Bad day for an open house

A common mistake some realtors make is scheduling an open house on a day of a big sporting event as the turnout it usually poor. Sometimes, however, realtors schedule an open house merely to appease their sellers and then get a newer agent to host it, or call in a favor with an agent they helped years back.

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Who let the dogs out?

Sellers are often discouraged from leaving pets – particularly dogs – at their house during showings unless it is truly not feasible to relocate them temporarily while buyers look at a home. Having the pets remain in the home may cause distress to the animal/s or to those viewing the house.

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Home financing and other burning rings of fire

If you are embarking on the process of purchasing your first home, or already have a home and are buying another, then you are acutely aware that getting financing is a challenging, confusing, and sometimes frustrating process. As you reach the end stage you may find yourself waiting with baited breath for the lender to provide your agent with the loan commitment letter stating you have made it through underwriting. Until that time you might find yourself living in a semi-constant state of fear and uncertainty about whether or not the wizard behind the curtain – also known as the underwriter – will grant you the power to become a Homeowner.

Just know that you are not alone. Many have gone through the same thing and lived to tell about it. You can too.

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Did they like the house or not?

confusing layout smallIn real estate, most agents are expected to provide feedback to the listing agent after showing a property to their buyer/s. On the face of it the concept of giving and receiving this feedback sounds reasonable and practical. If ten buyers see a home and seven of those buyers make a negative comment about the lawn needing to be mowed then it is safe for the sellers to assume this is something they need to address. In all likelihood their realtor told them that the foot high grass in the front yard – complete with weird weeds no one can identify – would not go over well with buyers, but perhaps the seller just needed a second or seventh opinion on the matter before they would agree to take the advice. It happens. Life goes on and the problem gets solved. Or not.

However, feedback sometimes comes with some very specific drawbacks. One such drawback is that it is not unusual for realtors to give feedback that includes issues with the house that the seller cannot easily or even conceivably change. An example of this is a realtor that writes on the feedback form, “The house is nice, but my buyers need five bedrooms instead of three.” This is not helpful feedback to the seller or to the listing agent. And it prompts questions like: Why is the buyer looking at a three bedroom house when they really need five bedrooms? Why is their agent taking them to see houses without the appropriate number of bedrooms? Only the realtor and his or her buyers know the answers to these questions. Meanwhile, the seller may have been copied on the feedback and now they are angry they had to clean their house, leave at 6:30 p.m., and walk their dog around the block for forty-five minutes. In the rain, where they were almost attacked by a power hungry and overly aggressive Chihuahua. And so now the sellers are upset for good reason. Who wouldn’t be irritated/angry/infuriated over something like that?

Then there is feedback that is extremely ambiguous and difficult to decode. For example, an agent took her buyers to do a second showing on one of my listings a while back. When asked how it went she remarked that it “went well”, but then pointed out things the buyers did not like about the house. To a listing agent words like “went well” imply there is possibly further interest in the home. However, when these words are immediately followed with only critical feedback it sends an entirely different message, albeit a confusing one. The listing agent is then left to wonder if maybe the showing really did not go all that well at all. Maybe, just maybe, the second showing was a total bust and the agent for the buyers cannot gather the courage to say that outright. Then, when the listing agent asks for clarification, the agent for the buyers may stop responding to texts, calls, and/or emails entirely. This is how a lot of people in the technology age handle conflict. They simply ignore it and pretend they did not get those two emails, one voicemail message, five texts, one message via social media, and a facetime request.

Upon realizing that the listing agent is not going to get specific answers regarding the showing, he or she is then left with this strange, contradictory feedback to take back to their sellers. The sellers will inevitably ask questions like, “Oh…okay…so are they going to make an offer?” And, “If the showing went well then does it mean they like the house but are not sure if they want to make an offer yet?” Or, “I don’t really understand what this even means…What are they saying exactly?” All of this could have been avoided if the agent for the buyers just admitted the house was not right for their clients.

Another type of feedback worth mentioning occurs when the agent that showed a place to her buyers does not want to hurt anyone’s feelings, but also does not want to ignore all feedback requests from the listing agent (or an automated showing service that sends these requests on behalf of the agent). This kind of feedback is not optimal, but it is definitely preferable to ambiguous and/or contradictory feedback because it answers the question as to whether or not the buyers have any further interest in the home. They do not and now the seller knows this after reading or hearing the feedback. The main problem with this feedback, however,  is that it does not shed any light on what the sellers could do to make the home more appealing since it refers to aspects of the home the seller probably cannot change – or at least not easily. Examples of this feedback include:

“My buyers do not like the layout.” An alternative to this one is, “The layout will just not work for my buyers.”

“The footprint is weird.” Or they say, “The buyers don’t like the way the house sits on the lot.”

“My buyers are just barely starting their home search and this is only the twenty-third house they have seen, and so they really want to see everything on the market before they make an offer on a house. And when I say they want to see everything, this includes every new listing that comes on the market with each passing day. Do you have any other listings coming on the market in the next twelve months in this price range that I may show my buyers? I suspect I will be assisting them in their home search for many years to come and I like to plan ahead when possible.”

Again, the above types are preferable to others because 1) it is feedback and the sellers want to know what the buyers thought of their home – or at least they think they do, and 2) it leaves minimal questions about whether or not the sellers should sit on pins and needles, with their phone in hand, waiting for an offer from said buyers that is highly unlikely to come.

At some point in the future I will revisit this topic and discuss other kinds of feedback, such as:

  1. Feedback that upsets or offends the sellers
  2. Feedback that does not seem to apply to the house at all, leaving the listing agent to wonder if the agent for the buyer/s mixed up two homes they showed and is giving feedback on a totally different house
  3. Feedback that is not helpful because it recommends the sellers do things to or with the house that would cost more money than the house is already worth
  4. Other feedback that is so bizarre it is hard to categorize, and probably deserves its very only post

The Zestimate Project: An Introduction

A bane of a realtor’s existence is the Zillow.com “Zestimate”. The Zestimate is the website’s estimated market value of a property – whether it is for sale, sold in the past, or off the market. When a home is offered for sale on Zillow the website automatically provides an estimated value of the home and places it near top of the page, just below the asking price of the property for viewers to see. It appears as follows:

1 Grove

In the example above, the Zestimate values the property on 1 Grove Court at $387,805. The house is a 4 bedroom colonial, with 2.5 baths that sits on just over an acre of land. The value Zillow has provided is considerably lower than what the sellers are asking for the home. $72,195 lower to be exact. Why though? Is the home overpriced? Is Zillow using poor sales comparisons in its estimation? What gives? And more importantly, is the Zestimate in this case, and others, even accurate? 

The above questions, combined with endless conversations and debates over this seemingly benign valuation tool have prompted me to examine this matter further and decide – at least for myself – once and for all whether this tool is helpful to buyers and sellers, or harmful. Thus this post begins what I am now calling The Zestimate Project. My project will consist of research into past and present sales in Southern New Hampshire to track the accuracy of the Zestimate, shed light on the strengths and weaknesses of the tool, and propose recommendations for improving it if applicable.

Going back to the first home example above on Grove Court, I scrolled down to the bottom of the listing page to determine what comparisons (comps as we call them in realtor speak) were used to calculate the estimate. The homes used are as follows according to the tiny print at the bottom of the page:

47 Garden Drive in Litchfield

2 Garden Drive in Litchfield

Let’s discuss these two properties for a moment, from a valuation perspective. 47 Garden Grove was last listed on the MLS (multiple listing service) in 2014 for $329,900. The listing did not sell and subsequently expired. The home is presently offered for sale on Zillow by the owner. It still has not sold and therefore is not a valid comp. However, it is also not a valid comp for a couple of other reasons. A look at the expired listing from 2014 shows this home was built in 1983. The one on Grove Court was built in 2002. 27 Garden Drive has a 2 car garage and is a cape style home. 1 Grove Court has a 3 car garage and is a colonial. A look through the photographs on Zillow for both properties demonstrate the many differences between the interior and exterior aspects of the homes. They are not reasonable comps and 27 Garden should not even be used as such by Zillow because it has not even sold.

The next property Zillow listed at the bottom of the page, and claimed was comparable, is 2 Garden Drive. Zillow states, “Another comparable condo, 2 Garden Dr recently sold for $290,533 on 06/05/2015”. None of these homes are “condos”, but other than scratch my head over that description I don’t know what to do with that information and have no knowledge of where Zillow came up with that. The homes discussed herein are single family residences. Not condos. 

In reference to 2 Garden Drive, a home that sold almost exactly one year ago is not a good comparison property. Second, the home itself is not comparable for other reasons. 2 Garden Drive was built in 1973, instead of 2002. It states on the MLS that total finished square feet is 2,366. The total finished square feet for 1 Grove Court is 3,021. The list goes on.

The difference of 655 in square feet is important to note. I will preface my next statements with an acknowledgement that I am a realtor, not an appraiser. I am well versed in providing valuations for sellers in the form of a comparative market analysis, but a true appraisal is exceptionally detailed and thorough. That said, square footage is an important aspect of a home’s value. The difference of 655 square feet might seem minor, but if an appraiser were determining the value of either property he or she would choose recently sold properties that were as comparable as possible in terms of size, age, condition, square feet, etc. and then make adjustments to the value of each comparison property to bring it in line with the subject property. In simpler terms, if the comparison property for example has 200 more in gross living area (square footage) then the property being appraised, the appraiser would deduct an amount of money from the comparison property based on a determination of what each square foot is worth. I have reviewed a wide range of appraisals completed on properties I have sold and found there is some variation in terms of the value attached to square feet that depends on many factors, including locality. An average, based entirely on what I have seen in local appraisal reports I have viewed is about $25 per square foot that is above grade and finished. Sometimes higher and sometimes lower. If we use this average to determine the difference in value between 1 Grove and 2 Garden, merely going by the square footage difference, then we get $16,375. That’s no small chunk of change.

The above does not take into account the age difference between the properties, 2 Garden Drive having one less garage bay, the differences in exterior and interior updates, and so much more.

The Zestimate in this case only refers to the above two homes as comparison properties. If it is using others it does not state as much, but realistically the website should disclose all homes used for comparison purposes to allow readers to make decisions about the Zestimate’s reliability in any given situation. The comparisons used for Grove Court consist of a home that sold a year ago and one still on the market. But now let’s look at recently sold comparison properties on the MLS to see how far off the Zestimate is from actual comparative properties. I will use three properties for this purpose.

Property 1: On May 5, 2016, 9 Riverview Circle sold for $410,000. The home has 3,116 square feet, 4 bedrooms, 2.5 bathrooms, and a 3 car garage. However, this home was built in 1986 instead of 2002 and lacks the multitude of updates found in 1 Grove Court. That said, 9 Riverview is a lovely home, with plenty to offer, and is a closer comparison than the ones chosen by Zillow. But here’s the kicker. The current Zestimate for 9 Riverview Circle is $494,876, even though the home sold for $410,000 this month. If the Zestimate is truly accurate then the buyers made out well and the sellers…not so much.

Property 2: On April 1st, 2016, 21 Moose Hollow Road sold for $455,000. It has 3,884 square feet according to the MLS, 4 bedrooms, 2.5 bathrooms, and sits on just over an acre of land. It has one less garage bay than 1 Grove Court, but is updated throughout the house and was built in 2005. The home does not appear to have as many updates as 1 Grove, and is lacking some of the structural architecture that makes 1 Grove unique and aesthetically appealing, but 21 Moose Hollow is a fabulous house and would serve as a good comparative when valuing a home like 1 Grove Court. The current Zestimate is $470,283 despite the fact the property sold almost two months ago for $455,000.

Property 3: On December 11th, 2015, 15 Moose Hollow Road sold for $457,500. The home is comparable in that it is extremely similar in square feet, has 4 bedrooms, 2.5 bathrooms, is a colonial style home, and sits on over an acre of land. This property only has a 2 car garage and is lacking some of the cosmetic and structural features that make Grove Court an appealing property, but nevertheless 15 Moose Hollow is nothing short of a gorgeous home that appears well kept and cared for in the photographs. The current Zestimate for this home is $464,659, even though it sold for $457,500.

In summary, the three recently sold properties I found on the MLS are more in line with the price point of 1 Grove Court when one takes into account size, land, updates, special features, number of garage bays, location, and other factors than those used in the Zestimate (or at least the two the website suggests it used). It will be intriguing to see the final sales price for 1 Grove Court in light of all this information.

Over the course of the next few months I will periodically track the Zestimates of properties in the Southern New Hampshire region, including Litchfield, Merrimack, Amherst, Bedford, Nashua, and Manchester (perhaps other towns, but right now I am limiting it to certain markets) to make estimations about its accuracy within those markets. I would also like to conduct a survey at some point of buyers and sellers to find out how much faith they place in Zillow’s Zestimate and learn the ways in which the Zestimate impacts people’s perceived value of the properties it valuates. Because maybe, just maybe, the Zestimate could use some improvement in areas of consistency and accuracy.

Time will tell!

Some adjustment is necessary

In the beginning of the home buying process some buyers believe they know exactly what they want in a home. They have a clear and definitive list. However, after buyers begin to see homes with an agent their expectations evolve and change. Some realtors are impatient with buyers that experience changes of heart regarding what they want, need, or can afford in a home even though this is normal behavior on the part of most buyers. Many have to see and experience the process by viewing a range of homes in the market before they can determine whether their initial expectations were realistic, as well as make decisions about what home features are truly important to them. A good realtor does not force this process, but rather learns to expect it and is patient while the buyers get out into the housing market to see homes on their price range and then make appropriate adjustments to their list of requirements. 

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