Appraisers... er... Non-profit Group Complains To FTC About Zillow's Electronic Estimates
from the those-poor-gullible-zillow-users dept
The real estate industry doesn't have the greatest track record in responding to attempts to make their industry a bit more transparent. Real estate agents have been trashing the book Freakonomics ever since it put forth some data about how the real estate business really works (and why an agent might not get you the best price for your house). It appears something similar may be at work in an FTC complaint filed against Zillow. Zillow, which launched earlier this year, collects a bunch of data and tries to estimate the value of a home. It's a fun toy, but even they admit very clearly that their estimates are a big guessing game and may not be particularly accurate (though, I've watched how they've valued the various houses for sale in my neighborhood, and it seems to do a pretty good job). Still, a non-profit organization, the National Community Reinvestment Coalition, which recently founded "The Center for Responsible Appraisals & Valuations" (made up of a bunch of appraisers, not surprisingly) has sent in the FTC complaint. The group claims it has nothing to do with their association with appraisers, but has much more to do with their need to protect people from getting in "trouble" via the site. Apparently, they're afraid that a low income person will somehow be tricked into getting a bigger loan than they need, all because of a bad estimate -- yet they don't provide any examples of that actually happening. Others, such as those who use Zillow, tend to think it's much more a publicity stunt by appraisers upset that technology is encroaching on their business. Still, it hardly seems likely that Zillow is going to hurt the business of appraisers (or trick many people into bad loans). Getting an estimate is exactly what it is: an estimate -- and it's hard to see why that should be blocked.Thank you for reading this Techdirt post. With so many things competing for everyone’s attention these days, we really appreciate you giving us your time. We work hard every day to put quality content out there for our community.
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No Publicity is Bad publicity, right?
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Striesand Effect.
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One thing left out
Another consideration: Ask your real estate agent to show you houses that are Assist-to-Sell or For Sale by Owner. Those sellers are screwing up the intellectual monopoly that real estate agents have, so they will avoid showing clients those homes, not because they aren't a good deal, but because they either won't get a good cut or they don't want to encourage people doing it themselves (or with minimal assistance).
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Re: One thing left out
Ever.
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how?
Isn't that how it works?
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Re: how?
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Not suprisingly, we were the ones who found it online, not him. The asking price was good, but I checked out zillow beforehand. Made an offer based on that estimate and with a little haggling they accepted. Both parties were very happy with the exchange and while I feel tha zillow estimates are usually lower I was still very satisfied with how close they got.
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RE Agents = BS
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Re:
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ZILLOW
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Re: ZILLOW
Be very careful about trusting ZILLOW, or any other Automated Valuation Model (AVM). There certainly are neighborhoods where these programs can produce reasonable (i.e., +/- 5%) results, but they are wildly inaccurate when they try to pretend they can cover anythign but the simplest of neighborhoods.
AVMs can do a reasonable job in neighborhoods that are fairly new (i.e., under 20 year old housing stock), but not too new (new-build competition can play hell with the quality of the AVMs data, which compromises its accuracy), and with highly homogeneous housing.
Some of the hallmarks of neighborhoods where AVMs can easily mislead a non-expert user are those in which: a lot of homes have been, or are being, renovated (i.e., new kitchens, new baths, new roofs, new windows, new furnace, etc, etc), but many homes remain "original"; a lot of fraudulent sales (e.g., flips) have been noted; a high proportion of purchases are being financed with FHA financing; and where the housing stock is highly diverse in terms of quality, condition and amenities.
If you are thinking about buying into a neighborhood where the data seems to be "all over the place", you would be well-advised to hire an experienced local Appraiser to make sense of the data before making any decisions. Hint: we work for a LOT less than 3% of the purchase price ;-)
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I'm a Realtor
FSBO / Help-USell / etc:
Selling By Owner is a great way to go. In a hot market where things are selling almost as fast as signs go up it makes sense to try that route.
In a slow market it's not that easy. We call it Help You Stay. In my neighborhood three people went that route since January. None of these homes have sold. If the owners were actually marketing the house - doing mailings, working the internet, holding open houses at least twice a month, networking with people, contacting companies who may have relocating employees and so on and to forth they might have sold. Putting up a sign and sitting back does not sell houses in a normal or worse market.
I love FSBO sellers. I have a 56 page instruction manual that I give FSBO sellers for free. I'll put an FM Radio Tour at a FSBO sellers home for free. I'll do a Virtual Tour for free.
Why? Because - the numbers vary by market - waay over 50% of FSBO sellers list with an agent within 45 days of putting their home up for sale, and I want to be that agent.
To summarize - in a hot market when houses sell the day they hit the market FSBO can work and work well. In a "normal" or slow market - Realtors who work provide a valuable service...heck my company will even move you for free if you buy or sell a house with us!
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real estate agents serve a purpose on the higher e
also, good agents are practically lawyers and bring the full support of the real estate companies legal team to every deal, not to mention the agents and companies carry massive insurance, that you can sue and settle with, if something goes wrong.
zillow is interesting, but pretty inaccurate. the price paid for a home is more complicated that what some website database can figure out. the local comps don't tell the whole story.
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Zillow
I wonder how that would compare with the actual appraisels done by the "professionals".
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appraising is crap and i can prove it
then, put your house up for sale and see what the a buyer's appraisal is.
there will be at least a 10% if not 25% difference in the appraisal. a re-fi appraisal is always way more than a new mortgage appraisal.
the other way is of course, to have a house appraised before you buy it, then buy it and tell a different bank you want to re-fi. the results will be close to the same.
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Re: appraising is crap and i can prove it
Fascinating. I don't dispute your experience but I haven't seen it. There is one thing that might make a difference. The Re-Fi appraisal might allow comps at greater distance than the Purchase appraisal.
Either way, the appraisal must meet guidelines or the loan won't be eligible for sale. For the unaware, mortgages are typically bundled up by the lenders and sold to large holding funds - FNMA etc.. The loans in the package must all meet certain basic guidelines, and appraisal guidelines are at the top of that list.
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Re: appraising is crap and i can prove it
Thses changes have been made pursuant to directives of the OCC, which has required all lenders who are in any way affiliated with an FDIC-insured depository institution to insulate the Appraiser from their commison-incentivized lenders.
These institutional changes took effect in early-2005.
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Automated Valuation Models not always right.
I just had a recent re-fi (August) and the appraiser's valuation was 11K higher than Zillows.
Bottom line, as much as we hate the 'drag' realtors and appraisers seeming contribute to a market, more often than not, their services are a valuable contribution to the process.
However, that does not mean that the Realestate industry is comprised of all angels. It needs WAY more transparency, accountability and industry endorsed options for allowing home owners to 'sell by owner' if they so choose. These options could include access (for a fee) to the MLS system of the area and changes in the law that allow 'commission sharing' between a home owner and a Seller's Agent (a big no no here in Texas).
In Texas (and elsewhere), Realtors essentially control entry into the market. That aspect should be changed either by industry pressure or via legislation.
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Learning Real Estate do's and dont's
I purched nine Investment properties within the last year in prime hotspot areas, not knowing my credit wouldnot allow loans. I'm 22 yrs. old and did not use an agent, but clearly my eyes for real estate are not blind but that lack of knowledge cost me stop me from millions, is there anything i could do ? should i sell? 314-477-9056
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Learning Real Estate do's and dont's
I purched nine Investment properties within the last year in prime hotspot areas, not knowing my credit wouldnot allow loans. I'm 22 yrs. old and did not use an agent, but clearly my eyes for real estate are not blind but that lack of knowledge cost me stop me from millions, is there anything i could do ? should i sell? 314-477-9056
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