Why The Zillow Zestimate Is Less Accurate Than It Looks

Far too many times people put way too much stock in the Zillow value of their home. It is so common that when I prepare for a listing presentation, I always check the Zillow value first, so that I know what is going through the mind of the Owner. Inevitably I have to educate Owners on the accuracy of Zillow, and how their valuations are determined.

I found the following post to be one of the most informative that I have seen. The Source is HomeVisor LLC, and the post was published by Brett Doshan.

Why The Zillow Zestimate Is Less Accurate Than It Looks.

A few months ago we wrote about the accuracy of the Zillow Zestimate, or maybe we should say, the Zestimate's lack of accuracy. This is obviously a hot topic - a Google search for ‘Zestimate accuracy' will quickly illustrate that there are a lot of questions and frustration around the Zestimate. Additionally, our Zestimate accuracy blog post is one of our most viewed posts.

We are actually big fans of Zillow, and we fully understand that no predictive valuation system is perfect, however we do have a major issue with the way Zillow calculates its accuracy. From its website, here is how Zillow calculates its accuracy:

Zestimate accuracy is computed by comparing the final sale price to the Zestimate on or before the sale date.

The important thing to note here is that Zillow uses the Zestimate ‘on or before the sales date.’ That is our issue – that they use the Zestimate after the listing price becomes public. That makes their Zestimate look more accurate than it really is since, what you will see in the data below, the Zestimate can change dramatically based on the listing price. Let me pose this scenario to you – say the Zestimate on your house is $439,000, you then list it for sale at $1,495,000, after your listing price is made public and picked up by Zillow, the Zestimate then increases to $1,200,000! This is a real example – you can check it out at this link. Let me ask you this, would you consider $439,000 accurate if you just listed your house for $1,495,000? That is a difference of over $1 million.

Here is the rub for us – if this house sells for, say, $1.35 million, Zillow will use its most recent Zestimate of $1.2 million when it calculates accuracy. That calculation will say that this house sale was within 11% of its Zestimate. This would be consistent with their claim that nationwide, 78.8% of all sales occur within 20% of the Zestimate.

However, a more honest assessment of their accuracy would be to use the price before the listing was public – to do that we use the Zestimate of $439,000 and a sales price estimate of $1.35 million – which puts the sales price at over 3x the Zestimate, not nearly as accurate!

That being said, we only had to look at a handful of For Sale listings in each city to find these examples, which leads us to believe this pattern occurs fairly often.

Are we cherry-picking listings to prove our point - of course we are! However, it does prove our point, the Zestimate can be very inaccurate and can move a lot based on the listing price. Looking at the three examples above, on average the Zestimate more than doubled after the house was listed for sale. And that, in our opinion, is what makes the Zestimate accuracy look much better than it actually is.

Our advice, as always when it comes to Zillow, is to use it as a data point during your research, but not to rely too much on it.

Reposted by:

Mark Vandervest, Principal Broker
Mark Vandervest, P.C.
Extraordinary Real Estate Representation &
Property Management
503-941-0775 Office
503-941-0776 Fax
www.TheOregonBroker.com

Buying a Home is Now 38% Cheaper Than Renting!

Source: Forbes.com (3/5/14)

Is renting or buying a better financial bet? Every six months, Trulia’s chief economist Jed Kolko runs the numbers to answer that question and help you stay on top of the trends. So what does Trulia’s Winter 2014 Rent vs. Buy Report tell us? Although the gap between renting and buying is narrowing across the U.S., homeownership is still 38% cheaper than renting.

Homeownership remains cheaper than renting nationally and in all of the 100 largest metro areas according to Trulia TRLA -2.49%’s latest Winter Rent vs. Buy report. Rising mortgage rates and home prices have narrowed the gap over the past year, though rates have recently dropped and price gains are slowing. Now, at a 30-year fixed rate of 4.5%, buying is 38% cheaper than renting nationally, versus being 44% cheaper one year ago.

The rent versus buy math is different in each local market. Buying ranges from being just 5% cheaper than renting in Honolulu to being 66% cheaper than renting in Detroit. But even for a specific market, the cost of buying versus renting depends on how much home prices rise (or fall) after you buy. Our model assumes conservative home price appreciation, but – as we all know after the last decade – home prices can unexpectedly rocket or plummet. Buying Beats Renting Until Mortgage Rates Hit 10.6%.

Even though prices increased sharply in many markets over the past year, low mortgage rates have kept homeownership from becoming more expensive than renting. Also, in some markets, like San Francisco and Seattle, rents have risen sharply; rising rents hurt affordability relative to incomes, but rising rents make buying look cheaper in comparison.

Will renting become cheaper than buying soon? Some markets might tip in favor of renting this year as prices continue to rise faster than rents and if – as most economists expect – mortgage rates rise, due both to the strengthening economy and Fed tapering. For each metro, we identified the mortgage rate “tipping point” at which renting becomes cheaper than buying, given current prices and rents. If rates rise, Honolulu would become the first metro to tip, at a mortgage rate of 5.0%. San Jose and San Francisco would also tip before rates reach 6%. But those are the extreme markets. Nationally, rates would have to rise to 10.6% for renting to be cheaper than buying – and rates haven’t been that high since 1989.

For full article with graphics, visit: http://www.forbes.com/sites/trulia/2014/03/05/buying-a-home-is-now-38-cheaper-than-renting/

Are you buying or selling real estate on Oregon? Do you have rental properties to manage? Give us a call. We can help!

Mark Vandervest, Principal Broker
Mark Vandervest, P.C.
Extraordinary Real Estate Representation &
Property Management
503-941-0775 Office
503-941-0776 Fax
www.TheOregonBroker.com

Quick Tips To Beat Out Cash Buyers

You’ve been searching for the perfect home for quite a while, and finally, you’ve found it! You get all of your finances in order and place an offer on the house.

However, you’re not the only one that loves the home, because there are multiple offers — and one of them is cash.

Cash buyers are seen as desirable because they’re almost always a guaranteed quick close.

They don’t have to borrow money from a bank therefore won’t have any financing hang-ups, which is where a large portion of offers fall through. Don’t worry; not all hope is lost.

Follow the steps below to beef up your offer and get your foot in the door.

Less Expensive Homes
If you’ve put offers in on homes at the asking price and are continually beat out by buyers that are paying more, then you might want to consider looking in a lower price range. This is an especially smart strategy for those living in fast-selling markets. By looking at less expensive homes, you can be the one that puts in an offer over the asking price.

20 Percent Down Payment
Save up a higher down payment for the price range of homes you’re considering. If you can come up with 20 percent, then you’re in a position to wave the appraisal contingency for financing with the bank. The more you have in cash, the better.

Take-It-Or-Leave-It Home Inspection
This means that based on the home inspection, you’ll take the property with all its issues, or you’ll walk away. What you won’t do is ask the seller to waste more of their time and money fixing every little problem that’s found.

Fees
Waive the seller concessions, such as closing costs and the home warranty, and pay your real estate broker’s fees. These extra costs add up in the mind of the seller and will show that you really want the property.

Going up against cash buyers can be extremely discouraging. But, just because they’re dealing in cash doesn’t mean they’ll get the property. Many investors think they can put in a low offer because they’re dealing in cash.

So show you’re serious about a property, follow the steps above and put in your best offer. You’ll be a homeowner soon enough!

Bonus Tip – Get Pre-Approved NOT Pre-Qualified
What’s the difference?

Getting pre-qualified – is the initial step in the mortgage process, and it’s generally fairly simple. You supply a bank or lender with your overall financial picture, including your debt, income and assets. After evaluating this information, a lender can give you an idea of the mortgage amount for which you qualify. Pre-qualification can be done over the phone or on the internet, and there is usually no cost involved. Loan pre-qualification does not include an analysis of your credit report or an in-depth look at your ability to purchase a home.

Getting pre-approved - is the next step, and it tends to be much more involved. You’ll complete an official mortgage application (and usually pay an application fee), and then supply the lender with the necessary documentation to perform an extensive check on your financial background and current credit rating. (Typically at this stage, you will not have found a house yet, so any reference to “property” on the application will be left blank). From this, the lender can tell you the specific mortgage amount for which you are approved. You’ll also have a better idea of the interest rate you will be charged on the loan and, in some cases, you might be able to lock-in a specific rate. With pre-approval, you will receive a conditional commitment in writing for an exact loan amount, allowing you to look for a home at or below that price level. Obviously, this puts you at an advantage when dealing with a potential seller, as he or she will know you’re one step closer to obtaining an actual mortgage.

In a competitive market, this lets the seller know that your offer is serious – and could prevent you from losing out to another potential buyer who is paying cash, or already has financing arranged.

Once you have found the right house for you, you’ll fill in the appropriate details and your pre-approval will become a complete application.

Extracted from http://www.michaelsmortgageblog.com

Mark Vandervest, Principal Broker
Mark Vandervest, P.C.
Extraordinary Real Estate Representation &
Property Management
503-941-0775 Office
503-941-0776 Fax
www.TheOregonBroker.com

Real Estate Open House: Doorway To Trouble?

Extracted from Marilyn Lewis’ blog on July 23, 2013:

You may think you have nothing to lose by employing this traditional marketing tactic. But critics say that's not true -- and your agent has more to gain than you do.

Now that real estate has emerged from its coma and more would-be sellers are listing their homes for sale, it's worth asking whether a seller's open house, that traditional marketing technique of real estate agents, is worth the effort.

Open houses are more effective at marketing real estate agents than they are at selling homes, critics say. They also present an opening for thieves who pretend to be homebuyers but in fact are there to steal the owner's belongings or to case the joint with the idea of returning later.

For buyers, searching for a home has changed with the Internet. That would seem too obvious to bother pointing out except that the numbers are so interesting. A National Association of Realtors 2012 survey of homebuyers and sellers found that:
· In 2003, 16% of homebuyers surveyed found their new home through a yard sign or open house (the survey did not distinguish).
· In 2012, just 10% found their home through a yard sign or open house ("The Internet has edged out all other sources in the process," the report says").
· Most (41%) buyers today go online first to learn about homes for sale.
· Just 3% turn first to an open house to learn about properties for sale.

In defense of open houses:
Despite this shrinking effectiveness of the open house as a marketing tool, 55% of sellers surveyed said they'd used one. And, as NAR spokesman Walt Molony points out in an email, 45% of buyers -- even more than in the late '90s -- do attend them.

"Not well understood is the fact that open houses also are attended by real estate agents, where they learn firsthand about properties that may be of interest to their buyer clients. So while a buyer may not have first learned about the home they purchased through an open house, their real estate agent may have," Molony says.

In the experience of Seattle broker Ray Akers, though, open houses are "a waste of time."

"No one has ever walked in and said, 'I love it. Where do I sign?'" he says. "People walk onto a car lot and buy a car. People don't do that with houses."

Agents typically advise their sellers to lock up or remove valuables and prescriptions, but Akers still worries about thieves who lift unsecured items from the home or who visit to learn the layout and vulnerabilities so they can make a return visit later.

Thieves worked an open house "I don't think it's wise to have an open house in an occupied house," Akers says, talking by phone. He recalls staffing an open house once when a couple distracted him while, he later learned, their associate rifled through drawers in another room. Fortunately, the home was vacant.

"The following day it was reported that several open houses were hit by the threesome. Had my open house been an occupied home, they could have walked out with valuables, prescription medicine, or my client's I.D," Akers says.

Need help with real estate?

Call me.

Mark Vandervest, Principal Broker
Mark Vandervest, P.C.
Extraordinary Real Estate Representation!
503-941-0775 Office
503-941-0776 Fax
www.TheOregonBroker.com

Three Reasons to Buy that House NOW!

Here are three great reasons to consider buying a home today instead of waiting.
1.) Prices Will Continue to Rise
The Home Price Expectation Survey polls a distinguished panel of over 100 economists, investment strategists, and housing market analysts. Their most recent report released last week projects appreciation in home values over the next five years to be between 12.3% (most pessimistic) and 32.8% (most optimistic). The bottom in home prices has come and gone. Home values will continue to appreciate for years. Waiting no longer makes any sense.
2.) Mortgage Interest Rates Are Increasing
As reported by Freddie Mac, interest rates for 30-year fixed-rate mortgages have risen about one full percentage point over recent historic lows. The National Association of Realtors, the Mortgage Bankers Association, Freddie Mac and Fannie Mae, in their July forecasts, have all projected 30-year-fixed mortgage interest rates to be between 4.8 and 5.1% by this time next year. An increase in rates will impact YOUR monthly mortgage payment. Whether you are moving up or moving down, your housing expense will be more a year from now if a mortgage is necessary to purchase your next home.
3.) It’s Time to Move On with Your Life
The ‘cost’ of a home is determined by two major components: the price of the home and the current mortgage rate. It appears that both are on the rise. But, what if they weren’t? Would you wait? Look at the actual reason you are buying and decide whether it is worth waiting. Whether you want to have a great place for your children to grow up, you want your family to be safer or you just want to have control over renovations, maybe it is time to buy. If the right thing for you and your family is to purchase a home this year, buying sooner rather than later could lead to substantial savings.
Extracted from kcmblog.com on 7/30/13

Mark Vandervest, P.C.
Principal Real Estate Broker
503-941-0775 Office
503-941-0776 Fax
Beaverton, OR 97007
www.TheOregonBroker.com

Buying Foreclosure Homes

“Foreclosure” happens to a homeowner when they have defaulted on the loan or loans on their real estate. The first phase of foreclosure happens after several payments are missed… after such time a “Notice of Default” is served to the Owner from the Lender. Once the Notice of Default is delivered to the Owner, it becomes public record, and there is a defined period of time that the Owner has to cure the loan including full payment of all past due payments, late charges, attorney’s fees, court filing, service, and trustee fees.

Very often, I receive inquiries for Buyers looking to take advantage of potential discounts that are perceived to be available on foreclosure properties. There are many websites that offer subscriptions fees for lists of foreclosure properties, with the lure that these properties can be purchased for pennies on the dollar. First of all, there is no need to pay money for these lists. They can be obtained for free from Title Companies, or at the County courthouse.

What you need to know is that statistically less than 2% of all properties that go into the foreclosure process with a Notice of Default actually get foreclosed on. Taking it a step further, nearly all of the 2% of properties that actually go to foreclosure sale are highly leveraged (the loan amount is close to, or even above the actual market value of the home). The bottom line is that it is very, VERY rare to see a property go to foreclosure sale where there is much, if any equity in the home. Combine that reality with the fact that most foreclosure homes are in very poor condition by the time that the occupant vacates the property. Even if you found that rare deal, you need to be prepared for the vast competition at the foreclosure sale (also known as the Sheriff’s Sale). To purchase a foreclosure property certified funds are required. Therefore, conventional financing is not an option.

Most of the time the Lender winds up with the foreclosure property at the Sheriff’s Sale for the amount of their loan on the property, plus costs. The Lender then processes the home, and will often complete necessary repairs on the home to make the property marketable. This can often take several months. As you might imagine, all improvement costs are typically added to the Lender’s bottom line. In the end, foreclosure properties may be priced higher than market value when they finally hit the market. The result is that foreclosure properties are sometimes not the great deal that the perception leads you to believe they are.

I know a couple of foreclosure hunters in the Portland area who spend a great deal of time and money soliciting those Notice of Default lists to try and secure the property before it gets foreclosed on. By a lot of time, I’m talking FULL time. When I say a lot of money, we are talking thousands of dollars a month in mailings alone. That being said, I find that they will secure 2 or 3 properties a year, after all of their work hunting and soliciting hundreds of Owners in default. I know this because they have come to me to resell the properties. And guess what… by the time these investors are ready to flip the property… their asking price is right back at market value.

My advice is that there are better deals, that are easier to be had, on the market RIGHT NOW, that are likely to be in better condition, and that can be purchased with far less hassle than foreclosure properties. I am happy to forward you the Notice of Defajult lists for free if you desire. However, we should meet first to talk more about what is required to compete in the foreclosure market.

Best regards,

Mark Vandervest, Broker
RE/MAX Equity Group, Inc.
www.TheOregonBroker.com

Now… more than ever…
~ There is simply no substitute for experience. ~
“People Before Profit… Reputation Before Revenue!”
Mark Vandervest

Copyright© 2009, Mark Vandervest, P.C. – All rights reserved.
No portion may be reproduced without express written permission of Mark Vandervest, P.C.

The Scoop on Short Sales

“Short Sales” are real estate listings that are trying to be sold for less money than what is owed on the property. The current owner has a loan (or loans) on the property that exceeds the listing or sale price. On the surface, the property seems like a really good value… almost too good to be true. The enticement of the possibility of purchasing a property for less than market value certainly seems very appealing. It is natural to get excited and hopeful about getting a great deal when purchasing real estate.

So what’s the downside? Unfortunately the odds that Short Sales will mature to an actual sale are against you. Recent statistics report that less than 30% of all Short Sale offers are accepted by Short Sale Lenders. Therefore more than 7 out of 10 are a complete waste of time. Statistics go even further by reporting that of the 30% of Short Sales that are accepted by Short Sale Lenders, 60% fail to close! It's not hard to do the math. The question becomes where to you, as a Buyer, want to focus your energy?

When you understand the dynamics of what has to happen, it becomes easier to understand why Short Sales hardly ever work out. Essentially, when an offer is submitted to a lender for Short Sale approval, the lender is put in the position of determining if they are willing to take less than what they are owed (a LOSS) to release the mortgage lien from the Short Sale property. Because the lenders often have an appraisal in the file that is higher than the offer price (because an appraisal was needed in order to fund the loan(s) to begin with), they are typically very reluctant to take less than what they are owed. The decision is further complicated when there is more than one loan on the property (i.e. a first mortgage plus a second mortgage, or home equity line of credit). Negotiating Short Sale acceptance on two loans is extremely difficult, and a complicated process to say the least.

Another dynamic that plays into the Short Sale dilemma is an interesting bit of information that an attorney provided at a conference I attended. Amidst all of the lending turmoil going on in the market over the last couple of years, Lenders have to be very careful to keep their assets in line with their debts. It is important to know that when a Lender transfers interest or releases their loan, they are accountable immediately for the gain or LOSS. This means that if they agree to accept a Short Sale, they have to account for the LOSS on their books at the time of closing. Losses are not a good thing for Lenders in this market… in fact, losses are precisely the reason why so many Lenders are closing their doors and going out of business. According to the attorney presenting at the conference, it often benefits the Lenders to let the property go to foreclosure, and take the property back as an ASSETT, vs. having to report a short sale as a loss on their books. In theory, it is better for the Lender to sit on the property, hoping that the market will get a little better so they can recover their loss, or at least break even on their loan, thereby not resulting in accountability for a loss. The most frustrating component of a Short Sale, is that the majority of the time, the Lender will not even respond to Short Sale offers! Instead, many offers continue to accumulate on the Short Sale property, of which each Buyer hopes to result in a great deal for the Buyer, and which the Lender hopes will be close to, or above the amount they are owed.

There was new legislation that was passed in January 2008, and further revised in April 2008, that provides that Agents must disclose Short Sale “language” in such listings. Unfortunately there are many agents that don’t follow the rules too closely. If you would like to read more about the summaries, you can see more at www.TheOregonBroker.com/shortsalesummaries.pdf.

I am happy to schedule a meeting to discuss how Short Sale transaction may or may not work for you. It is a complex phenomenon new to the industry, and never before seen by most homeowners or Realtors®, and is changing on a daily basis.

Now… more than ever…
~ There is simply no substitute for experience. ~
“People Before Profit… Reputation Before Revenue!”
Mark Vandervest

Copyright© 2009, Mark Vandervest, P.C. – All rights reserved.
No portion may be reproduced without express written permission of Mark Vandervest, P.C.

The Portland Oregon Metro Real Estate Blog

This blog is designed for real estate related information. Most will be specific to the Portland Oregon Metro real estate market, but some information may be extracted from the National Real Estate Market, and the National Association of Realtors®. In the event you would ever like more information specific to a topic, I can be reached through my website www.TheOregonBroker.com.

Best regards,

Mark Vandervest, Broker
RE/MAX Equity Group, Inc.
www.TheOregonBroker.com

Now… more than ever…
~ There is simply no substitute for experience. ~
“People Before Profit… Reputation Before Revenue!”
Mark Vandervest

Copyright© 2009, Mark Vandervest, P.C. – All rights reserved.
No portion may be reproduced without express written permission of Mark Vandervest, P.C.