Friday, August 27, 2010

Just how wrong is Zillow and what do you tell your clients?

With Free Data, You Get What You Pay For
We all have clients who go to Zillow, CyberHomes and other sites to get an estimate of the value of their home. An article in the Sacramento Bee a couple of weeks ago talked about how far off these sites can be. Even Zillow's chief economist says they are accurate to within 10% on their best day. Since it's free to consumers, do these sites do more damage than good. Is the free data offered without the expertise of an agent setting expectations higher or lower than they should be? The value of Zillow and other automated estimating sites is just as they present themselves, a starting point. Where they fall short is in areas where the homes become more distinctive.

It's Just A Step Along The Way
A lot of agents, myself included, feel that in some markets these estimates are so far off the mark as to be at least useless and at most dangerous. Sellers could feel their home is undervalued and decide not to sell. Buyers could get unrealistic expectations on value and press agents to make offers based on those estimates. However, I seldom see these things happen. What is most often the case is that buyers and sellers get an idea of the relative value of the home to others in the area. In general, these estimates are a starting point from which they and their agents can start.


A Local Realtor Is Better
These automated tools will never replace an expert in the area. A Realtor will be able to account for variables the software can't. In the process, the Realtor can educate the seller or buyer about the market and set a price that makes sense.

In the local market of Los Altos and Los Altos Hills, Zillow is often very wrong. A few times it has been very accurate, but 9 times out of ten it's way off. It's often wrong because an entry-level rancher with 1800 square feet can appear on Zillow to be worth $1.2 million because it hasn't been fixed up. However, with some updates it may be worth as much as $1.5 million. The 25% discrepancy is huge and requires a Realtor to discuss and explain. There's a piece of property on Loyola Drive in Los Altos that Zillow shows as worth $902K. It has a 672 s.f. house and a 20,000 s.f. lot so it's really worth at least $1.2M - based on my expertise.

This problem is even more pronounced in Los Altos Hills. It's easy to find examples of valuations where updated homes with $3-5 million are given estimated values of $2-3 million. Just remember to check with your local Realtor to get the most accurate estimate of the value of your home.

Tuesday, August 24, 2010

Do luxury hotels bode well for the local housing market?

A new luxury, boutique bed and breakfast hotel has been approved for construction at the corner of San Antonio and Main Street in Los Altos. The three-story 12,000 square foot building will have 18 rooms. The builder, Abigail Company, has been a long-time successful builder of luxury residences in Los Altos. This latest project is inspired by homes and estates seen in the French countryside.

So, does this mean that the economy is coming around enough that visitors will stay in town? I can't imagine the room rates will be cheap, given what else is available locally. Though rates haven't been published, it's safe to say they'll be in line with other luxury hotels in the area. That said, I see this new hotel as an indicator that there are people who believe that the economy is turning around. Building such a hotel tells me that we'll see more discretionary spending which could result in empty stores replaced with new businesses and downtown becoming a lively "destination" on the Peninsula.

Assuming the economy is turning around enough to warrant investors backing such a project, does that mean we can expect the housing market to continue improving? Inventory in Los Altos is lower than it was a year ago. The median is exactly the same from Q2 '09 to Q2 '10 and the average is up in 2010. We'll have to see as the year progresses.

Monday, August 23, 2010

What is a foreclosure really like on the courthouse steps?

Foreclosures are a hot topic these days but have you ever actually been on the courthouse steps while they auction off someone's home? Probably not.

It was the best of times, it was the worst of times...
A moderate group of about 12 people were standing or sitting in various spots on the steps of the civic center building in Santa Cruz, California. Nearly everyone looked like they shopped for clothes at Eddie Bauer (except one lady who looked just a bit unique). As the minutes went buy it was clear that most of these people knew each other and exchanged witty banter back and forth as the court clerk read off the list of properties that would presented today. The mood was lighthearted and as warm as the weather.

Lots of foreclosed homes but then again, maybe not...
The clerk reads the list quickly and clearly of everything on the docket for today. Those are homes all scheduled to be auctioned, but wait! They're not all really being auctioned. What!? Why?

Well, as she reads through all the properties not being auctioned today some interesting reasons are offered such as "bankruptcy" and my personal favorite "lender discretion". Bankruptcy I understand, but lender discretion? Does that indicate a banker with a heart? of course not silly reader, bankers are blood-sucking vampires as anyone knows. The discretion in this case, while unexplained, was probably a private money lender willing to "work a deal". Then again, who knows.

In the end, after reading off the list of about 50 properties we actually have two...yes 2...actual properties being sold at auction.

There's a sucker born every minute....
Because I'm such a believer in the mass media and all their fine reporting on the profits to be made in foreclosures, I'm really excited about the prospects of what I can buy. I've actually got my checkbook in the car (just by chance) ready to buy that deal of a lifetime.

Up first is...drumroll...a mobile home for a mere $89,250. Really?! No land, no rights, just an oversized camper? Argh!!! Up next, an actual house! Cool! But, the other buyers all laugh as the address is read by the clerk. It's a run down dump in a location slightly better than prison. So I waited on the steps for nothing?

No, but I thought it would be fun to convey that the media portrayal of heated sales of fine homes is a bit off. This is just one auction of thousands around the country. Sure, many fine homes have been sold in both Santa Cruz and Santa Clara counties. There's a home in Los Altos Hills heading to the steps that is worth about $2 million. However, the lesson I offer is that foreclosures are not all they're cracked up to be.

Tuesday, August 3, 2010

The signs of the times are changing in Los Altos

A hot topic these days in Los Altos is signage, of any kind. Those discussions have included signs used by Realtors. In the course of those discussions we've got two highly polarized camps; those who want signs and those who don't. The ones who don't would like to see ALL Realtor signs banned. They may, and I use that term loosely, yield to allow directional arrows.

So, why all the fuss? It's simple, some agents use too many signs. There are numerous intersections and streets with 2-3 signs at every corner on many weekends. There are signs in medians, sidewalks, and other places. In fact, there are signs in a lot of places they are NOT LEGALLY ALLOWED. The agents have been told the rules and choose to ignore them or just forget.

Here's my take on what we need:

No More Than 3 Signs
People don't drive around at random and follow signs for miles. You need one in front of the house and one each at the two closest intersections. That's it.

Directional Signs Only
The purpose of putting a lot of extra signs out is to make the agent look bigger, busier, etc. So we kill that benefit by limiting ourselves to directional signs only when placed off the property. That levels the playing field for everyone.

Penalties For Violators
As of now, there are no penalties for violators due to how NAR and CAR rules work. I'd advocate that agents violating local sign ordinances be fined (perhaps $500 per sign) to make it hurt when someone breaks the law. If we're supposed to be fine upstanding members of society, let's try acting like it and follow the rules.

As of now, nothing has changed but there have been some strong recommendations. If agents can't regulate themselves, the cities and towns will do it for us.