Web

An Insider’s Look at Online Search

October 21, 2014 By Rick Jarvis

Want to know the best way to search for homes online? See the chart below.

The explosion of online search sites has changed the landscape for both the public and Realtors as it relates to searching for a home…both good and bad.

The good is that the information the public seeks is far more available than it ever was. The bad news is that not all search sites are created equally.

At the end of the day, the ‘closer’ the site is to the local MLS, the more accurate it is. Without going into boring technical details, the MLS (Multiple Listing Service) is the most accurate database of both available homes and sold ones. Not only do Realtors use MLS, Appraisers use it as well due to its accuracy.

The public may only have access to the MLS database via a ‘Client Portal.’ This can only be set up by a licensed Realtor who is a member of MLS and the information therein cannot be displayed publicly.

IDX Search sites (the one you are on right now) is a very close approximation of the FOR SALE (not SOLD) properties available and pulls its data directly from MLS. Since an IDX feed is published by the MLS, it is subject to a very specific set of rules as to how it can be used and its accuracy is directly related to many of these rules. Generally speaking, an IDX search site will be accurate to within a day or two of real time meaning any change in a property status will be reflected usually in no more than 48 hours from the change. IDX does not show sold data.

Trulia and Zillow do not receive data directly from MLS and thus are far less accurate in both property availability and status (ACTIVE, SOLD, UNDER CONTRACT). While they have numerous tools available to help predict values and market conditions, by their own admission, are only able to predict values within 10% of the actual value roughly 60% of the time. It should also be noted that the search results are skewed by who pays to be at the top of the list. In effect, T and Z act more as a message board and far less like the true database they claim to be.

Make sure to understand the strengths and limitations of the site you choose to use.

If you’d like us to set up a ‘client portal’ for you that gets you direct access to MLS, just click here.

Most Superior Awesome Peerless Pinnacle Realty

July 30, 2014 By Rick Jarvis

Elite Pinnacle Moon Realty has a nice ring to it... — ‘Above Everyone on the Moon Realty’ has a nice ring to it…

We (Realtors) try way too hard.

Our industry, at some point in our past, quit naming real estate brokerages after the founders of the company (or their market location) and began using adjectives and adverbs implying increasing levels of superiority. Glance at any roster of companies in any MLS Board and you will see a list of names suggesting perfection, self-actualization and/or rapture.

I can only assume that there are more than a handful of clients who have experienced less than an ‘elite’ or ‘superior’ experience (or worse) from ‘Super-Duper Elite Realty’ or ‘Awesome Real Estate’ (I actually found a company branding under ‘Awesome Real Estate‘ in Florida!)

Put down the Thesaurus now and step away.

_____ Realty

If we really wanted to name our companies accurately, we should try giving them names like:

Consistently 20 Minutes Late Real Estate
Never Returned Your Call Properties
Probably Should Wash My Car if I am Going to Show Property Today Realty
Ill-Prepared Associates

I know I could go on creating names for quite a while and I am sure the public could, too.

Focus on Service

The practice of naming a company after an action verb or superlative term which rarely describes the level of service provided only calls attention to the lack of connection between the promised and delivered results. It hurts us all.

So maybe, instead of trying to outdo ourselves with names that ring extremely hollow, notably arrogant and often just plain ole dumb, maybe we should be focusing on providing what the public wants … knowledge, insight, analysis, value, transparency. Focusing on what our clients want seems so obvious but for some unknown reason, we call ourselves ‘elite’ when our service levle is the exact opposite.

Portals or Agents?

The big news in our industry is the increasingly powerful impact of the online portals of Trulia, Zillow and some ‘yet to be named’ company currently in its beta test somewhere in a garage in Silicon Valley. As we spend our time trying to create a name that makes us appear more important than we actually are, these behemoths, stocked with drawerfuls filled with cash and workstations filled with Stanford graduates, are currently in the process of creating REAL value for the client. And guess what, they are doing it (or at least the public feels that way.)

At One South, we are attempting to do the same thing (adding value, not renaming our company to Superior Elite Best Thing Ever Realty.) By using the data provided to us by our MLS, applying advanced analysis AND local knowledge (something Trulia and Zillow’s computers in California and Washington will never have), we provide our clients with true insight into the marketplace.

For now, we will keep our boring name and focus on providing our clients with the intelligence and analysis they need to make informed decisions.

Why Did You Register?

July 15, 2014 By Rick Jarvis

iStock_000029132670Small — Keeping some degree of anonymity is fine by us…just make sure it is for the correct reason.

‘Are you working with an agent?’

‘Well, sort of…but I didn’t want to bother them…your site is so good I just tend to search here’ or ‘Yes, but I am doing my own research and your site had a lot of info’ or ‘well yes (lie) but I, uhhh, wanted some information on this house.’

We get a version of these comments frequently and, honestly, we find it both wonderful (it is an endorsement of the value on the site) and frustrating (in that many are using an agent whose market knowledge is not sufficient to truly serve their client.) I guess everything has a yin and a yang. Knowing that we provide value feels great but knowing we often times provide it to another agent’s benefit is what sometimes gives us a little bit of heartburn.

Look, we knew that when we made the conscious decision to put our thoughts out there for the market to read, we were giving away our knowledge for free. And while giving away products for free is not the best way to run your business, we realized that Google’s mission is to identify the most valuable sites in any arena. In order to rank, we needed to offer the most value.

We also hoped, by putting ourselves out there, it would allow the marketplace to see the depth of our knowledge. Google measures value through the public’s engagement with your pages, the time spent on your site, the number of pages viewed and the number of other sites which link to you…as well as about 200 other factors. For the most part, it has been a very successful endeavor for us as we have developed a loyal following online and helped many folks transact a piece of real estate all over Richmond…which is rewarding.

But what we have yet to figure out why so many people use our site, register to receive updates and otherwise willingly engage, despite a relationship with another agent.

The rules of engagement for the agent community are gray, even in the eyes of those who know the rules (Realtors.) The rules of engagement for the buyers and sellers of the world are far more murky in that who represents whom and at what point is a client bound to an agent is complex and subtle, even when explained and expressly written. Suffice it to say, we understand the frustration felt by the market when trying to decipher the confusing world of Realtor representation. We can only assume that the lack of clarity is partially to blame for the marketplace using our site for value and then their own agent for execution.

So…generally speaking, we have found the following are the most common scenarios for folks who use our site:

The ‘Actually Committed-to-an-Agent’ Buyer – We get many who call/e mail/register for our sites but are actually committed to an agent…which is fine. For a myriad of reasons a buyer or seller may feel obliged to use a specific agent:

family/friend/colleague
former relationship
met them at an open house and they send me stuff
I looked at house with them
my buddy recommended them

Some of these reasons are pretty legitimate (we have actually several registrations from Realtor’s kids looking for a house!) and some are not. Regardless, we offer the following question, ‘Why can they not provide this information or guidance to you?’ If they cannot, I would ask why their are involved at all.

Ultimately, if the bond is so strong, then get your agent involved now. They need to know you are looking and they need to help guide the search. Don’t feel as if you are bothering them, you may be committing transgressions you are unaware of.

Otherwise, if you do not feel they are the right person for the job, remove them from the equation. Lingering or uncertain representation relationships are a recipe for trouble.

The ‘If I TELL Them I am Committed to an Agent, They Won’t Harass Me’ Buyer – We get it. Nothing is more annoying than a salesperson who seeks to accelerate YOUR buying process to accommodate THEIR schedule. That being said, a good salesperson is more advisor than ‘pressure-applier’, especially in today’s informational intense environment, and can clarify and offer pointed guidance about the market, the process or strategy. We have worked with buyers literally YEARS BEFORE THE TRANSACTION OCCURRED!

Do not feel as if you need to tell us you are working with an agent to keep us at comfortable distance, just tell us where you are in the process. The goal in early stages is to structure the search/research in such a way as to offer the most value. We have many tools at our disposal that you do not…allow us to help you use them.

The ‘I was trying to reach the LISTING agent’ Buyer – It is frustrating when you try to call a listing agent and get someone other than the listing agent. The rules which allow brokerages to display listings other than their own on their sites makes discerning who has what for sale quite confusing…we get that.

Ultimately, using a listing agent as your primary source of information may not always (think – RARELY!) be the best strategy. It is the listing agent’s job to make the subject property seem like a qualifier for ‘Deal of the Century.’ Having your buyer’e agent call the listing agent is a far better strategy.

The ‘I Had a Bad Experience with a Realtor’ Buyer – Yep, that sucks. We have all had a bad experience with a service provider at some point. It turns you off of the entire industry. What we offer to all those who do have the courage to call and engage is the following…lets chat and see if we strike the correct tone of respect for your search.

You should know that we can provide our resume and a long list of clients who you can ask about our ethical behavior, market knowledge, availability and overall skill. Most don’t realize that not only are you allowed to ask for these references, you should. Vetting us as your potential representative, in our opinion, is one of the most important aspects of our business. We choose to operate in a transparent manner, and this site is only one such example. When we can offer references from architects, bankers, many of Richmond’s most talented developers, business owners as well as a host of hard working individuals, we feel as if our track record of successful and impactful relationships is our greatest assets. Research us, we invite it.

Summary

Whether you fall into one of the categories above or just don’t fully understand the rules of representation, just let us know where you are in your search, what questions you have and how we can help. We will act accordingly and at your pace. Remember, you have the right to demand value from your representative, whoever it may be, and you have the right to work with who you choose. Just know that a good agent will know:

If we offer the most, then we will earn your business, and you deserve the most value in your representation.

If you want to know more about what a Buyer’s Agent does, read more here…

Assessments, Appraisals and Zestimates

July 5, 2014 By Rick Jarvis

Why is the assessment so high (or low)? Why does Zillow say my house is worth so little (or so much)? Is that the same as my home’s Market Value? And why is the appraisal different from the assessment?

It can be confusing to say the least.

Agents are asked a version of this question with regularity and often, time does not allow us to fully explore the subtleties of the answer. The summary answer is that each ‘valuation’ is estimating a different value, using differing data and for differing purposes.

Market Value (or Fair Market Value)

iStock_000000808927Small — Wall Street seeks to measure Fair Market Value of almost everything imaginable…

Any discussion of the different valuations begins with the definition of Fair Market Value (FMV). Fair Market Value is the measurement which most closely reflects the value of the asset at any given point in time. The simplest definition of FMV is: the price at which both a rational buyer and a seller would exchange the asset neither under undue pressure.

Two key points to remember :

FMV is established by the market
FMV measures a specific moment in time

Stated differently, FMV is NOT established by a third party at a point in the PAST. While there may be additional interested parties to the transaction other than the buyer and seller (lender, mortgage insurer, title company, assessor’s office), they are not the ones who set the FMV. FMV is set by the market and all other valuations SHOULD be driven by this fact.

Alas, it is not always so. FMV is under attack by the other parties in the transaction and in order to make an informed decision, a buyer or seller needs to understand the intent of each of the other forms of valuation.

Below begins a discussion of the other common valuations and how they are established.

The Assessment (Tax Assessment)

Want to go down to City Hall to protest your assessment? Here is where... — Want to go down to City Hall to protest your assessment? Here is where you go…

Each year, property owners get a piece of paper from their local City (or Town) Hall asking them to remit payment to the treasurer for their property tax. We all open the bill with curiosity to see where our ‘assessment’ is and generally, it is met with a grunt, nod or gasp. Sometimes we feel it is so egregiously incorrect we place a call to the local assessor’s office to argue that the value is either too high (meaning you are paying too much in tax) or too low (meaning that you wish to pay more in tax…not sure I understand why people wish to argue their values UP, but I digress…) Regardless, the assessment value is what your property tax bill is based on.

Now, how is the assessment established? Much like Realtors, assessors use a combination of factors including size, age, beds, baths and location, as well as sales price of other ‘similar’ properties…and establish a value. A city or county does not have to be right, they just have to be ‘close enough.’ In reality, the perfect assessment is one which generates the most revenue without making its residents vehemently complain. As the actual bill is computed by taking the tax RATE and multiplying it by the tax ASSESSMENT, so a county is better off to lower assessments and up the rate…which they do with regularity.

So how accurate are assessments? A word that comes to mind is ‘somewhat.’ The assessment uses the least current information (tax assessments are generally adjusted on an annual or bi-annual basis) and it uses the least accurate information. Since the assessment department does not see the information in MLS and rarely (if ever) visits the home, an assessors office will likely not know if a home has been improved or unfinished areas are completed (think 3rd floor or basement.) The assessors office will likely not know (or really care) about the condition of a property (unless it is in need of condemnation) or if deferred maintenance has been kept up with and if the grass is cut regularly…despite all of these factors impacting FMV.

Accuracy Level – 85% at best and generally below the FMV, unless the market is falling dramatically.

Want to see what an appraisal looks like?

The Appraisal

If you have recently gone through the purchase process and used a mortgage as a part of your purchase, you are familiar with the appraisal.

So what is an Appraisal? An appraisal is a valuation process required by almost every lending institution when a buyer is using debt (a mortgage or loan) to purchase a home.

It goes like this – a bank contracts a professional appraiser to examine the property and offer an unbiased opinion the value. An appraiser (generally) has access to the most accurate information (MLS data), the most recent sales and actually visits the property to confirm measurements and condition. (*** It should be noted that appraisers are licensed and required to attend continuing professional education and many seek additional designations in order to help value more and more complex properties. In addition, all appraisers use standardized forms to help guide the process ***)

How do appraisers establish values? While the appraisal process notes the three primary methods of valuation (comparable sales, income approach and replacement cost) the comparable sales method is the most common when establishing value of single family homes. It is the job of the appraiser to compare the subject property to 3 of the most applicable (and recent) sales in the immediate marketplace and make adjustments for any differences. Simply put, an appraisal on a 5 bedroom home in Salisbury should be compared to other 5 bedroom homes of similar size and age in Salisbury with small adjustments for differing features (garage size, lot size, new roof, etc.) The houses being used for comparison purposes should be substantially similar…thus the term ‘COMPARABLE sales.’

What is the purpose of the appraisal? The appraisal is used by the bank or mortgage company to establish the maximum loan amount. Typically, the effective interest rate increases (and this is a gross over-simplification) the more debt is applied to the value of the home. Stated differently (and another incredibly gross over-simplification), a bank might give you an interest rate of 5% if the loan is 80% of the value of the home but closer to 6% if the loan is 90% of the home’s value. The bank uses the appraisal (and NOT THE SALES PRICE) to establish the ‘loan to value’ ratio for the home. If the appraisal is less than the sales price, then either (and alert, my last gross over-simplification is coming) the buyer must make a bigger down payment or accept the higher rate. Needless to say, a great deal hinges on the appraisal, especially when maximum loan amounts are sought, and many deals have failed to consummate due to an appraisal coming in lower than the sales price.

Then how do appraisals differ from FMV? In many minds (including appraisers, underwriters AND many Realtors) an appraisal and FMV are one and the same…which is unfortunate. An appraisal is measuring value at a past point of time to establish a value in the present under the assumption past and present market conditions are effectively constant. Using recent history as an example, the rapidly accelerating (or decelerating) markets of spring 2013 (or summer of 2008), the appraisers were being asked to value properties whose values were literally shifting several percentage points each month and thus, no longer accurate.

And remember, the appraiser did not see what the buyer saw during their home selection process. A buyer can easily look at 20 homes during their search and select the best option given the available homes at the time. The appraisal seeks to compare the subject decision to one made during a different time period and by different people who saw an entirely different set of homes. Far too little attention is paid to this hugely important fact.

Real_Estate_Market_Statistics_for_Zip_Code_Report___RBI — This chart shows median sales price in 23220. Do you think that a sale closed in January can be used to measure the value of a property contracted during May?

Regardless of the arguments presented above, the appraisal is USUALLY accurate enough (in most instances) and while not perfect, is probably the most accurate of the measurements of Fair Market Value.

Accuracy Level – 95-98%

The Zestimate (or other Automated Valuation Models…sometimes called AVM’s)

Zillow buries their accuracy charts deep in their site but they can be found if you know where to look…or by clicking here.

A lot has been written about the issues with Zillow’s estimate of value. They are far from the accurate estimates the market feels they are.

In Henrico County, for example, Zillow offers the following disclaimer – a Zestimate of $400,000 means a computer in Palo Alto has estimated that the ultimate sales price be +10% in 64% of the cases. The other 36% of the time, the value is less accurate than that.

Use the Zestimate at your own risk.

Accuracy Level – see the chart that Zillow publishes

Summary

If there is any takeaway from this post, it is the measurements of value are all measuring different things for different parties. Do not mistake any of the varied measurements for FMV. If you and your agent take the time to do the correct homework and to structure the search correctly, then the correct outcome will occur. Before you allow a Zestimate or Assessment to cloud your view of a home you are considering, take a good look at the methods used to establish the valuation and ask yourself who is doing the measuring and how they came to their conclusion. If you do your own homework and strive to understand the forces that drive the market, your own estimate will be far more valuable than anyone else’s.

An Insider’s Look at Online Search