Buying

The Making of an American Farmhouse — Walnut Hill, Rockville VA

September 5, 2016 By Rick Jarvis

Periodically, you get smitten with a neighborhood, and Walnut Hill in the Rockville area of Western Hanover County tends to have that effect on people.

Walnut Hill is pretty close to what most are envisioning when they imagine a classic neighborhood in a rural setting. With extremely large lot sizes (most are between 8 and 25 acres) and the kind of gently rolling topography that brings to mind the picturesque farmland in the foothills of Western VA, the Walnut Hill neighborhood perfectly captures the imagery of what rural Americana should be.

Walnut Hill

If you have not been to Walnut Hill, you should go.

The neighborhood is a testament to the developer – they resisted the urge to take the path of least resistance and try to wedge as many lots as possible onto the site. By NOT trying to create maximum density, they ended up creating incredible spacing throughout the community that allows differing architectural styles to coexist peacefully with one another.

Walnut Hill does not ‘demand’ a specific style or size. Rather, it lets the land dictate the home. Within the neighborhood as it stands today, you see mostly traditional residential architectural forms (variations on colonial styles along with some ‘craftsman’ influences) and generally a quality material palette ensuring enduring physical structures. I think that any good design is cognizant of its surroundings and should compliment the existing homes.

Creating the Home on Paper

Deep within every Realtor is both a frustrated architect and would-be builder.

So when we were presented with the chance to work with a builder with decades of Richmond home building expertise, WB Garrett, on conceiving a home in Walnut Hill, we jumped at the opportunity. Being involved from such an early stage is every agent’s dream, and one we wanted to make sure we took seriously.

Effectively, we were engaged with the ultimate question of ‘what should we build?’ Not just from a price and size standpoint, but in all facets — from architectural style and aesthetic to features to materials.

Several ideas were tossed about, mostly relating to style, but the concept of the ‘New American Farmhouse,’ seemed to speak to each of us. Rather quickly, we all agreed that should be the direction. We recognized that even within traditional forms were variations and departures that could work, especially in such a bucolic rural setting, and thus we chose to craft a modern version of the American Farmhouse to pay respect to the setting as well as the surrounding homes, while still introducing what the market demands.

Walnut_Hill_Leasing_Plan_pdf__page_1_of_2_

[ Download the Walnut Hill ‘Amercian Farmhouse’ Plan ]

So the team of home builder Bill Garrett of WB Garrett, Peter Fraser of 37 Ideas and Rick Jarvis, with One South Realty sat down and discussed the features and materials for such a home and with a little hope from our friend and film colleague, Kent Eanes, we were able to document the creation of the plan in such a way that will give the marketplace a peek behind the curtain of how homes go from ideas and concepts to paper and plans.

Using Realtor Recommendations

August 1, 2016 By Rick Jarvis

[ A quick note — the 2017 spring has been even more insane than last spring. In order to give yourself the best chance to purchase a home AND close on time, a team approach is required. Below we talk about the reasons why agents make recommendations for team members and why it matters. ]

Imagine this …

You are buying a home and it’s the day before closing. Everything is ready to go. Your stuff is totally packed, your movers are scheduled to be at your home first thing in the morning and the cleaning crew is coming soon afterwards. Your in-laws are (thankfully) lined up to take the kids (and the dog) so that you can direct traffic. The utilities are set to switch over and the cable company will be at the new home between noon and 3 (ok, noon and the following Tuesday) … everything is lined up.

And then the phone rings.

‘WHAT DO YOU MEAN the loan is still in underwriting and we may not close on Friday?!?!’
‘WHAT DO YOU MEAN there is a unreleased deed of trust from 2006 that was missed?!?’
‘WHAT DO YOU MEAN the closing statement is off by $29,000?!?’

In a panic, you call your agent who informs you that the internet lender you chose for your loan and your closing attorney (an old college roommate who specializes in divorce) cannot be reached — and there is nothing that can be done.

Are Agents in Cahoots with the People They Recommend?

So why would a client not use lenders and attorneys that the agent recommends?

Sometimes, the reasons are perfectly understandable. Corporate relocation packages might mandate the use of a specific lender or attorney. Other times, office politics or family relationships play a role.

Chris Owens at Southern Trust — Might want to give these guys a call. They are extremely good a delivering on time.

But in most cases, the main reason that clients do not take the Realtor recommendation is simply a lack of trust — ‘What is the agent getting for making this referral?’ is the prevailing thought. The public quite often feels that the relationship between agent and lender (or attorney or inspector) is designed to benefit the agent at the expense of the client.

The perception that agents somehow make recommendations based on a kickback is as unfortunate as it is untrue.

Kickbacks are highly illegal in our industry.

RESPA is Your Friend

The public is largely unaware that the practice of Realtors being directly compensated for referring a customer to a lender (or other service provider) is a big no-no. The practice is known as a ‘kickback.’

Legally, Realtors, lenders, attorneys, title companies and home inspectors are all strictly prohibited from being directly compensated for referring business to another service provider. Stated differently, if every time I referred a loan to a lender, they sent me $100, we could both be fined, lose our license or even go to jail.

The Real Estate Settlement Protection Act (RESPA) spells this out in great detail and no agent, lender or attorney wants to be caught in the net of a RESPA violation.

So despite the public’s opinion to the contrary, the practice of ‘quid pro quo’ referrals is largely non-existent.

So What is Allowed?

Real estate service providers are allowed to enter into formal business relationships with other real estate service providers as long as they are legitimate business arrangements.

A common arrangement is for a lender (or title company) to lease space from a brokerage or an attorney in order to facilitate workflow. Putting the multiple necessary services to complete a transaction physically under the same roof both enhances communication and makes it easier for clients to obtain services in one location. Additionally, service providers can share expenses relating to marketing or technology in order to drive business opportunity or create efficiencies.

As long as the business reason is legitimate AND the referring of service is not compensated on a deal-by-deal basis AND the client is not being injured by the relationship, then it generally is deemed to be within REPSA compliance.

So Why Use Our Team?

The client spends money before the transaction closes that cannot be recaptured. No closing = lost money

When we say ‘you should call this lender’ or ‘ we recommend this attorney,’ we are saying it with the confidence that the recommendation will positively impact the transaction.

Here are the primary reasons why:

As a commissioned salesperson, my compensation is tied to the SUCCESSFUL transaction. Any and all of the work I do comes BEFORE I get paid. No closing = no payday. Why on earth would any agent risk a $10,000 commission check for $100 and the threat of legal action? I just don’t think anyone is that stupid.
Similarly, the client is spending money on the transaction before it closes, too. Deposits, inspections and appraisals (and sometimes rate locks and title searches) are all expenses that occur prior to closing. If closing does not occur, then the some (or all) of the money spent by the client is lost.

So when we make our recommendations we are protecting our own work and money in the same way we are protecting yours — our interest are aligned.

(A quick sidebar — I once had a client tell me that the only reason that I was recommending a specific lender was that ‘You just want the deal to close.’ I was actually too stunned to respond.)

Money is a Commodity, but a Financial Product is Not

‘There are horses for courses’ goes the old saying.

Banks not only offer different loan products, but they also differ in what they do well — and a Realtor’s recommendation should change based on the asset type, credit profile or income level. Each mortgage company typically offers the same Fannie Mae, Freddie Mac and/or FHA products (and rates), but the other niche products (non-warrantable condo, construction/perms, HELOCs, Grant Programs, Doctor Loans) can vary widely from lender to lender. Furthermore, lenders often times underwrite to different standards (‘straight agency’ or ‘credit overlay’ are the terms used to describe this practice) and thus, some banks may be more aggressive for different types of buyer profiles.

It is also important to note that the way banks handle underwriting, closing and funding is also of great importance and having a lender headquartered in your time zone matters more than you know.

It is the agent’s job to know and make the correct introduction.

Missing is Expensive

I cannot stress this enough — a missed closing date is hugely expensive.

Do you know what happens when a closing date is missed — especially with little to no notice?

Rate locks expire
Contracts sometimes can be voided
Deposits sacrificed
Movers cancel or worse, begin to go into full extortion mode (and if you don’t believe me, read your agreement with your movers about ‘storing’ your stuff)
Hotel rooms might be required
And other financial penalties can be levied

And do you know who pays the penalty? Well, it isn’t the lender and it isn’t the agent, that’s for sure.

The party with the most to lose in the case of a missed closing date is the buyer. Look, if the house is vacant and the deal is cash, then a missed closing date is not a huge deal. But when the buyer and seller are all set to close in a sequence, and the first closing allows several more to happen down the line, the ability for a lender (and attorney, and title company) to deliver on time is of critical importance — because the one with the most to lose is almost always the buyer.

So How Do You Know Who to Recommend?

So how did we find the best service providers in the marketplace? Trial, error, experience, vetting, familiarity … all gained over 20+ years.

Since becoming licensed in the early 1990’s, we have largely used the same lender(s) and followed them through the numerous mergers and acquisitions that they endured in the volatile world of mortgage banking. Why? They are good at what they do. They don’t miss dates. They don’t tell a client that they can deliver a product or rate when they can’t. And they don’t employ bait and switch tactics. Having done this for as long as we have, we know who shoots straight (and who doesn’t) and we know who consistently delivers.

And furthermore, when we recommend a service provider, we are not only recommending the individual, but the organization. Our knowledge of the companies we recommend extends well above and below our primary contacts. We know the owners, the managers, the administrators and the processors so that when the inevitable hiccup occurs, we can often times go direct to the individual who can solve the problem.

Volume = Preference

All of the above notwithstanding — imagine the scenario at the beginning of the post.

A day before closing and a problem comes up, whose files are going to be worked on first? Is the lender or attorney going to work on the file of the agent who sent them one deal this year or the one who sent them 50? The answer is obvious. When last minute issues arise (and they ALWAYS do) service providers fully understand where their bread is buttered.

The volume we generate for our preferred partners creates an implied concierge service for our clients.

But Remember, You Are Free to Choose

Please understand that you are free to use whoever you choose to use. This post is in no way a mandate that you have to use who we recommend.

If your brother is an attorney and your father is a lender and they do hundreds of transactions in any given year, then yes, by all means, use them. But if you are unsure of their volume or if their real estate specialty is in the specific type of transaction you are conducting, beware.

When we make a recommendation, the only kickback we receive is great service for you. When our clients have a pleasant and efficient experience, everyone wins. So when a client takes our recommendation, it means they have the highest chance for their transaction that closes on time and on the money.

Without a doubt, the most troublesome deals are the ones where the buyer selected an online lender (or other inexperienced or incompetent service provider) and the deal went sideways at both a critical and expensive point. I wish I had a nickel for every time I’ve heard a client in a self-made pickle say, ‘I guess I should have used your guy.’

Seriously consider taking our recommendations — we are looking out for you more than you realize.

Using ‘Currency’ to Your Advantage

May 10, 2016 By Rick Jarvis

What do you think of when you hear the word ‘currency’?

Cash? Bitcoin? Dineros? Dollars? Sawbucks? Moolah? Dead Presidents? Pesos? C Notes? Shekels? Or my personal favorite, wampum?

Currency is nothing more than a form of value that can be exchanged between parties. And while we generally associate currency with cash, currency can take on many forms. Time, risk, certainty, labor or other more conceptual versions of value can also be used as currency by a shrewd buyer or seller.

… often times, each side misses the opportunity to strengthen the deal for themselves by introducing other forms of ‘currency’ into the negotiations

So when I hear people talk about negotiating for a home, piece of land or other property, I almost exclusively hear them talking about price. It is unfortunate, as often times, each side misses the opportunity to strengthen the deal for themselves by introducing other forms of ‘currency’ into the negotiations.

So what do I mean by ‘other forms of currency’ in a real estate transaction? Lets discuss.

Time

The first and most obvious most universally accepted form of currency is time. Our beloved bespectacled founding fatherly figure Ben Franklin once said (or so my 3rd grade teacher said he did) that ‘Time is money.’ Time IS money — provided it is leveraged correctly.

It amazes me when I see or hear one side of a transaction digging in on a time issue when they don’t have to. Typically, when a seller is trying to simultaneously sell their home and move to a new one, they have a time issue. And when an apartment dweller or someone else with time flexibility is trying to purchase and is inflexible on the possession date, they are costing themselves money and/or possibly even the chance to secure the home for themselves.

Figure out what currency you can offer cheaply that the other side values dearly, and you will come out ahead.

Offering a time-constrained seller the luxury an early settlement with some form of possession post-closing can mean the difference between winning a competitive bid and losing it. Similarly, accelerating inspection schedules (other contingency deadlines) to create a fully ratified contract or offering a floating closing date — this things help aid the seller in finding the home of their wishes — and everyone wins.

A buyer can can either help or hinder the seller’s next purchase and the lesson is that while cash means the same to each of us, often times 30 days may mean a great deal more to one side than the other. Figure out what currency you can offer cheaply that the other side values dearly, and you will come out ahead.

Risk

Hand in hand with time, as a form of currency, is risk.

Real estate is typically a two-sided transaction. While it is easy to focus on only one side of the transaction, they are almost always related as selling one means buying another or moving out of one home means moving into another.

The younger crowd may not remember the epic board game, Risk ... — The younger crowd may not remember the epic board game, Risk …

So anytime there is a two-sided transaction (which is most transactions), each side carries varying degrees of potentially negative outcome if the transaction fails to consummate. A buyer spends money on inspections, loan fees, title searches, deposits and other items that are paid for well before the transaction closes. No closing = sunk costs. Similarly, a seller also experiences many of the same costs, especially if they are also buying and again (if the transaction does not close) they are left with not only the loss of any fees, but potentially subject to legal action for failure to perform under the terms of their contract to purchase the next home.

Needless to say, both sides carry risk, but often in different forms and quantity. So when one party who can potentially absorb risk (think of a tenant who can stay month to month) refuses to mitigate the risk for other side of the transaction, I see an opportunity lost to really strengthen a deal.

Paying attention to the Days on Market of a specific segment can lend guidance on how to best structure offers.

Comparing Offers

Imagine yourself as a owner who has a home under contract with a builder that will be ready in ‘about 90 days.’ Your current home is older, but in good (although not great) shape and probably needs some work. You put the sign in the yard and within a week, you have three offers, all from buyers who are currently renting an apartment:

Offer One — Full price with the seller putting 5% down, pre-approved by a local lender, who wants you to respond by tomorrow at 5 p.m. and wants to close in 60 days.
Offer Two — Full price with the seller putting 20% down. They have been pre-qualified by Quicken Loans, and want to close in 90 days, but needs 3 weeks for inspections due to travel. They have given you two days to respond.
Offer Three — Is for $10,000 less than full price, but will close in 30 days and offer you a rent back for up to 120 days if you need to. They are pre-approved by a local lender and putting 10% down. They have given you two days to respond. Additionally, they will inspect the home within 7 days AND absorb the first $5,000 any inspection items found.

Which one would you choose? I know which one I would recommend to my seller to accept. While offering a marginally lower price, the third offer contains the most time-friendly and flexible terms to the seller (that they TOTALLY needed) while still mitigating risk for both sides. Whatever agent recommended that final contract structure is a true pro and odds are wins a lot of bids for their clients (ok, that was how we structured a winning offer for our client in a competitive bid situation earlier this year, sorry to brag …)

‘Win-Win’ is Not Just a Cliche

‘Win-Win’ may sound cliche, but really provides the most durable framework for contracts.

In a prior post, we talk about how a typical real estate contract is made up of 20 pages with only one paragraph dedicated to price. The remainder of the contract discusses terms ranging from timing to contingencies to inspections to personal property to title — each one of these clauses can and should be used to strike a deal that benefits both parties. ‘Win-Win’ may sound cliche, but really provides the most durable framework for contracts.

Think each deal through, strive to understand what currency each side can offer the other one — and don’t solely focus on price. While price is obvious important, don’t ignore the other terms. Your deal will be stronger, your risk lower and the likelihood of your transaction closing on time and as written and will skyrocket.

Deal Killers

March 27, 2016 By Rick Jarvis

Client: ‘Sorry, the _________ is a deal killer.’
Agent: ‘Yep, we could tell.’

As agents, we have all seen it before; a client walks into the front door of a home and simply refuses to engage. You can see it in their body language — there is no way your client is buying the home. And even more frustrating, you know that the home suits their needs well and it deserves serious consideration.

Do you what else? There is absolutely nothing that you can say or do to change their minds.

Something about the way the home was presented killed the deal.

What is a Deal Killer?

Now when I say ‘killing deals,’ what I am really saying is a home will have to be discounted well below its market value to sell it. If the correct buyer walks through your home and does not buy it because of a fixable issue, then you have cost yourself money unnecessarily.

The math is simple — if the discount you have to take to get the home sold is greater than the cost to cure the issue, then fix the issue — otherwise you are engaging in a deal killing activity. Don’t do it.

Remember, buyers don’t really want to do work harder than they have to and they generally have difficulty imagining anything other than what is readily apparent. If you, as a seller, feel that the people who are walking through your house will see its potential or that they will look beyond the flaws, you will end up selling for less than you should.

Here are some of the most common errors that sellers make:

Smells

Not everyone is a dog lover. Sorry ... — Not everyone is a dog lover. Sorry …

I am not saying you have to bake cookies before every showing, but please, spend as much time on the olfactory as you do on the visual.

Smells such as wet dog, litter box, pile of shoes, damp basement and chain smoker are the most common offenders — but the unidentified ‘what-the-heck-is-that-smell’ which hits you the minute you walk in can kill a deal as quick as anything.

People cannot get over any strange odor and no matter what you say as an agent, will assume that the smell that greets them in the foyer will never go away … it is impossible to convince anyone otherwise.

If you think you have a smell, call your mother (she can smell anything,) neighbor or best (or worst) friend and ask them to come over and take a big deep whiff. Get their opinion as other people will smell things you don’t. If they mention anything at all, figure out what it is and get rid of it.

And for goodness sake, don’t cook pungent foods an hour before a showing. Show me a stinky home and I will show you one that trades as a disproportionate discount to where it should.

Pets

When someone is looking at your home, they don’t want to be there with your pets … sorry.

This is no exaggeration, I once showed a home where the owners kept a crow in a birdcage. The bird was furious and let us know in no uncertain terms. — This is no exaggeration — I once showed a home where the owners kept a crow in a birdcage. The bird was furious and let us know in no uncertain terms. It was wholly unnerving.

I know Fido is a big ball of love and just wants to say hello, but please, get him out of the home. And by out of the home, I don’t mean in a crate, in the guest bedroom, in the garage, in the back yard or behind a baby gate … I mean out of the home. As long as the pet is there, your potential buyers are unable to fully explore the property.

Listen, no one wants to see any animal in a crate and at the same time, no one wants to be licked, followed, sniffed or otherwise engaged by your pet when they are trying to look at your home. One, it is a distraction and two, it can also be a liability. You think you know your pet but in reality, pets don’t always react to strangers the way you think they will. Please make the necessary arrangements.

And worst of all, no agent wants to notice the ‘Please Don’t Let the Cat Out’ sign just as a streak of orange fur goes flying by your leg as you walk in the front door …

The Dirty ‘____’

The aforementioned smells go hand-in-hand with the (lack of) cleanliness discussion and ‘we will have it spotless by closing,’ is not an acceptable strategy.

Dirty carpet, crusty vents, dusty corners, smudgy windows, a messy garage, disorganized closets, a jam packed shed … all are giving the buyer clues that the maintenance history of the home has been less than stellar.

If your carpet is 10+ years old and stained, just go ahead replace it. No amount of shampooing will work.
If your garage is filled with decades of stuff, hire a dude with a pickup truck to clean it out and take the junk away.
If you actually change your air filters, then make sure to clean the return grates as well.
If your baseboard trim has an inch of dusty funk on it, wash it and touch up the paint.
If your hand railings are the color of your car’s tire, get out the Murphy’s Oil Soap and go to work.
If you cannot walk into your attic, get a ‘Pod’ and clean the attic out.
If you have to lean on the closet door to close it, then you might need to spend a little time cleaning that out, too.

And after you think you have cleaned everything in your home as well as humanly possible, hire cleaning crew to come in behind you and REALLY clean it. It is a great investment and will pay you back in spades.

Wallpaper

In 1997, my wife bought up a fixer-upper that had not been updated since 1958. We (naively) took on the chore of removing the wallpaper that covered probably 70% of the home. It is safe to say that I will N-E-V-E-R do that again.

I am sure it is beautiful, but odds are, the buyers dont want it. — I am sure it is beautiful wallpaper, but odds are, the buyers don’t want it and are scared of the effort to take it down.

The people who installed the wallpaper must have used a military grade adhesive that DuPont created in their secret underground test lab … nothing we tried would break the bond. It took us several weeks (not days) to get it all down and we did so much damage to the underlying sheet rock, we would have been better off to just rip the walls down on Day 1. Oh well, lesson learned.

So when I look in MLS and see homes covered in 1980’s wall paper, I get a nervous tic and immediately scroll to the next home. And while not everyone feels the same way, most do, and will avoid any home with more than one room of wallpaper.

Seller Present

You know your home is being shown at 2 p.m. so go ahead and get out before they get there.

Leave.
Don’t wait for them to get there.
Disappear.
Don’t try to show.
Don’t try to help.
Don’t cut the grass while they’re there.
Don’t walk over to the neighbor’s house and hang out.
Don’t sit outside on your porch and read a book.
Don’t be there.
Don’t drive by and check on the showing.
Don’t be there when they leave and ask them what they thought.

Get out, get away and disappear.

I don’t care that you wrote the Sales Training Manual for IBM and taught Zig Ziglar, Tony Robbins and Mark McCormack everything they know, you are not the correct person to sell your own home. Get far away from your house when it is being shown. Your presence, or even your perceived presence, is preventing the buyer from feeling comfortable and costing you money.

People aren’t buying a house, they are buying a home. They are not buying a thing, they are buying a feeling. If you are there (or even if they buyer feels like you are,) then the home is still your home and the buyer will not feel as if it can ever be their home.

Which leads to …

Personal Items

Please, please, please, please de-personalize your home. Do not make it sterile and austere, but don’t make it so ‘you’ that it can never be ‘them.’

Too many photos, too many personal effects, controversial art, political statements, shrines to loved ones past and present and/or anything that draws attention away from, in lieu of complimenting, the home — should be minimized, if not removed. You never know who is coming to view your home and you have no idea of their political affiliations, religious preferences, personal beliefs, lifestyle choices or if their children are going to be viewing the home as well.

True Story – I once was previewing homes and had my 7 year old daughter with me (yes, it is what Realtors do with their kids.) The tour was going well until we walked into the living room only to find two full-sized anatomically correct ‘sculptures’ facing one another. While I can laugh about it now, at the time, it was not nearly as funny.

I agree that art is meant to spur thought and start conversation … just not while your home is on the market. You would be amazed at some of the suggestive (ok, pornographic) pieces of art or extremely revealing photographs and/or portraits I have seen while showing homes. And yes, I know you are proud of your ‘________ Party’ membership, but your buyer is a card carrying member of the other party and is now angrily talking about the presidential race and no longer paying any attention to your home …

Again, people are trying to feel themselves in the home and the more difficult you make it, the less likely a buyer is to feel the way you want them to feel in your home.

Hard to Show

If you are going to put your home on the market, be prepared to show it a moment’s notice and be able to respond to a showing request promptly. And don’t get annoyed when buyer’s don’t give you enough notice. Everyone is busy and just trying to get through the day … don’t fault them for not giving you 48 hours notice.

When your listing agent gets a request to show, don’t take 3 hours to call or text them back and then ask if the buyers can come through in the afternoon instead of the morning. When an agent is trying to set up the showing on your home, it is at the buyer’s request for that particular time window and odds are, your home is part of a 3 – 4 home tour schedule that is geographically sequenced. Try to move the time and the buyer’s agent will say something like ‘we will get it next time.’ And you know what, there rarely is a next time.

Listen, sometimes you have a sick kid and sometimes you have guests in town, but even then, do your best to accommodate. I know that having your home on the market is a pain, but the pain of keeping your home in show ready condition for months is a far bigger pain than pricing it correctly, allowing appropriate access and selling it quickly … especially if you have kid’s practice schedules to keep up with and dogs that need to be removed from the home every time it is shown.

If you are going to sell your home, make it easy to show.

Summary

I get it — selling your home is disruptive — so don’t prolong the agony. Do what you need to do to get it sold and get it sold quickly.

If you are going to go through the effort to put your home on the market and live through the interruptions and annoyances that accompany the process, then don’t make unnecessary mistakes that not only drive up the marketing time but drive down the price. Consult your agent and treat all of their advice with objective detachment. The suggestions made are in an effort to increase your bottom line and decrease the effort required to get it sold.

The Rise of the New AVM’s

March 23, 2016 By Rick Jarvis

“Click here to get your home’s value!”
“Do you want to know what your home is worth?”
“Use this code to find out what values are doing in your area!”
“Want to know what has sold in your neighborhood?”

Yes, we get them, too. They come in the mail … and appear in our inbox … and follow us around the web … and show up in our sidebars and in the banner ads. The opportunities to check a home’s are everywhere and the services that provide them are relentless.

The Rise of the AVM

At the end of the day, the rise in the Automated Valuation Models (AVM’s) has been transformative in the real estate industry. No longer does the public have to call an agent (or appraiser) to get an estimate of value, anyone can now go to Zillow, or Realtor.com, or SmartZip, or one of the now dozens of websites that offer free valuation service and plug in an address to see what a computer thinks the home is worth.

Are they accurate? Sometimes.
Are they easy? Usually.
Are they valuable? Well, they’re free, if that tells you anything …

The Technological Achievement

On a technological level, being able to estimate a value of a home that you have never been in that sits on a lot in city you have never been to is pretty impressive. As a data nerd (in addition to being an agent,) I tip my cap to these services … I really do.

call-to-action-green — We use the SmartZip service for our home value estimator. We like its accuracy and how it illustrates values.

So when you see much of our (negative) writing on our sites dedicated to valuing property and bashing Zillow, it is for the following reason — Zillow convinced the market that it was right and everyone else (especially REALTORS) was wrong. Their stance is unfortunate because it obscures how valuable a site like Zillow can be when used correctly.

Where Zillow Missed

Until recently, Zillow’s estimate (creatively called the Zestimate!) was the only game in town.

From when they launched in 2006 until about 2015, Zillow had largely cornered the market on free estimates. They had convinced the public that their Zestimate was gospel and anyone who dared to differ was either wrong or incompetent.

Virginia_Data_Coverage_and_Zestimate_Accuracy___Zillow — The accuracy of the Zestimate in your market is available, if you know where to look. The rates for Virginia can be found here … and no, they are not that great.

As agents, we could see a ‘Zestimate-er’ coming a mile away. Sometimes a client would announce it by saying ‘But Zillow says …’ and other times we would hear a statement like ‘we feel the home is worth $337,452’ (and when you check Zillow, you would see a $337,452 Zestimate.) I do not have enough fingers and toes to count the number of times I saw a client make a decision based entirely on Zillow’s valuation yet never question either how they arrived at the number, or what data was used to compute it … but that is another post for another day.

Needless to say, it was frustrating as the public did not understand Zillow was for what it was. Zillow, while filled with great information about a million different things, was stating values in absolute terms (not in ranges) and not disclaiming the underlying information or stating values using statistical confidence intervals. In my opinion, this is a huge disservice to the very market they claim to be helping.

Zillow was saying ‘Our Zestimate = $276,400” and not ‘Our Zestimate is between $271,000 and $278,000 and our data indicates we are 80% sure of our estimate.’

While they sound like they are saying the same basic thing, one means something entirely different than the other.

Zillow’s Competition is Better

So what has changed? For one, several new services are in the market providing values right alongside of Zillow and they are doing so in ways that are much more responsible. Oh, and the value estimates range widely.

See below:

Here is a sample of AVM’s for the following home – 1857 Sealing Wax in Richmond VA 23235 :

HomeFacts – $191,000
Zillow – $182,933
Movoto – $188,666
EApprasial – $185,410
HomeSnap – $190,000

The difference between the highest and lowest is roughly 5%.

So which one is correct? Great question …

How it Should Be Done

Now the CoreLogic platform that we subscribe to state values differently.

They offer not only a suggested value, but also a range of probable values as well as a confidence interval around the estimate to give you a better sense of how confident they are in their own estimate … and I think that is a far more responsible way of going about it:

Finally, someone did their job correctly …

The Market Reacts

And you know what, we are already seeing the behavioral change.

Where a great number of people used to quote Zillow’s estimate during negotiations or during the listing presentation, they now ask why Zillow’s estimate is different from Realtor.com’s is different from the SmartZip estimate (quoted in a range, btw…) is different from Movoto. In effect, the multiple sources of estimates has undermined the reliance upon a single valuation as the primary arbiter of values. People now recognize that the estimates vary based on the algorithm used and the data that lies beneath and are far more willing to accept that values are subjective and can vary by day, week or month and are impacted by a myriad of factors.

And guess what else is happening? People are asking Realtors to assist them in sifting though the informational clutter and to help them understand what is really going on … and more importantly, why. When agents can really help their clients understand the market forces and develop strategies instead of blindly assuming that a computer algorithm contains the correct answers, then far better decisions are made by all.

So as we have said on many occasions, you should incorporate AVM’s into any analysis of a home’s value, but they should not be used IN LIEU of doing your homework.