Will Fannie Mae's New Tool Sink Your Southern NH Home Sale?
Besides "location, location, location", Z does not have the ability to evaluate local, local, local which is the credo RE is built on. Z does not have the physical 
ability to be everywhere at one time.
Their valuations or lack thereof are not Zestimates at all. They're merely Guestimates which any of us can do just as well as Z. I mean why even have appraisers anymore with all this new electronic programming?
This was a very well written post and certainly warrants a reblog. I think unwary folks who are genuinely seeking real well founded information about real property evaluation should be aware and never rely on Zillow for accurate and credible information.
And as if that wasn't enough now we have to deal with institutional bureaucracies throwing their shallow hats into the ring. Whoopee!
Getting to closing in an appreciating market, when the buyer needs a loan (which means the bank requires an appraisal) has always been a challenge as it can be difficult for the appraiser to find adequate sold comparables to justify the sale price if values are going up rapidly.
Well things may have gotten exponentially more difficult with the addition of Fannie Mae's new "tool", Collateral Underwriter.
Collateral Underwriter is a software program which is supposed to be a "risk management tool" that lenders can use to have a "constructive dialogue with the appraiser to resolve specific appraisal questions or concerns".
The reality is that, despite Fannie Mae's protests to the contrary, the program is basically a juiced up Automated Valuation Model (AVM) - think Zestimate on steroids. The problem with Zestimates and all AVMs, including Fannie's new tool, is that they lack the ability to differentiate between geographic locations and we all know the first tenet of real estate is location, location, location! (They also lack the ability to tell which house had 30 cats and a cigar smoker living there but that's a whole other issue.) They all take every sale within a proscribed radius and average the sale price.
I recently had a very telling experience with two of my new listings and their Zestimates. One listing is an updated and upgraded townhouse in a very desirable and well maintained development. The development is small and units don't become available there too often but when they do, they sell well. The other listing is a small, basement level, garden style condo (think converted brick apartment building). The listings are in two different towns.
The interesting thing here is that the Zestimate for the townhouse came in about $25,000 lower than where it will sell because the development it is in is within a certain number of miles from another much larger, more congested and less well maintained development where properties sell for less. Zillow can't tell the difference.
On the other hand, my little basement condo received a Zestimate that is easily $100K more than it would EVER sell for because of it's proximity to another more desirable development that has much larger townhouses (as opposed to the subject property's apartment-like units) and is much more well maintained. Apples to oranges! A newbie real estate agent with the ink still wet on their license would know that, despite geographic proximity, you cannot compare the two developments...but Zillow doesn't know that...and neither does Fannie Mae's new tool.
And that, my friends, is the problem. This new tool will potentially generate numerous erroneous comps which will raise flags (interestingly, Fannie admits that comps that come in above the appraisers value WILL NOT raise a flag but comps that come in below WILL raise a flag) which will cause appraisers to either spend a lot of time justifying the comps they did use and justifying why they did not use the comps that CU comes up with OR they will have to go with the lower comps.
Will this sink your sale? The National Association of Realtors has reported an uptick in the number of contracts that have fallen through in the last three months because of appraisal issues and The Mortgage News Daily recently published an article which indicated that there has been a sudden increase in appraisals reflecting market values well below what has been expected. Mortgage News Daily queried their members about this phenomenon and Fannie's new tool was mentioned more than frequently.
What can you do as a seller? The first thing is to just be aware that this is going on so that you can make realistic and informed decisions about the sale of your home and your next purchase and the second is to realize that listing your home for a price that is beyond the most recent (truly) comparable sold comps is probably not going to end well.
For a realistic evaluation of your home's value, you can contact me at 603-490-5344.
P.S. This appraisal issue does not just affect Southern NH home sales. It is a national issue.
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