Zillow to Acquire Trulia; What YOU need to know about Home Values.

By
Real Estate Appraiser with Lanier Appraisal Service CR004373
Since the Announcement this week of Zillow acquiring Trulia for 3.5 Billion in Stock (see link above on the story) I thought it appropriate to have a discussion on the real difference between "Zestimates" or AVM's (Automated Valuation Models) and Appraisals. 
 
Very Few Lenders rely on AVM's solely for loan decisions and that is just smart business practice. We all know AVM's cannot be relied upon to value unique properties such as Lake Lanier, Golf Course Homes or homes on Acreage. They are best for "Cookie Cutter" Homes where they are all very similar to each other. 
 

7 things an automated or non-appraiser valuation won't tell you. Before you Buy or Rely on one of these online automated valuations of a home, read below:


 

Lenders and brokers using Automated Valuation Models (AVMs) and homeowners using "free online home values" to determine the value of a property need to know what those results aren't telling them.

  1. Whether the house is really there & Its proper Square Footage? A computer can't so much as drive by a house to see if it's actually located where it's supposed to be, has four walls and a roof, and really is a four bedroom split level and not a one bedroom shack. It relies on Courthouse or other data for its square footage not an actual appraiser's measurement of the home. We all know how inaccurate TAX records can be on Square Footage. 
  2. Whether unique features of a property might add to or detract from market value. So a computer returns an estimated value of $150,000. Did it account for the sewage treatment station next door? The railroad tracks nearby with trains that blow their whistles every night? The school district? The desirability of its tree-lined street versus the next street over?
  3. How long ago the property was assessed. Many AVMs and free online services rely on public assessment records. In many states, for example, assessments may only be required every three years - the value may be nearly three years old in that case. Some states mandate that an assessed value not increase beyond a certain percentage, even if sales activity indicates the property has appreciated far more. When you use an AVM or free online service, you risk a lower value than reality.
  4. What makes the comparable sales comparable. A computer might compare your subject property to another property with similar square footage sold three months ago a quarter of a mile away. Even if that "comparable" property is in a different, less desirable school district, fronts a four-lane, 55 M.P.H. street, and is flood-prone. Or even if the property was sold under duress, such as in a divorce situation, or not at arm's length, such as to a family member. A computer simply does not know all the adjustments that might need to be made to a "comparable" property's sales price.
  5. Whether a market is increasing or declining. Automated valuations use data from recent, nearby sales. If those sales were completed at the peak or valley of a local housing market, the computer will think the trend is going up or down. Even if a professional appraiser knows that the overall neighborhood is beginning to experience an upturn or a downturn. As a lender, don't get stuck with a property that's been over or under valued by a computer.
  6. Whether there is a conflict of interest. Free online home values are often farmed out to real estate agents in your area, who use the service to get your listing when you decide to sell. The best way to do that is to impress you with their confidence that they can get a higher price for your property. If they tell you your property is "worth" the high end of what they believe they can sell it for, the theory goes, you're more likely to sign a listing agreement. With most things, it's best to "under promise and over deliver" - but the opposite is true when you use a free online home value service.
What qualifications, designations, experience and education the preparer of the value has. When you work with an appraiser, you can be confident we're highly qualified, ethical and prepared to complete your assignment professionally and with good judgment. Most of the time, you don't know the qualifications of whoever is behind those free online values, and they couldn't compare to an appraiser's if you did. And if you're relying on an automated valuation, you're cheating yourself out of an appraiser's education, experience and expertise.
 
 
About Us
 
Lanier Appraisal Service
5747 GARDEN WALK
Flowery Branch, Georgia 30542
770-967-0753 
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Rainmaker
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William Feela
WHISPERING PINES REALTY - North Branch, MN
Realtor, Whispering Pines Realty 651-674-5999 No.

Anytime information gets passed down the line like to these 3rd party sites, the information gets diluted.  Some of these sites use numbers and no real life experience to come up with the numbers.

Get a real Professional to gfet the real numbers.

Aug 02, 2014 03:13 AM #1
Rainmaker
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Sara Goodwin
Ashcroft & Associates - Portland, OR
Portland, Oregon Appraiser

Well said, Mary ~

Aug 15, 2014 03:28 AM #2
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Rainmaker
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Mary Thompson

Lake Lanier Appraiser in North Georgia
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