Thursday, October 15, 2009

Wishing the Zestimate for Your East Bay Home was Higher?

an opinion by Tracy Sichterman

All homeowners wish the automated valuations on sites such as Trulia and Zillow would be a bit more optimistic. However, a recent post titled, Home sellers wary of new MLS rules, warns of a new Northwest MLS rule attempting to screen these valuations. Staff writer Gerry Spratt writes:
The Northwest Multiple Listing Service has instituted new rules about blogging and automated estimates of property values, but some industry insiders say the changes could end up hurting the people they are meant to protect -- sellers.

The new rules allow sellers to block automated valuation models (AVMs) from appearing next to their listings and prevent agents from blogging about their properties. AVMs are intended to reflect the market value of a property, but can often vary wildly from listed prices.
Despite wild variations and negative valuations, I am against such rules that would block blogging and AVMs. In my broad opinion, if you try to regulate the internet, you only end up screening out the “real voices.” Those who want to manipulate the data always seem to find work-arounds to the barriers. Conversely, those with a legitimate perspective often only participate if they feel invited. Blocking AVMs and blogging may effectively uninvited many voices.

Blocking contrary opinions on the web also feels a bit deceitful to me. Throughout the sale, ethical Realtors encourage sellers to “disclose, disclose, disclose.” How do such agents go from that stance to a sidebar statement of, “let’s opt to screen out any potentially negative information that your future buyer might find on the web.” Instead a smart real estate agent should employ tools like Google Alerts to keep up and participate in the active dialogue about their listing.

We need to embrace transparency throughout the real estate industry. In the aftermath of the sub-prime crisis, consumers cried out for more transparency. Screening out negative comments or valuations on the homes that we sell flies in the face of that goal. It is like saying, “we want our banks to be subject to scrutiny but don’t look too closely at the property itself.” If a public AVM comes in with a low price, it is up to the seller and agent to effectively dispute that data. Convince the buyers otherwise. And, by the way, he/she is a 2009 consumer and you are going to need some facts to back up your argument.

Prove why you think your Zestimate is wrong, but don’t pretend the information isn’t out there. This statement is coming from a Berkeley agent who works in an area sprinkled with “older homes” and “famous architects”; two complex issues for computer generated valuations which often create wild discrepancies in AVMs. The real estate industry needs to stop working so hard at protecting and sequestering information and stand up instead for the competent professionals who are willing to participate in active, informed dialogue with consumers.

Speaking of information being “out there”, how do they intend to regulate such a rule? Take the following scenario: Let’s say an agent blogged about a particular listing last year, but it did not sell. This year, the homeowner puts the home back on the market to once again test the waters. The seller now opts to restrict agent blogging. A search under the property address may bring up a reference to last year's blog. If that blog doesn’t have a date stamp, is the agent in violation of the current restriction? Web 101 students know that you can’t really take anything back. Once it is out there, it’s out there. Regulation, in my opinion is not only deceptive, but pointless.

Tip for Buyers and Sellers: This post references publicly listed AVMS. Currently, lender generated AVMS (ordered as part of the loan underwriting process) do occasionally interfere with the transaction. In some instances, Bay Area buyers have offered to purchase the property for substantially more than the AVM price would reflect. The difficulty often comes when the buyer pursues a loan to complete the purchase. The lender employs an AVM that doesn't take into account important specifics about the property (such as the LEED certification or the famous architect.) We have seen loans get turned down based on a banks faulty AVM or a narrowly restricted appraisal despite the willingness of buyers. So far, the answer has been to 1. try to dispute the resulting appraised value or insist on a new appraisal, 2. resubmit the application to a new lender, or 3. in the worst case scenario, put the house back on the market to look for a new buyer. We have discovered that open dialogue only works when all parties are reasonable. Given the pendulum effect of the mortgage crisis, not all banks are ready to be reasonable.

As for the public sites, a homeowner can correct inaccurate data that may have gone into the algorithm. (My own home was listed on Zillow minus 1,000 square feet of legal living space-- until I corrected it.)

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