared to the other homes on the market, all you are doing is helping other people sell other homes by making their homes look like a better value. The guidance of a high-quality real estate agent can help homebuyers land on the most strategic price and get a home sold for top dollar.
STICKER SHOCK STALLS DOWNSIZING BOOMERS —CNBC, FRIDAY, FEBRUARY 27, 2015, BY DIANA OLICK
Betsy Friedlander, 66, and Mike Klipper, 67, have adored their light-filled, three-story colonial in suburban Bethesda, Maryland, for nearly three decades. They had the more-than-3,000-square-foot home built, and they raised their two sons in it. Now with the boys grown and gone, they are looking for a new home as part of a new lifestyle.
“I think we wanted to have more of an urban life, if we could be downtown and walk to everything, that would be our preference,” said Mike.
But after an exhaustive search of condominiums and townhouses in downtown Washington, D.C., and in downtown Bethesda, they learned a tough lesson about this new lifestyle. It has become incredibly expensive. The prices were so high, and the properties so small, they would be getting very little for their money. One bedroom condos were selling in the $1 million range in some buildings.
“We started looking in D.C., and we were shocked, absolutely shocked, because we thought we would be able to sell our house and put a little money in the bank, and buy something we would enjoy,” said Betsy. “Even if we went up a substantial amount, we didn’t see anything that we could feel comfortable living in.”
Even making a lateral move, buying for the same prices as they could sell their home, they would get half the space and still have to pay large condo fees. They finally decided to give up.
“Here we stay!” proclaimed Betsy, with a tinge of regret.
It’s a problem facing the baby boom generation (born between 1946 and 1965) from coast to coast, and it is also creating a larger problem for the overall housing market. Boomers were expected to downsize out of their large suburban homes, bringing much needed inventory to the market.
Their desire, however, to live in walkable, urban centers, where they can lead an active physical and cultural lifestyle, is just not affordable in today’s tight market. They are therefore staying put longer, and causing a huge shortage of available inventory for the overall housing market. Renting isn’t much an option either with rents nationwide at record highs.
“Fifty percent of boomers feel like they can’t get out of their house, and that’s limiting supply,” said Jane Fairweather, whose Bethesda real estate firm represented Betsy and Mike in their search. “So the houses that we’re waiting to come on the market, for the young families that are trying to move into the good school systems and the good neighborhoods, aren’t coming on.”
There were 9 percent fewer homes for sale in January of this year than there were one year ago, according to Realtor.com.
That, in turn, is pushing prices higher for the homes that are listed, because those homes are now seeing bidding wars. Higher prices are then sidelining first-time and even midlevel buyers, in something of a vicious circle.
“We were a bit shocked at the prices, yes,” said Howard Sokolove, also a resident of Bethesda.
Sokolove, in his early 70s, is retired, but his slightly younger wife, Ruth, is a baby boomer and still works as a nurse in a nearby hospital. They already sold one of their cars, hoping to move to a more urban setting.
“We would have to spend at least twice as much, maybe 2 ½ times as much for a similar-sized space,” said Howard.
The Sokoloves decided to stay put as well, although they worry about aging in a house with stairs and a large yard that needs upkeep.
“I’m learning to love what I’ve got,” he said.
Back at her real estate office, Fairweather explained how she rationalizes these moves to her clients. She asks them to think about what rooms they use the most. The answers are generally the kitchen, family room and bedroom.
“And if you measure that square footage, it’s going to be close to what you’ll end up with in a condo,” said Fairweather, “but it’s a major psychological transition, and oftentimes it takes a lot more time to get people ready.”
The problem is considerably more acute in higher-priced suburbs of major urban markets, but even in smaller cities, the inventory problem persists.
Some builders, like Pulte and Lennar, have put major resources into so-called active-adult communities, where single-level homes are offered at very affordable prices, and they have seen strong demand; these communities, however, are generally not close to urban centers. They tend to be more popular in the South and Midwest and in less urban areas.
“I think that part of the enjoyment that we have is being in a diverse community. That’s really important. And diverse in every way. Mike and I enjoy being with people of different generations,” said Betsy.
She and Mike said they would not consider moving to an active adult community.
Zillow offers estimates of your house’s value. But the error rate can be high.
By Kenneth R. Harney
February 6, 2015
When “CBS This Morning” co-host Norah O’Donnell asked the chief executive of Zillow last week about the accuracy of the automated property value estimates – known as Zestimates – that can be found on his company’s Web site, she touched on one of the most sensitive perception gaps in American real estate.
Zillow is the most popular online real estate information site, with 73 million unique visitors in December. Along with active listings of properties for sale, it also provides information on houses that are not on the market. You can enter an address or a general location into a database of millions of homes and probably pull up key information – square footage, lot size, number of bedrooms and baths, photos, taxes – plus a Zestimate.
Shoppers, sellers and buyers routinely quote Zestimates to realty agents – and to one another – as gauges of market value. If a house for sale has a Zestimate of $350,000, a buyer might challenge the sellers’ list price of $425,000. Or a seller might demand to know from potential listing brokers why they say a property should sell for just $595,000 when Zillow has it at $685,000.
Disparities like these are daily occurrences and, in the words of one realty agent who posted on the industry blog ActiveRain, they are “the bane of my existence.” Consumers often take Zestimates “as gospel,” said Tim Freund, an agent with Dilbeck Real Estate in Westlake Village, Calif. If either the buyer or the seller won’t budge off Zillow’s estimated value, he told me in an interview, “that will kill a deal.”
Back to the question posed by O’Donnell: Are Zestimates accurate? And if they’re off the mark, how far off? Zillow chief executive Spencer Rascoff answered that they’re “a good starting point” but that nationwide Zestimates have a “median error rate” of about 8 percent.
Whoa. That sounds high. On a $500,000 house, that would be a $40,000 disparity – a lot of money on the table – and could create problems. But here’s something Rascoff was not asked about: Localized median error rates on Zestimates sometimes far exceed the national median, which raises the odds that sellers and buyers will have conflicts over pricing. Though it’s not prominently featured on the Web site, at the bottom of Zillow’s home page in small type is the word “Zestimates.” This section provides helpful background information along with valuation error rates by state and county – some of which are stunners.
For example, in Manhattan, the median valuation error rate is 19.9 percent. In Brooklyn, it’s 12.9 percent. In the District, Zillow is unable to compute an error rate. In Somerset County, on Maryland’s Eastern Shore, the rate is an astounding 42 percent. In some rural counties in California, error rates range as high as 26 percent. In San Francisco it’s 11.6 percent. With a median home value of $1,000,800 in San Francisco, according to Zillow estimates as of December, a median error rate at this level translates into a price disparity of $116,093.
Some real estate agents have done their own studies of accuracy levels of Zillow in their local markets.
Last July, Robert Earl, an agent with Choice Homes Team in the Charlottesville, Va., area, examined selling prices and Zestimates of all 21 homes sold that month in the nearby community of Lake Monticello. On 17 sales Zillow overestimated values, including two houses that sold for 61 percent below the Zestimate.
In Carlsbad, Calif., Jeff Dowler, an agent with Solutions Real Estate, did a similar analysis on sales in two Zip codes. He found that Zestimates came in below the selling price 70 percent of the time, with disparities ranging as high as $70,000. In 25 percent of the sales, Zestimates were higher than the contract price. In 95 percent of the cases, he said, “Zestimates were wrong. That does not inspire a lot of confidence, at least not for me.” In a second Zip code, Dowler found that 100 percent of Zestimates were inaccurate and that disparities were as large as $190,000.
So what do you do now that you’ve got the scoop on Zestimate accuracy? Most important, take Rascoff’s advice: Look at them as no more than starting points in pricing discussions with the real authorities on local real estate values – experienced agents and appraisers. Zestimates are hardly gospel – often far from it.
Source: Washington Post
STARTING WITH ZILLOW’S ZESTIMATE MAY NOT GET YOU VERY FAR
February 17, 2015
By Bob Hunt
A couple of weeks ago real estate columnist Kenneth Harney reignited a heated real estate conversation about the use and value of “Zestimates” — the automated property value estimates that appear alongside otherwise objective property information provided by Zillow, the dominant real estate information site on the Web.
Agents around the country have weighed in on comment posts and the blogosphere. Some say Zestimates are consistently too high, some say too low, and some say they are just too often erroneous — giving both low and high valuations.
In my own experience, a decidedly unscientific sampling of recent closed sales showed that the Zestimates had tended to be on the high side, with a median error rate of 10%. But, credit where it’s due, some of the Zillow estimates were, as far as real estate valuations go, right on the money. One Zestimate indicate a $480,439 value for a property that ultimately closed at $484,000. Pretty impressive for a remotely-located automated valuation system.
Zillow — which makes its money on advertising purchased by real estate agents who have supplied it with critical information (listings) in the first place — is sensitive to the problems that Zestimates can cause for agents. (It’s awkward to be an agent who appears to be endorsed by Zillow when your CMA indicates a value $50,000 lower than the Zestimate.) To that end, Zillow recently made available to its agent-customers a document entitled “Talking Points: Scripts for Explaining the Zestimate to Clients”.
Zillow spokespersons are fond of saying that Zestimates are not appraisals; rather, they are “a good starting point” or sometimes “just a starting point.”
But what is that supposed to mean? Any number picked out of the air could be a starting point. Especially if we don’t even know if the Zestimate is liable to be high or to be low, how does it help us to start?
Presumably, the Zestimate is a “starting point” for a conversation that aims to get to a reasonably accurate evaluation. But, as a starting point, the Zestimate provides precious little help in that regard. Sure, if it is incorrect about some of the few public records characteristics (e.g. age, number of bedrooms, square footage) adjustments can be made accordingly. (There is a process for correcting such misinformation on Zillow.) But, outside of that, the Zestimates, allegedly based on “millions of data points”, provide no help as a so-called starting point. That is because Zillow doesn’t say what those data points were or how they were factored into the result.
If you have a disagreement with a CMA, or even a full-blown appraisal, you have something in hand that you can work with. What comparables were used? What might have been overlooked? How much value was attributed to this feature or that? Are features of the comparables (e.g. view, street location) adjusted in an appropriate manner?
A Zestimate doesn’t allow for those questions to be asked. That is because you don’t know what data the Zestimate was based on; nor do you know how adjustments were made. So what help is it as a starting point? You just have a black box with a number on its output screen. Good luck with that conversation.