Zillow Fakery

Pushing Property Taxes Up

Readers, I have a bit of passion for this topic. I apologize if my thoughts are a bit disorganized or switch viewpoints between buyer and seller below. However, when buying or selling a home, many are faced with time constraints and are easily misled by numbers created by the market, and not so much by property assessors, mortgage agents, and insurance companies. For tax purposes, your home should be based on what you paid for it, plus inflation, but it is not. In Nebraska, property evaluations are based on the market. For this reason, you need to know what is out there influencing the market, thus, Zillow.

There are a lot of nice real estate agents out there. But realistically, the whole business is plagued by lazy agents who do nothing but shuffle a few papers. This is where software websites tend to fill the gap such as Zillow.com. Many people go to the site, including those lazy agents, to see what prices homes are going for and how much a house is worth. Yet, such sites are often supported by ads and dominated by certain groups such as realtors. Without understanding who is all involved in supporting and using such sites, determining what biases they have can be difficult.

General practice in selling a home is to obtain 3 assessments for a home. Next, compare the dollars per square foot spent on recently sold local homes and based on such figures, determine your house price. Next, merely tell your neighbors you intend to sell your home and possibly hire an agent. However, you may be better off selling it yourself. Also, many buyers contact homeowners directly for offers either through mail or Facebook.

The problem with Zillow is largely the estimates, what are called Zestimates (above), and the posting of listings. Their results have a pervasive sellers bias which causes home “values” to be far greater than they actually are. Best option is to tweak the site to merely show you the value of sold homes. The values shown under sold homes (below) are a bit more sober. As for the Zestimates, there is lots of flawed data. All of this creates a false illusion of accuracy and rising property values when it is merely what the software is capable of displaying. In buying or selling, you may want to consult with a mortgage expert. They can give you a better idea of what your home is worth and how much you are worth and determine loans. Also, financial organizations like Chase, may have already determined how much they think your home is worth, because they want you to take out mortgage with them.

There are other factors. People are often lured into the photos and decor of a place, but a sound investor looks for functional problems: wet basements, creaky floors, and other flaws. Zillow does not show you any of this. Before ever buying a house, you are best doing a couple of walk-throughs. Yet, Zillow causes people to dismiss such things as secondary as houses often sell quickly and prices are uniquely luring. Add to the problem of rising interest rates, and such pricing may become totally unacceptable.

Many people talk about house-flipping. There are generally three categories of house flippers. First, the decor people. They will take a worn house with outdated decor and spend hundreds of dollars updating the decor of the house. Generally, they may spend a couple of thousand dollars but not too much more but their money is spent perfectly to take a drab place and make it eye-popping. People will overpay for such homes if they do not do research. People have bought such homes, and a few years after the buyer’s warranty runs out, something goes wrong with the utilities or the nice wood floor has nails popping up. Also, if seller says they did the hardwood floors, think again.

The second type of house flippers are the engineers. They will do something to structurally improve the place. Take a half-bath and make it a full bath. Redo wiring of lights. They may rip out a wall to make a better room or remove a window or install a larger one. They may install a deck, fireplace or even a swimming pool. They can easily spend over 10 thousand dollars. House will be totally brought up to code. They are literally trying to move the grade of the house from one category to another. They know what people are demanding in housing and will make the house fit the most common demands. They will not budge on selling price even when the market is down.

The third type of flipper is the kitchen and bath handyman. These guys can be very good and deceptive at the same. Depends on how bad the house is and how strong their skills are. They will completely update the kitchen and bathroom and do very little to the rest of the house. They probably will do about 1 to 3 thousand dollars of work. You can expect to pay more but do not let the good looks fool you. Two years in, you may find the tree in the yard crashing through your roof or retaining wall gives out or the water heater leaks.

Yet Zillow and other sites provide few if any details on what all these flippers are doing. You may need to put contingency clauses in your bid and negotiate a few items to your advantage (https://realestate.usnews.com/real-estate/articles/6-things-that-are-surprisingly-negotiable-when-buying-a-house). If dealing with a flipper, or questionable house, you may want the seller to provide a home warranty (https://www.homelight.com/blog/what-is-a-home-warranty-when-selling-a-house). There are other problems as well. Private sales or sales-by-owners often do not appear. To make matters worse, you have no idea of what all the factors are for someone buying or selling a home. This is where a good, patient, seasoned, realtor can be of great assistance.

There are other strategies at play too, which people never consider. For example, as a buyer, if you are looking at two or more properties and are indecisive, put in a low-ball bid on all the properties before they sell. One buyer put in a low-bid because he was not in a hurry to buy and he got the home. The house was great and at a great price. So what was the problem? Research may show someone was murdered in the house or some horrific crime occurred on the property. Such things discourage neighbors from telling people “hey, there is this great house up for sale on our street!” At the same time, the seller is motivated to unload the property when there is nothing wrong with the property itself.

If you ever have to sell a home, tell your neighbors. They know who they want to move into the neighborhood and will spread the word. At the same time, they can vouch for what you did to the house if you show them. Neighbors can also give you feedback on what price you should ask for. Also, if you get a loan set up before seeking a house, do not tell the realtor how much the bank is willing to loan you.  Just because the bank says you are worth 500k, you should not tell anyone, and stick to the plans of buying what you need in a home. A 200K home will be nice but if the realtor knows you have 500K, you will end up being shown more expensive homes.