Being both a licensed real estate agent AND a certified residential real estate appraiser, I’m often the “go-to guy” for all questions of valuation from my colleagues in the office, my buddies at poker night and the lady bagging my groceries.
They all seem to figure that with 1,500+ appraisals under my belt, I ought to know a thing or two about the potential market value of a particular piece of real estate. Usually, I do and I can come pretty darn close. But in this current market it’s been a little bit trickier. In the current market it’s sometimes easier to start the conversation by telling them what their house is NOT worth.
Your house is NOT worth what your neighbors paid for theirs 12+ months ago. I get this one most often from consumers I am visiting when I do an appraisal for a refinance. They are quick to tell me that, “The Smiths next door paid $575,000 for their house back in 2005 and they don’t even have an above ground pool like we do.” I usually just smile politely and thank them for the information. With lenders tightening the strings and frowning upon the use of comparable sales even over three months old, 2005 might as well have a B.C. after it. It’s entirely irrelevant.
Your house is definitely NOT worth what you need it to be to make the numbers work. Again, this one comes from the appraiser side of my split personality. Usually from one of the few remaining crooked mortgage brokers out there or a desperate homeowner. “At $350,000 we’re looking at a 80% LTV” is the basis of one of the biggest issues facing the appraisal industry today, pressure.
The value of your home has absolutely no correlation whatsoever to how much you owe on it, how much you need to pull out of it to pay off your gambling debts or how close you are to eliminating that pesky PMI.
Your house is NOT worth what the town currently assesses it at. My real estate agent friends love to lean on this one like a wobbly barstool at last call in South Boston. How easy would it be to price properties if you simply had to look at the town assessor’s latest number? Assessments do not equal current market value, especially when the market is as volatile as it has been lately.
There is no humanly possible way any town assessor could keep pace with the roller-coaster ride that is current market value. Some tricky agents like to find the perfect Googley algorithm and apply it to assessments. “Properties in town are selling at approximately 94% of their current assessments.” Key word being “approximately”. Good for broad, sweeping generalities but not so accurate for pinpointing individual values.
I also get a kick out of the fact that MLS gives you only 500 characters to describe your property in words and so many agents insist on wasting 22 of them with “priced below assessment” (23 if they really, really mean it and add an exclamation point to the end!). So what? Why are you assuming there is a calculated ratio between assessments (based on old data) and current market values?
Your house is NOT worth what Zillow says it’s worth. Or maybe it is. Their Zestimates ™ can run the gamut of accuracy from “nearly dead on” to “what the heck are you Zmoking ™?” and there seems to be no rhyme or reason why. I’ve noticed that as more active listings are published on Zillow, the closer the Zestimates ™ come to the list price.
Price gets reduced, Zestimate ™ follows suit. No crystal ball going on there. Once in a while they nail it, but then again a broken clock is right twice a day as well.
Your house is NOT worth what the appraiser says it is worth. This one is tough to swallow and really hits home for me, but I am constantly reminding people that we as appraisers offer what we carefully refer to as “an opinion of value.” Appraising is by no means an exact science.
We based our analysis on careful consideration of the most relevant current market data, but we’re still sometimes wrong. I’ve done numerous appraisals for my sellers only to find out that even if it makes perfect sense on paper, the proof is always in the pudding.
So although there are many ways to try to estimate the current value of your home in today’s market, at the end of the day there is still only one true way to definitively pinpoint its exact value. And even though it has most likely become ridiculously cliche, I believe it more so than ever these days: Your house is worth exactly what a willing, able and educated buying is ready to pay for it.
Buyers set the market. Always have, always will. The market is fluid and constantly changing. That’s why there is no way to predict when we’re at the bottom of the market (or the top for that matter…IMHO we’re not near either). That’s why there’s no such thing as a “low-ball offer” (another post altogether on that one there).
So I usually begin the conversation with what it’s NOT worth, move through some of the ways to analyze what it might be worth, or how we can formulate an educated “opinion of value”, and end up telling them if you really want to know EXACTLY what your home is worth let’s get it on the market later today! I then pull out one of the listing agreements I always carry around with me.
If you know someone in the Boston area who might benefit from the services I provide as the “Appraiser-Realtor”, please contact me. To keep up with the Red Sox, follow @RedSoxCast on Twitter. To keep up with me, follow @RealtorLefebvre.
Take care. All My Best!
Nice post, Mike! A similar post was written by CAAR President Judy Savage and posted by Dave Phillips over at CAAR Blog about a month ago. Yours is a bit more fleshed out and there are a few on Judy’s list that aren’t on yours and vice versa, but they both get the point across. The things that is most frustrating is that you can explain all these points to a seller until you’re blue in the face, if they’re not receptive to you and have the attitude that they know what their house is worth better than you do, most likely the listing will sit on the MLS until it expires, sometimes more than once. And even agents will differ on what the house is worth; the listing agent might use a half dozen or so comps that they think are well suited to the property, but the buyer’s agent might have used a totally different half dozen and advised the buyer to offer $xxx,xxx based on those. Of course, their agendas are polar opposites (get the most money possible for the seller, save as much money as possible for the buyer), but what are ya gonna do? Even if, by some strange alignment of the solar system, you get the sellers to list their house at a price that no one could refuse, you STILL might get offers far below that magical price. It just looks like a big guessing game where no one’s right and no one’s wrong, but never the twain shall meet (well, at least not until after a lot of negotiating!). Is that an accurate assessment? Be kind, I’m a Red Sox fanatic going on 40 years now!
Wayne,
Thanks for posting my first official comment here on the Real Estate Radio USA Blog! I have officially arrived. : )
I agree, it can be very frustrating explaining this concept to non-receptive sellers. But as long as you’re doing all the appropriate marketing activities and the showing activity is healthy, if there are no offers coming in, it can only be one thing, right?
With my appraisal background I might have a slight edge on judging which comps the bank or lender will view as the “most appropriate and comparable.” Banks have pretty strict criteria when evaluating comparable sales and real estate agents rarely abide by these rules. They find the comps that support their story, whether they’re 8 months old, 35% larger or backing up to active railroad tracks. Our office had two deals fall apart last month because the appraisals came in below the agreed upon purchase price. Now THAT’S frustrating!
The one thing I would disagree with you on is that “no one’s right and no one’s wrong.” The buyers who put in the offer that is ultimately accepted are right.
Knowing that CT can go either way (Yanks/Sox), I’m glad to hear you’ve chosen to keep your allegiance at Fenway!
Thanks again for the comment. I’m relatively new to this forum and appreciate the support!
Take care,
Mike
Mike – what a great article – I’d love to talk to you about using it on my blog – our local sellers can’t hear this enough! Looking forward to reading more from you!!
Great article that’s worth quoting from or at least paraphrasing from with anxious sellers, especially clients who haven’t sold a house in 40 yrs, or even 10 or maybe even 5. Mike’s insights would drive an accountant nuts…nothing’s numerically stable or formulaic.
Thanks for the kind words Gene and it’s always good to know of another professional industry that I have the potential ability to drive nuts. Thanks for reading. New post coming soon from me….
Great article Mike! I have nearly the same credentials – Realtor and Certified Residential Appraiser, 7 years and over 1500 inspections – and am just starting to see homeowners come back to reality. It’s hard for many people to grasp the concept of their home actually declining in value because it hasn’t happened for such a long time.
The comment about Zestimates made me laugh. In my area, they are based mostly on tax assessed values, and every now and again a recent sale. I look forward to reading more of your posts.
Thanks Ben! Yes, we have eerily similar credentials! I actually use the 1,500 number for my inspections as well! Glad you liked the post. You’ll get a kick out of the one I’m working on for tomorrow. Sounds like you run into some similar circumstances in the Minneapolis area. BTW, LOVE your website (http://www.thegoheens.com). I haven’t dug in too deep, but based on aesthetics alone, you and Stacia have NAILED it. Thanks for reading and commenting. I really appreciate it!
Cyndee,
Thanks for the thumbs up! Please use it however you’d like. It’s not rocket science, but sometimes a simple message bears repeating. Send me a link if you quote me, so I can check it out.
See you online,
Mike
@RealtorLefebvre
PS- New post coming very shortly here….
I think you may be my cousin???? Was your dad named Maynard?? My dad is Richard Lefebvre and lives in California. If so, hello!! just noted your name in a search, saw your website and thought I’d say “hello”. If you are not my cousin, sorry to bother you. Cyndee