Market Newsletter
April, 2008

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To Zillow Or Not To Zillow?

Zillow.com offers useful information, but do not believe everything...

Ever heard of Zillow? It’s the popular internet site that pops up values for homes across the country. It has been given a lot of press recently, presumably due to the seemingly insatiable desire and/or need of home owners to figure out what their house is worth. Could also be it satisfies a need for simple and quick, and after all, if it’s on the internet, it must be true….

Zillow is kind of neat - go to the web site, www.zillow.com, plug in an address and up pops some data with answers that look compelling. Here is the problem - Zillow is an algorithm, that is, a complicated mathematical formula that jumbles up a bunch of public data and spits out a simple minded answer. Now this can work in what we call “conforming” neighborhoods (think tract homes) where there is more that is similar in the neighborhood than is not. However, in high-end, custom neighborhoods like where we live, every house is different so Zillow doesn’t work very well. In fact, it is misleading and doesn’t work at all for the following reasons – our public records are often incorrect (more or less square footage than actual), a particular house may have just been remodeled at a cost of $1MM or more and the algorithm doesn’t know that, views are hard to quantify and there is no way an algorithm can figure out nuances such as specific streets and micro neighborhoods having significant location adjustments, etc. As an example of this latter point, homes on the even side of San Rafael Ave in Belvedere are on the Lagoon; odd numbered homes across the street do not have Lagoon frontage, views or access….same street but with a big time location adjustment totally unknown to the algorithm. Oh well, so much for algorithms.

And for a clear, specific example of how inaccurate Zillow is in our market, listen to this – out of curiosity, on the day I closed a sale
for $3.85MM, I went to Zillow and asked for the Zillow value. I was elated to know that the value was $2.35MM, which meant my seller
received an extra $1.5MM for their house. Seriously, 40% off is nonsense – here we had a sophisticated buyer and a sophisticated seller with independent representation, plenty of exposure, an all cash transaction - all of which defines the essence of market value - and Zillow was 40% off, with no clue.

Moral of the story? Quick and simple answers tocomplex issues like understanding a sophisticated real estate market can be meaningless and misleading. If you want to know what your home is worth, contact a local professional who understands the nuances of the market. Like us. If you are thinking of selling or know someone who is, I’m never too busy to provide a market valuation based on knowledge and experience and understanding of how the market values a home. Plus, I’ll tell you the truth, whether or not I get the listing. On the other hand, there is always Zillow, a good looking web site with an algorithm that amounts to garbage in = garbage out.

Falling out of escrow is a Seller’s worst nightmare...
Dashed hopes are no fun, they create suspicions that something is wrong with the house, warranted or not

• Before the contract is ratified, require your agent to do
  accurate and comprehensive due diligence. This takes
  some digging, and many agents don’t want to do this.
  Who are the buyers? Are they qualified? Employment
  history? Personal history? A letter from a mortgage broker
  doesn’t cut it — anymore.
• Have your agent verify the Buyer’s financing and cash to
  close – in writing. This can easily be done in the countering
  process before contract ratification.
• Furnish reports and disclosures during the offering process
  so the property condition is transparent.
• Require the Buyer to sign off on those reports and disclosures
  before contract ratification to preclude back trading.
• Don’t let your agent pit one buyer against the other in an
  attempt to drive up the price — this creates bad blood
  and may come back to bite the Seller. Go with the most
  qualified buyer who really wants your property and you
  will create a better relationship during escrow.
• Avoid bidding wars as they can create overly anxious
  buyers who may feel Buyer’s remorse once they are in
  contract.

Hire an agent who pays attention to the escrow rather than letting their “assistant” deal with these critical details.

What Are Buyers Thinking And Feeling These Days?
Or, How To Sell Well In This Market

These are tough times for buyers. They read the papers, watch the news. Negative, negative, negative…. Consumer confidence is down. Consumers not spending. Housing crisis. Mortgage crisis. Politicians say change is the answer. The cliff is just ahead, vote for me. Oh, my God!

For the home buyer this translates into fear and caution. And this translates into being on the fence and indecisive. The worst nightmare for a buyer is to close on the house they want only to find out a year later that it’s gone down 10%. From their standpoint, this is catastrophic as negative leverage reduces their equity. Here’s why. Say they put 25% down, but the house has gone down 10% that translates to a 40% loss, of their investment plus they have to absorb selling costs.

So you are a seller and you want to sell now for whatever reason - moving to a new job, the stairs are too much, you want to move down to less maintenance, divorce, or you just want to access all that equity, including the huge tax advantages from the $500,000 capital gains tax exclusion on personal residence sales. After all, buyers think and feel this is a down market, there may be no appreciation in real estate for a few years, and maybe that equity with zero return could be put to better use.

So, if you are that seller, how do you sell in this market?

It’s all about the basics, the three “P’s” is what I call them – Pricing, Presentation and Positioning your house as the most competitive in the market so those fewer, fearful buyers come out of their shell, see the compelling value and superior appeal in your house and go for it. So what about these three “P’s”?

It’s clear the market decides what a property is worth – not you or I. What buyers will pay determines the market value. Fundamental. True. Reality. Further, research shows that if you price your property more than 4% over what the market feels its worth, no offers, it will sit, stagnate and the value will diminish.

It’s also clear that there are less buyers and they are in the driver’s seat. So in addition to your property needing to be priced consistent with the market, it needs to stand out in terms of appeal. Buyers today are spoiled and entitled – they want to close and move in on Wednesday and have a dinner party on Saturday to show off their new wonderful purchase. So, as a seller, you need to provide them an appealing and attractive product that they “want.” What they don’t want is a project, and, if they do, they will severely discount their offer. If you want top dollar, presentation is key.

These two fundamentals – pricing and presentation – work together to create positioning. That simply means that when buyers look around at the available product/properties from which they choose to make an offer, yours is the best value and most desirable.

As you can see, we understand the real estate business. And we are ready to put our twenty years of experience to work for you to achieve your goals. Especially in this market. Call us for a no obligation assessment of what the market sees your home is worth and why. And if you aren’t in the market to sell your home, but know someone who is, please refer them to us. We will treat them right and do a great job for them. I am always busy, but never too busy for your referrals – after all, referrals make our business.