How to do your own ‘Comp Search':
1) Talk to your borrower about their house. Ask them if they have any amenities or upgrades (inground pool, new roof, updated kitchen, etc.). Ask them what year their house was built and what style it is (Ranch, Split-Level, Traditional, etc.). Ask if there have been any additions or conversions to the house and if so, ask them what they believe their current square footage to be.
2) If the property is:
- a) built earlier than 1970
- b) is in a neighborhood with hills and valleys which may provide views
- c) is near a river where there might be riverfront properties
- d) is custom built
- e) has a basement (or properties around it have basements)
- f) is on a acreage
- g) is rural
- h) is a manufactured home
- i) is near manufactured homes, attached homes, condos, etc.
- or
- j) is in an area where other houses were not built in similar styles, ages and square footage
Then skip steps 2 through 7 and call an Appraiser and order an appraisal.
3) Enter the borrower's address into Zillow or any other AVMs (such as Cyberhomes, Trulia or Real Estate ABC). Be sure that the property information matches what the owner has told you. Keep in mind that AVMs take information from tax databases and so the information provided to them is only as good as the county's record keeping. In addition, please note that Zillow allows a home owner, Realtor or anyone who can type in a password to manipulate information in it's database which may render this information useless.
4) SET THE PARAMETERS... This is a huge step and if you choose to disregard it, contact an Appraiser and order an appraisal now. Set the square footage within 15% of the subject property's square footage. Look for sales no older than 6 months back. Make sure that all sales are within 1 mile of the subject property. If the borrower's home has anything unusual like 5 bedrooms in a community where there are usually only 3 in a home look for 4-6 bedroom homes.
5) Take note of the valuation ("Zestimate") of the borrower's home. (For Zillow): Deselect the ‘For Sale', ‘Make Me Move' and ‘All other homes' check boxes. If the sales in the area are more than 10% difference in size or ‘Zestimated value', disregard this as a valid opinion of value and contact an Appraiser and order an appraisal.
6) Print out this information. Your borrower may have looked up the same information on Zillow and it may be where they came up with the estimated value of their home. It is wise to speak with them about their discovery and talk with them in an educated manner about why the value may or may not be correct. Check the value against at least two more AVMs (Cyberhomes, Trulia, Real Estate ABC, etc.) to determine any discrepancies. If there are differences that vary more than 10% in value, contact a local Appraiser and order an appraisal.
7) If you have access to a local mls system, look up the subject and each sale that the AVM has listed as comparable to see if there are condition differences, square footage differences, etc to tax and AVM information.
Impressively, Zillow, Cyberhomes and Trulia estimate my home to be within a $10,000 variance of each other. Unfortunately, the square footage of my home is 200 square feet off because the county considers 200 square feet of my home's basement as ‘finished' (I put this in quotes as I'm not sure how they came to this conclusion) and all three AVMs have thusly added it into the above ground square footage which makes me wonder how many of the ‘comparable properties' were askew as well.
Unimpressively, the example home I used in the screenshots gave the following estimates:
- Zillow: $276,685
- Trulia: $345,667
- Cyberhomes: $276,012
- Real Estate ABC: no coverage available
- Actual sold price (within past 30 days): $308,000
I find AVMs to be helpful, interesting and educational... until people start to take them seriously and then I find them dangerous. There is no reason not to use these resources to educate yourself on the area and subject property, but free is a very good price .... and you do get what you pay for... In short; Contact a local Appraiser and order an appraisal.
Comments (7)Subscribe to CommentsComment