is one of the many variables considered in the appraisal of a home, along with
condition, effective age, appeal, design, etc.
Not only the quality of the home being appraised, but also the quality
or lack of in the sales comps used in the appraisal.
When a lack
of quality or a need for improvements is observed, as an appraiser, I will make
a list of deficient issues and what it will cost to repair them. This cost to cure is then utilized as an
adjustment in arriving at an “as is” current market value for the home being
appraised. In my experience buyers do
this when making a purchase. A home might technically be remodeled, but if
the work is sub-standard or obviously “do it yourself”, it may not compete with
professionally remodeled homes. When
something looks off in a house, it’s a red flag to look at other details more
sometimes influenced by flashy ornamentation.
While we may not agree with it, if buyers are paying more for these
shiny features rather than something older and so-called better, it is our job
as appraisers to recognize the market reaction and take that into consideration
in our value.
and Historic homes are also a consideration.
Buyers may pay 15% more for a log style design compared to more
conventional construction. Historic
homes like those built by Gus Maltby, in Big Bear, during the 30s and 40s have
a mountain charm that many buyers pay a premium for and appreciate.
One last point
worth mentioning has to do with quality issues that are below the surface, like
2 x 6 framing, extra insulation, plumbing and electrical updates, extended life
roofing, energy, fire and seismic upgrades beyond current building codes,
etc. In order to determine if buyers are
paying more for these upgrades, it is necessary to extensively research the
market data rather than make our own assumptions about what the market should
and shouldn’t do.
While it is
difficult to put a dollar figure on differences in quality, there typically is
a range of value of the adjusted market data.
The recognition of a high quality home being appraised is a good
justification for favoring the higher end of the value range.
In the final analysis, whether it’s
logical or not, it’s the market that gives value and the appraiser is there to
reflect the market reaction and take that into consideration in the appraisal.
Zillow is one of the most
popular websites for real estate information. You can enter an address
and get an estimate of the home's value called a "Zestimate".
These computer generated value opinions are often taken as gospel and are
regularly quoted to real estate agents by buyers to challenge high asking
prices and sellers to question low listing prices.
The problem is, the Zestimates
are not always accurate, and in resort areas like Big Bear, where every street
and house is different, the margin of error can be large. Zillow uses a
computer program to determine the value of a home based on information from
public records, which are notorious for being inaccurate, and information
entered by users, which may be biased.
It doesn't know the idiosyncrasies of a real estate market , not to mention recent remodeling and updates, interior
condition, level of quality and charm, view or proximity to recreational
attractions and shopping. It doesn't know about road noise and traffic,
or structural problems and deferred maintenance. As stated in the fine
print on the Zillow website "it is a starting point in determining a
home's value and is not an official appraisal". The Zillow
help center goes on to state: "We encourage buyers, sellers, and
homeowners to supplement Zillow's information by doing other research such
as: getting a comparative market analysis (CMA) from a real estate agent,
and getting an appraisal from a professional appraiser..."
I reviewed the recent sale prices of
3 randomly selected 3 bedroom, 2 bath homes,
and compared them to the Zestimate and range of value offered by Zillow:
Sale #1 from Big Bear City sold for $360,000 while the Zestimate was $337,267 and the Zillow range of value $310,354 to $354,000
Sale #2 from Big Bear Lake sold for $193,000 with a Zestimate of $239,709 and the range of value $194,000 to $283,000
Sale #3 from Big Bear Lake sold for 693,000 with a Zestimate of $786,638 and value range of $747,000 to $826,000.
In these examples, the sale
price fell outside of the Zillow range with a large difference in the Zestimate
and final sale price.
There are studies that
demonstrate that Zillow can be reasonably accurate on the value of a home in
conforming tract developments.
However, in a resort area
like Big Bear, where you have old and new, large and small homes mixed
together, the accuracy can go way
down. Pricing a home properly is an art and science. It is not
accomplished by trusting a computer generated value whether it is Zillow or
some other online valuation tool.
If you want an
accurate value of your home, always consult with a local real estate
professional or competent appraiser.