If you’ve been home shopping or home stalking in the 21st century, then you’ve heard of the Zestimate.  It has been credited for Zillow’s instant popularity and continues to generate buzz today.  Is this magical estimate of value generated by algorithm’s the end all be all to your home value?  No, it isn’t!

Is the Zestimate an appraisal?

I met a seller once who said to me that he knew the value of his home because he had an appraisal. When asked who conducted the appraisal, he said Zillow.  Then I asked if he let the appraiser from Zillow come into his home, if they studied his neighborhood and studied the market. Of course that did not happen because your Zestimate is NOT an appraisal.  Appraisers are licensed, they follow a code of ethics & conduct, and they often live in the market they serve.  An algorithm can not duplicate their knowledge of an area or the condition of home. 

Is the Zestimate accurate?

If a seller tells me they are thrilled with their Zestimate that sets off all sorts of alarms for me. It could be accurate, but I don’t know that there is any rhyme or reason to why it is way off or closer to market value at times.  I sold a home this year that had a Zestimate nearly $75,000 less than my list price and it sold for list price.  That particular Zestimate also showed that in the previous 30 days the home value had decreased by $11,000. If I had put ANY stock in that estimate, my seller’s would have sorely lost out on a lot of cash. I also see Zestimate ranges of over $100,000!!!! So they are saying a home could be worth between $300,000-$425,000.  That really confuses buyers and sellers.  It’s like predicting Indiana weather, it could be sunny or we could have arctic blasts followed by hail.

Why isn’t it accurate?

I think a computer program can generate a range in sale price with the right information, but to get to an actual listing price there is a more human element involved.  There are some important considerations that are missing from the Zestimate.  Does Zillow know which schools are really popular?  Have they been in your home to see how it compares to others in your area?  Do they know if your neighborhood is appreciating or depreciating?  Do they know your backyard has the best sledding hill in the area?  These are just a few of the things that I have to think about when listing a home for sale.

As a REALTOR, I know that sellers often perceive their home value to be more than the actual market value.  There are things about homes that sellers might not care about, but the average buyer will as they compare your home to others.  A 4 bed, 2.5 bath home might have similar specs on paper to another in the area, but the other home might have a new roof, new kitchen, larger bedrooms, and a better yard.  So we have to account for that when determining price.  Your home Zestimate might be similar, but market value will not be as similar.

If you want to know what your home is worth, call me.  I will run comps and give you an idea of what you can expect for your home.  The sale price of a home is different at any point in time because buyers are entering and exiting the market.  Consider our area where we tend to have a very active Spring market, but when Winter hits we slow down a lot.  Listings lag over the colder months and that does affect pricing.

Have fun checking out Zestimate’s and trying to guess how accurate they are, but don’t think too hard about them!  When a home is pended the Zestimate seems to magically get closer to the list price, something I’ve noticed.  I would assume Zillow wants to create data showing the accuracy of the Zestimate.  If they were to take the last Zestimate posted before a home is a closed sale, then they could say their estimate was really close to sale price.

The most entertaining part of Zestimate’s for me is the constant increase and decrease in home values that sometimes are quite drastic over a short period of time. I also love that there are numbers like $386,509 listed as a Zestimate.  Wowzers.  I have never seen such inaccurate accuracy!

Happy Buying and Selling!

So you want to buy a home, but are you really ready to buy in this market? The number one thing that sellers fear is buyers walking away from the sale. Thus, sellers and their savvy realtors know that they need to see a solid letter from a lender OR proof of funds before they accept an offer. This means that once you, as a buyer, have interviewed realtors (yes, buyers can and should interview realtors) and selected one, the next step is going to be to meet with lenders if you are getting a loan.

There are a number of things that can happen when the time arrives for you to attain a pre-qualification or pre-approval letter from a lender.

1.) You call your realtor out of the blue to see a home you love and don’t have a letter yet.

2.) You saw a home with your realtor that you want to make an offer on, but don’t have a letter yet.

OR

3.) You have your letter ready, but it’s for an amount different than what you are offering.

For scenarios, 1 and 2 your best and fastest way to get pre-qualified is to fill out an online application. That way you have a letter to submit with your offer. You are not obligated to use that lender, but it sure would’ve been easier if you met with and selected a lender prior to making an offer. It’s not uncommon for buyers to put the cart before the horse, so don’t despair. You are just making things a bit more hectic for yourself.

The third scenario means you are on top of things (gold star for you) and all we need to do is email your lender to update your letter reflecting the offer price. Why show your cards this early in the game? The point is to at least show the seller you can very likely afford what you are offering. There might be an instance where it makes sense to send a letter showing you are approved for more than the purchase price, like in a multiple offer situation.  This will display your financial capacity is in excess of what will be required for that particular purchase.

Different lenders, the type of loan you are taking and your personal financial situation can all affect what is needed. These are commonly requested:  Last year’s W2s, recent pay check stub, and the last two months of bank and/or investment account statements. For a credit report they will need your social security number, date of birth, and a 2 year residence history.

What if I am self-employed?

If self-employed then your lender will need personal tax returns for the last 2 years as well as business returns if you file those separately from your personal tax return. 

Are you reading this and thinking that maybe you should connect with a lender?  Reach out to me and I can help.  Happy Borrowing!

Home inspections are a key part of the buying and selling process in real estate transactions. Every market is unique in terms of the way buyers and sellers approach inspections and then subsequently negotiate inspection items.

• In our local market, it is customary for the buyer to schedule an inspection after an offer is accepted and a typical inspection period is 14-18 days.
• The buyer pays for a general inspection and depending on any additional inspections taking place like radon, septic, termite, etc… the cost can climb to well over $500.
• The inspection period covers the time for an inspection and by the end of that period, the buyers will have to make their formal response to the sellers unless they ask for additional time to have other professionals evaluate items that came up in the report. Another blog post will be dedicated to more about selecting an inspector, the inspection process, and how to sift through the response items to make the best response.

Top 10 Inspection Issues:

1. Drainage issues due to clogged gutters and downspouts. It’s Indiana and it can be really really wet here. Cleaning gutters and downspouts as well as adding gutter extensions can do a lot to keep water away from your foundation.

2. Water or moisture in the crawlspace. The addition of a sump pump or some perimeter drainage often does the trick. The key is to keep water from getting in and when it does get it out. It might be that this is a result of clogged gutters and/or downspouts so check those first.

3. Damaged trim around doors and windows. Again, another water issue…notice the theme here. This permits water intrusion and the trim should be replaced or repaired.

4. Missing GFCI receptacle. This is a common safety/shock hazard noted in inspections. Have a licensed electrician install the proper receptacle.

5. Windows with broken seals. Oh this one, ALL the time! This is what causes the foggy glass that you can’t get clear no matter how hard you scrub. The glass needs to be replaced and local glass companies can take care of this chore. Sometimes this fix takes a while with the glass company first measuring, then ordering, and then installing.

6. Light fixture doesn’t work. If you are a seller, make sure your light bulbs are not burned out. Also, leave out any fan/light controls. Often a non-working ceiling fan or light is because they didn’t have the remote to test it.

7. Damaged siding. Moisture can penetrate and cause additional deterioration behind the siding so it should be replaced with the best match.

8. Mold. I often find mold showing up on reports in the crawlspace or attic. There are companies that will test for mold and some clients want to have the home tested after any mold remediation is done by the sellers qualified contractor. For buyers with mold allergies, this is a top concern.

9. Foundation settlement/possible structural concerns. This is something that will strike fear into the hearts of buyers, especially first-time home buyers. If the inspector recommends a structural engineer take a look, then I put my buyers in touch with our local engineer to get his professional opinion. If there are structural issues, the engineer will draw up a plan to remedy them and typically buyers will have sellers at least provide a credit for this work. One thing to keep in mind is that when you start to mess with the foundation of a home, you will find that you might have additional repairs to drywall which will lead to re-painting.

10. Roof with missing shingles, nails popping up, and damaged shingles. It’s fairly easy to have a roofing company come assess a roof based on the inspectors concerns and create an estimate for any necessary repairs. If you think your roof has storm damage, give your insurance agent a call to have it assessed in case they determine a new roof or repairs are covered.

Many sellers are surprised when they see the inspection report on their home. If you want to try to avoid some surprises, think about having a pre-listing inspection. Note that Radon is not mentioned here as that is a separate inspection and will be discussed in another post.  Happy buying and selling!