Zillow vs Appraiser 2013

 Zillow vs TCG

“Zillow told me that my home is worth…”

Appraisers across the USA hear those words at least once a week from well-meaning homeowners.  What many homeowners don’t realize is that Zillow, while a very useful tool, is not always the best indicator of the actual value of their home.  A Zillow Zestimate is not an appraisal.  In fact, if homeowners use Zillow to help them price their home for sale, they could be leaving thousands of dollars on the table, as we will show you.

Below is a chart of 18 randomly selected appraisals that The Coyle Group completed in the past 3 months.  The houses are located throughout Philadelphia, Montgomery, Bucks, Delaware and Chester County.  The chart is a comparison of our appraised value and the Zestimates produced by Zillow.  Keep in mind that our appraisals have the benefit of a full property inspection by a human being and nuanced market knowledge.   Zillow’s Zestimates rely on public records, complex algorithms and no physical inspection of the property.  Here are the results: 

Maple Glen Colonial Appraisal: $430,000 Zillow: $351,050

22.48%

Conshohocken Single Appraisal: $370,000 Zillow: $329,924

12.14%

Collegeville Cape Cod Appraisal: $364,000 Zillow: $355,012

8.65%

Bryn Mawr Mansion Appraisal: $2,000,000 Zillow: $1,662,317

20.32%

Lafayette Hill Colonial Appraisal: $550,000 Zillow: $470,806

16.82%

Chestnut Hill Colonial Appraisal: $635,000 Zillow: $686,018

7.44%

Gladwyne Cape Cod Appraisal: $745,000 Zillow: $697,428

6.82%

Condo – The Murano Appraisal: $575,000 Zillow: $458,870

25.30%

Art Museum Condo Appraisal: $280,000 Zillow: $257,852

8.59%

Condo – The Dorchester Appraisal: $345,000 Zillow: $339,499

1.62%

South Philly Row Appraisal: $110,000 Zillow: $157,378

30.10%

Berwyn Colonial 1 Appraisal: $750,000 Zillow: $886,168

15.37%

Berwyn Colonial 2 Appraisal: $1,200,000 Zillow: $1,153,633

4.02%

Doylestown Townhouse Appraisal: $325,000 Zillow: $294,410

10.39%

Fishtown Row Appraisal: $225,000 Zillow: $211,700

6.28%

Villanova Mansion Appraisal: $2,450,000 Zillow: $2,544,935

3.73%

Mount Airy Twin Appraisal: $285,000 Zillow: $324,137

12.07%

Roxborough Row Appraisal: $245,000 Zillow: $235,076

4.22%

As you can see there are some pretty dramatic deviations between Zestimates and the appraisals.  Based on our appraised values Zillow under valued 13 of the properties.  In some instances Zillow was almost right on, take for instance the condo in The Dorchester.  They were only off by 1.62%…that’s pretty good if you ask me.  For the condo at The Murano, they were off by more than 25%…waaaay off!  On average, Zillow under-valued the properties by 12.39%.

In the case of the South Philly row, the Zestimate was over by more than 30%.  However, I can’t fault Zillow on this one.  The property was really dated and needed a great deal of work.  But this does illustrate how having a full interior inspection of a property can lead to more accurate values.  Also, the Mount Airy twin was over-valued by 12%…but this doesn’t surprise me, everyone in Mount Airy thinks their home is worth more than it is.  Just kidding.

Now imagine that you’re a homeowner getting ready to sell.  You hop on your computer, plug-in your address and Zillow says your home is worth $300,000.  Based on our findings, if Zillow under-values properties 12.39% on average, you (the homeowner) could potentially be leaving $37,170 on the table.  That’s serious money!

This illustration underscores the importance of consulting with a knowledgeable real estate agent or Certified Real Estate Appraiser.  Getting a Pre-Listing Appraisal prior to putting your home up for sale and knowing the true market value of your home can save you time, money and effort when it comes to selling. 

As for Zillow, keep in mind that it is a tool…a starting point.  It’s great for neighborhood data, graphs, general sales information or for seeing what your new neighbors paid for their house.  It’s probably not the best place if you’re looking for assistance with making definitive decision or properly pricing your home for sale.

If you want to know more about our Pre-Listing Appraisal services or have any real estate appraisal related questions please visit www.TheCoyleGroupLLC.com.  You may contact us directly at…215.836.5500 or appraisals@coyleappraisals.com

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Agent Alert!

AGENTS!  Spring is here and these warmer temperatures will only help to heat up the Spring Selling Season.  If you haven’t done so already, now is the time to take a hard look at your older listings and think about how they will compete in the Spring market.  Perhaps, it’s time to do a little Spring cleaning and meet with your Buyers to decide whether they need to “reposition” (re-price) their listing. 

You can bet this new crop of inventory will be priced to sell.  If you want to contend with these new listings, you need to have a competitive price.  Proper pricing is the key!

One way to test the market is to have a Listing Appraisal completed.  Now, having an appraisal completed on a listing is not necessary for all situations.  However, if you have a unique property or a stubborn Seller, a Listing Appraisal may be the way to go.

The obvious benefit is that a Listing Appraisal will provide you and your client with an unbiased, professional opinion of the property’s current fair market value.  Aside from that important fact, there are other benefits to having an appraisal completed on your listing. 

As an agent, having a Listing Appraisal completed allows you to still “be the good guy” and maintain your client relationship while adjusting your Seller’s expectations.  Unfortunately, some Sellers refuse to believe that their home has been affected by recent real estate trends or, perhaps, they feel that shag carpeting and pickled-wood cabinets are making a come back with Buyers.  Having an impartial appraiser look at the property could provide you with the insight and feedback necessary to help your Seller “see the light.”

A Listing Appraisal also gives agents and Sellers an idea of how a potential Buyer’s appraiser may view the property when completing an appraisal for mortgage financing.  This way you limit the chance of being hit with any last-minute surprises or having to renegotiate your contract price because of a Buyer’s appraisal.

If your listing falls under the FHA program limit of $420,000 for Philly region, having a Listing Appraisal can provide added benefit.  Some appraisers will actually perform an FHA-style inspection when looking at your property and incorporate their findings in their appraisal report (our office does this as standard practice).  This will give you and your Seller a heads-up on any potential FHA issues that may affect your Listing.  That information can be used to correct the problem, possibly eliminating future headaches, negotiations and wasted time.

So, what’s the cost?  Well, typically a Listing Appraisal will be in the $300-$450 range (sometimes more if the property is unusually large or complex).  However, if you think about it, this is a relatively small investment if it can minimize your listing’s time on the market.  Or look at it another way…would you (or your Seller) be willing to pay $300 if you knew that your listing could sell faster and that you wouldn’t have to waste weeks dealing with hidden FHA issues, negotiations and stress? 

Think about it…and have a great Spring!

If you have any questions about Listing Appraisals or any other appraisal related question, please feel free to contact our office at appraisals@coyleappraisals.com or 215.836.5500.

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Are You Paying $500 for an Appraisal That Costs $200?

On April 19, 2011, Kate Rogers from FOX/Business published an interesting article exposing the collateral damage caused by the Frank/Dodd bill.  She explains just how Appraisal Management Companies (AMCs) have exploited a loophole, at the expense of appraisers and borrowers.  While some of her numbers may not be representative of the costs associated with appraisals in the Philadelphia Market; they do effectively illustrate the disparity between what some appraisals costs and what the appraiser may be getting paid when AMCs are involved.  Below are some excerpts from Ms Roger’s article.

If you’re about to close on a home, whether you are buying or selling, you may want to pay special attention to how much you are paying for the appraisal – and exactly where that money is going.

According to Ken Chitester, director of Communications at the Appraisal Institute, new Federal Reserve regulations that went into effect earlier this month have created a loophole for appraisal management companies (AMCs), allowing them to pocket more on appraisals—ultimately hurting the consumer. Appraisals typically average around $500, but appraisers themselves are being paid about half that cost, with the other half going into the AMC’s pocket, according to the Appraisal Institute.

Chitester said the loophole when it comes to the Federal Reserve’s new regulations — which mandate that “customary and reasonable” fees be paid to appraisers – is that the AMCs determine what these customary and reasonable fees are, including in the portion they intend to take. The fees look higher and are not broken down to explain who is getting what portion of the money. This was never a part of Dodd-Frank, he said, which was signed into law in July 2010 with the goal of improving the financial regulatory system after the recession, and intended to bring back the most qualified appraisers into the field.

“This would seem to gut the spirit and intent of Dodd-Frank,” Chitester said. “The best appraiser would produce the best work, whether you are buying or selling—you want a credible opinion of value. You want someone to defend it six ways to Sunday and back, and the best and brightest doing that work are (paid) much more.”

So why are consumers paying more than double the real cost for appraisals? Jeff Kaufman, partner at KEL Attorneys, said the answer is simple—they don’t realize it. Kaufman said all consumers need to ask for a breakdown of the fees and where each dollar they are spending is going, before they get to the table at a closing.

“If you ask for the appraisal costs upfront and you get to the closing and it’s more, you can walk away,” he said. “If you have it in writing, then that is wrong. I wouldn’t pay it. Do not trust the financial counselor or whoever is handling this for you because if you do not pay attention, they will figure out a way to take advantage of you.”

Also, be involved from the start, so you know what the appraiser, AMC and lender are doing every step of the way.

“It’s not like you’re holding a crappy Gucci bag and thinking, ‘Oh, this isn’t Gucci,’” Kaufman said. “You won’t know if you aren’t there.”

AMCs are trying to make more on the back end, according to Chitester, and are paying appraisers less and less. The most qualified appraisers are not willing to do their job for $200, he said.

“It’s a basic dumbing down of the profession,” Chitester said. “The most competent appraisers have refused to accept those fees and have found other ways to make a living.”

Kaufman said having lender-appointed appraisers appraise your home will lead to cutting corners and ultimately damage the deal, regardless of if you are buying or selling your home.

“It’s kind of like getting your medical treatment done in Mexico,” Kaufman said. “You are getting the worst possible person to appraise your house. Some of these guys won’t even inspect it; they may just drive by the house. And it can cost you a deal if they low-ball.”

All is not lost for consumers, Kaufman said. There are several ways you can be more involved, and make sure your home is getting the appraisal it deserves. The most important thing is to get involved in the appraisal and closing process. Look at your closing statement before the deal is done, and see where your money is actually going. Chitester also said consumers need to be present at the inspection, and point out all the features of the home.

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Another Reason to get a Pre-Listing Appraisal

Just the other day, I received a phone call from a Mortgage Broker friend of mine. Yes, appraisers and Mortgage Brokers are still allowed to be friends.

He wanted my input on a situation in which one of his former clients found themselves.  Let’s call them the Utley’s. (For the privacy of the parties involved, I will not use the actual names, streets, pricing or house photo in this post.)  The Utley’s currently have their home listed for sale in Springfield Township, Montgomery County for $345,900.  There home has been on the market for 39 days and they have an offer on the table for $339,000.  The Utley’s are concerned about whether or not they should accept an offer this “low”.

I began buy pulling up the information on the Utley’s home in the MLS and public records.  It is a nice 1939 colonial with three bedrooms, 1.5 baths, approximately 1,500 Sq.Ft.  A very common home in this area.

Then, I took a look at the sales and listing activity in the immediate area for similar homes.  What I found was surprising.  The last three sales in the neighborhood in the past year sold for $370,000, $370, 000 and $412,000.  There are currently two competing listings in the neighborhood listed for $370,000 and $469,900.  The home listed at $469,900 was a larger, four bedroom that was completely renovated, probably not the best comparable.

However, there was also one pending sale right around the corner from the Utley’s.  This house was last listed for $339,900 but, it lacked a powder room and was roughly 220 Sq.Ft. smaller.  It had also been on the market for over 160 days with an original list price of $364,000.

After looking at this information, my question to my Mortgage Broker friend was “why did they list it so low?”

By listing at $345,900, the Utley’s are basically telling the market “Hey, this is my pie-in-the-sky, hope I can get it number…but, I am probably willing to take less!”  The reason they are receiving “low” offers is because they apparently under listed their home, based on available market data.  They (and their agent) may have shot themselves in the foot.

To compound the issue, it turns out, the Utley’s agent is a “friend of the family” (probably not for much longer after this experience) that is a licensed agent but, who is not very familiar with their neighborhood.   In the end, the Utley’s may be leaving thousands of dollars on the table or may have to re-list at a higher price.

This is a perfect example of why Sellers and Agents need to have a Pre-Listing Appraisal completed prior to listing a property.  A Pre-Listing appraisal can assist Sellers and their Agents maximize their selling price without over or under pricing.  If the Utley’s and their Agent had an appraisal of the home done prior to listing they might have developed a different price point and might not be in a situation where they are entertaining such “low” offers.

For information on The Coyle Group’s Pre-Listing Appraisal services, please call our office at 215.836.5500 or visit this link.

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The Importance of Listing Appraisals

Last week temperatures in the Philadelphia area flirted with 70 degrees.  Spring fever was definitely in the air.  People were out and about; and for a day or two everyone forgot that it was still February.  It got me thinking about the upcoming Spring Selling Season. 

Traditionally, Spring is when the Philadelphia real estate markets start to shake off the Winter sluggishness and things start to pick up again.  However, I can’t help but think this year may be different.  Given accumulating inventories, high unemployment, impending inflation and the lack of a tax credit, the 2011 Spring Selling Season could be a challenge.  Sellers and Agents alike will need to rethink their marketing strategies and pricing in order to be competitive enough to attract Buyers.

Pricing will be the key this Spring. 

For Agents, this year more that ever it will be important to make sure listings are priced to compete.  Not only will you have to compete with the older listings that are out there, you will have to go up against fresh, new listings that will be priced to move.  If you haven’t thought about getting a Listing Appraisal, now is the time to act. 

More and more, Agents and Sellers are having Listing Appraisals completed to aide their decisions about pricing and marketing strategies.  They realize that in this market not only do you have to price a house to sell, you have to price it so that it will appraise, as well.  Other Agents (your competition) are getting Listing Appraisals.  Frankly, if you are relying on the same old CMA these days, it’s like bringing a knife to a gunfight. 

Aside from helping to price a house properly, there are several benefits to having a Listing Appraisal done:

  • Demonstrates to the Seller that the Agent is committed marketing the house effectively
  • Sets realistic expectations for Seller
  • Provides Seller with an unbiased opinion of how their home compares to others on the market
  • Helps maximize the asking price without overpricing or under-pricing
  • Can help identify potential problems, repairs or issues present at the house that may cause delays or make the sale fall through
  • Gives the Agent/Seller an indication of how a potential Buyer’s appraiser may view the property which could have an affect on the Buyer’s ability to obtain financing
  • Can help reduce days on market, resulting in higher selling prices and possibly eliminate unnecessary negotiations 
  • Saves time, money and effort

Selling a home can be a very emotional process.  Perhaps the most important benefit of a having a Listing Appraisal completed is that it allows Agents to maintain client relationships without having to be the bearer of bad news.  The Appraiser is the one to present any unpleasant or “bad” news to the Seller.  The Agent is there to aide the Seller with interpreting the news and devising a strategy to sell their home. 

Listing Appraisals can also provide some level of defense against issues arising from the HVCC Guidelines; namely, appraisers who are unfamiliar with your market, inexperienced appraisers and appraiser who may not have access to the best data for your market.  The Listing Appraisal will provide a benchmark against which any subsequent appraisals can be measured. 

So, as the Spring Selling Season begins to heat up, it is time to invest in your own success and that of your Sellers.  Get a Listing Appraisal from a Certified Real Estate Appraiser.  For $300-$450 depending on the size and complexity of the property being appraised, Agents and Sellers can get a solid understanding of the value of a property and use that information as a tool to develop the best pricing strategy possible for the property. 

For more information on Listing Appraisals please contact The Coyle Group at 215.836.5500.

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Inventory Levels

Inventory levels in the Philadelphia housing market are up over January 2010.  The latest data TReND MLS reports the following:

County Available Units Months of Inventory
Philadelphia 8,138 9
Montgomery 4,829 8
Bucks 3,421 8
Delaware 3,367 9
Chester 3,361 9

* Calculations based on single family dwellings as of 02/14/2011

These numbers basically tell us that if no more homes were listed for sale as of today, it would take 8 or 9 months to sell off the current inventory of homes.  This is an over-supply.  When there is an oversupply in the real estate market this puts downward pressure on pricing. 

Back when the market was on fire in 2004-2006, it was not uncommon to see inventory levels in the 2-3 month range.  In some areas, there were months that the levels went under 2 months.  Homes were selling the day that they went on the market.  This was a classic example of undersupply.  An “in balance” inventory is generally viewed as being between 3-6 months of supply.

It will be interesting to see how inventory levels are affected as the Spring Selling season begins.  Traditionally, Spring is the time when Sellers list their homes.  So we may see an uptick in inventory as new listings hit the market.  The question is, will the Spring Buyers be there to soak up the inventory?

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“Anti-Flipping Waiver” Extended

On January 28, 2011, HUD/FHA distributed a press release announcing extension of the temporary  “anti-flipping waiver”.  This regulation was waived last year through January 31, 2011.  Now FHA will permit the waiver through the end of 2011.  

The release states: “This action will permit buyers to continue to use FHA-insured financing to purchase HUD-owned properties, bank-owned properties, or properties resold through private sales. It will allow homes to resell as quickly as possible, helping to stabilize real estate prices and to revitalize neighborhoods and communities.”  Follow this link to read the entire press release.

This program is a good thing for Philadelphia and the region.  It will help properties to move by allowing investors and market forces to operate free of cumbersome restrictions.  Prior to the “anti-flipping waiver” FHA required 90 days between the initial acquisition and the date when the property could be place under contract, again.  FHA research found that in the current market, purchasing, renovating and reselling a property typically takes less than 90 days.  Click this link to read the Anti-Flipping Waiver.

If you have any HUD/FHA or appraisal related questions, please feel free to contact our office at 215.836.5500 or submit your question through our Ask PAB! page link.

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FHA Protocols

The FHA has a number of appraisal inspection protocols which must be followed by FHA Appraisers.  Agents and Sellers should be aware of these inspection protocols as they may affect the appraisal and upset settlement timelines.  These protocols are intended to assure a level of due diligence that must be performed by the appraiser in order to property assess whether or not a property meets the Minimum Property Standards set forth by HUD/FHA.

The Head & Shoulders Test – this standard simply means that when inspecting attics, basements and crawl spaces an FHA appraiser must enter the space to “head and shoulders” level, at a minimum, to allow for a proper visual inspection. 

Mechanicals & Plumbing – all of the homes mechanical systems and plumbing must be turned on and available to be tested by the appraiser.  A representative sampling of switches, outlets and fixtures must be tested.  The heater must be operational.  If temperatures permit, cooling systems must be tested.  Water pressure and temperature should also be tested.

If for some reason, the appraiser cannot access any of these spaces or complete any of the necessary system tests, the appraiser must contact the lender and reschedule another inspection of the property at such a time that property access can be made.

This is where Agents and Sellers have to be proactive.  Make sure that these areas are readily and safely accessible to the appraiser.  Have a ladder ready for the attic inspection if there are no drop stairs.  Clear the access to the crawl space and have a light available to light up those dark corners.  Remove any personal property that could block these areas from access and view.  Make sure that all of the utilities are turned on and are ready to be tested.

These simple steps will save time and money.  The FHA appraisal process will move more quickly without having to schedule unnecessary reinspection appointments; and the appraiser won’t have to charge a re-inspection fee.

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FHA Q&A

 

Also, take into consideration, that while the FHA may be OK with these conditions, most Buyers in the Philly region are not.  Would you be OK purchasing a property with either of these situations present?   

As more and more Buyers use FHA financing, Sellers and their Agents will have to educate themselves on the FHA repair guidelines and requirements.  This can be a daunting task.  As of today, the HUD Handbook, also known as Valuation Analysis for Single Family One-to-Four-Unit Dwellings (4150.2) is comprised of nine chapters and four appendices, totaling hundreds of pages.  And, it seems like the handbook is revised or updated on a weekly basis.  

When marketing your home, try to position it to appeal to the widest range of buyers.  If your home’s sale price is at or under the current FHA program limits for the Philadelphia region ($420,000) then you would be wise to make sure that your home is compliant with the FHA guidelines and be prepared to repair any FHA required repairs or inspections.  

If you don’t know the FHA Guidelines 4150.2 and how they apply to your situation, you may want to consider hiring an FHA Appraiser to visit your property prior to listing.  In addition to providing a Pre-Listing Appraisal, the Appraiser could point out potential FHA issues that might affect a potential Buyer’s ability to obtain funding as well as issues that could be addressed ahead of time…essentially taking them off the negotiating table and possibly speeding up the selling process.   

For answers to any other FHA related questions, please feel free to send us an email or just post to this site.   

 

Q: What do these two pictures have in common?  

A: They are both acceptable property conditions under FHA Guidelines.  Now, local laws and zoning may take issue with heaving concrete sidewalks and blood stained flooring surfaces but, not HUD/FHA.  In Mortgagee Letter 2005-ML-48, these conditions were cited along with a list of other “minimum property conditions that no longer require automatic repair.”

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Happy New Year 2011!

Happy New Year!

Now that the Holidays are behind us, we all can focus on making 2011 a year to remember, both personally and professionally.  At TCG, we will continue to offer you valualbe insights and advice about the greater Philadelphia real estate markets and information that you can really use.

This year we will expand our Listing Appraisal Services to include Philadelphia, Montgomery, Bucks, Delaware and all of  Chester County, in PA. We will also provide these services in Berks, Lehigh and Northampton counties.  In March, look for The Coyle Group to offer Listing Appraisals to real estate professionals and homeowners in New Jersey, as well.  So, if you are an agent or a homeowner who is looking for an objective, third party estimate of the value of your home in order to assist in Listing, we are here to help you.

In 2011, it is going to be more important than ever for Sellers and agents to price homes property.  Simply preparing a Comparative Market Analysis (CMA) it’s going to cut it in this challenging market.  Not only do you have to price the house to sell, you have to price it so it will appraise, too.  This step is vital if you’re going to maximize your profit and minimize the home’s time on the market.  Remember, homes that are priced correctly sell sooner and for more money than those whose pricing is “off”.

When selecting an appraiser to complete a Listing Appraisal you ask a few questions, first.  Appraisers often cover a relatively large geographic area, sometimes covering several counties.  This is not a bad thing; however, you need to make sure that the appraiser is familiar with your specific neighborhood/market.  Ask the appraiser how well they know your area?  how many appraisals have they done in your area?  how long have they been appraising in your area?  how long have they been certified?

All these questions are rather simple and if the appraiser is reluctant to answer them…move on!  There are other appraisers that would be more than happy to answer your questions.  If you are having trouble finding an appraiser there are several professional appraisal organizations that provide appraisers directories: Appraisal Institute and the Appraiser Subcommitte.

Once you’ve found an appraiser that you are comfortable with, then you should discuss the fee.  Typically, Listing Appraisals will be anywhere between $300-$400.  If the house is more complex, the fee may be higher…but get the pricing squared away prior to the appraisal inspection.

After inspecting the property, the appraiser will be able to deliver an appraisal report usually in a day or two.  Most appraisers can send the report via email as a PDF attachment.

Should you have any questions about Listing Appraisals, please feel free to contact our office.

Best wishes for 2011!

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