List price and offer?

[gooddecisions]

I found a house I like and it's listed at 379,000. It was built in 2006 for $445,000. Zillow (for what it's worth) shows the "zestimate" at 340,300.

2006 was a pretty inflated time to build, but this homeowner has already taken a significant loss. That's not really my problem, but what would a fair offer be? I'm not emotionally attached and know there will be other houses I like.

[movingforward]

So glad you asked this question. I am going to start looking in the fall and I just have no idea how to come with an offer if I find something I like. This is all new to me...

[milee]

Neither the listing price nor the price to build in 2006 have anything to do with what the house is worth or what you should pay.

You should pay what the house is worth in today's market (you'll need to do a form of appraisal - using recent sales comps and trends). In addition, consider how the form of the offer impacts the price. For example, if you offer 100% cash to be paid in one week with no inspection clause, that usually results in a discount off the market price compared to if you're making an offer subject to selling your current home, obtaining financing and closing in 60 days.

[midjd]

I've heard that unless the list price is obviously inflated, the "non-insulting" offer will be within 10% of list price... but in an area where there's been a housing bust, I'm sure Milee is right, best to see the prices at which similar homes are now selling.

[gooddecisions]

The problem is the appraisal doesn't normally get done until after the offer.

[gooddecisions]

...And zillow's values are based on recent sales, so...

[milee]

I didn't say to get an appraisal done. Do your own form of appraisal. Look at what has sold in that area for the last 6 months. Compare how those houses were similar to or different than this one. Do a little research to see what's going on in the area that might increase or decrease property values. Talk to the local permit office to understand what they're seeing in the area.

[milee]

Zillow does an OK job if it's a large, homogenous area. If all the homes have similar features, views, size, issues, etc., then it's a reasonable tool to start.

It doesn't do a great job if there are material differences in houses. For example, in my neighborhood, there is one street where the houses on one side of the street are direct, deep water bay front. Houses on the other side of the street have no water frontage. Zillow values them very similarly where on the water side, you can't buy a house for under $1 million but on the non-water side reality is that those are around $250k.

You're also relying on Zillow getting complete and accurate data, which isn't always the case and is difficult to determine.

[The J]

Do you have a realtor? They should be able to give you an idea of what places are selling for.

[gooddecisions]

I haven't signed a contract yet with a realtor but there is one trying to get me to sign now. I've followed the 10% rule in the past, but coming out of an over-inflated market where homeowners are trying to recoup a little of their lost value is totally new to me.

[Deleted]

May 2, 2012 9:08:04 GMT -5 gooddecisions said:

I found a house I like and it's listed at 379,000. It was built in 2006 for $445,000. Zillow (for what it's worth) shows the "zestimate" at 340,300.

2006 was a pretty inflated time to build, but this homeowner has already taken a significant loss. That's not really my problem, but what would a fair offer be? I'm not emotionally attached and know there will be other houses I like.

your real estate agent should be helping you determine that based on the what has sold recently in the neighborhood, the price it sold for (including seller concessions) and how it compares to the house you're looking at.

[Deleted]

$320k

[Deleted]

I agree with Milee that the "Z" estimate can be worthless for the reasons that she stated. Basically Zillow's algorythim is based on a bedroom count, price per sqft, and size of lot (if lot size is included in the county records).

But it can be a useful tool to make your own Z estimate if you're willing to do a little work. Before I do my annual property visit to my rentals, I'll note what has sold or is currently for sale. if I'm not familiar with the house, I'll at least do a drive by to get a feel for the siting of the property. And of course, I am a shameless real estate looky loo and have no problem stopping in open houses to do my R & D (Research and Development).

[Peace77]

What does Trulia say? For my area Trulia is far more accurate.

[giramomma]

Also, what is the house assessed at? You should be able to go online and get that info..

[Deleted]

In CA and in many other parts of the country the assessed value has nothing to do with current market value.

[gooddecisions]

Trulia has it listed for $379,000.

[souldoubt]

I tend to agree with milee and Bye-Bye Bonn but obviously it can be impacted by where you live. I live in SoCal and met with a realtor less than a week ago to start looking at properties. Considering how much property values have changed here the last few years some of the "sold for" info from a few years back is pretty much worthless. I'd check for what other properties in the neighborhood have sold for recently and pick your realtors brain. Your realtor will have access to detailed info about places on the market and also those that recently sold that isn't really something you can find or access without being a realtor.

[kgb18]

I didn't say to get an appraisal done. Do your own form of appraisal.

What you're saying is to look at what realtors call the "comparables." I think that's the best way to gauge what a good offer would be. When we bought our house our realtor printed out a list of others homes in the neighborhood that were comparable to ours and showed us what some had recently sold for and what others were on the market for to help us get an idea of what a good offer would be.

I don't trust any of those online estimate places.

[alabamagal]

As someone stated above, if you understand how Zillow works (or Trulia) you can get a pretty good idea of how accurate the estimate is. If you live in a large area with plenty of similar houses nearby, I think the estimate is pretty close.

When I recently did a refi on my house, I was hoping to have the assessment a little bit more than what was on Zillow. So I did a search on Zillow of recent sales. One of the houses recently sold in my neighborhood was way low. Since I could tell that the sale price was exactly the same amount as it had been sold for 10 years ago, I think it was a sale (probably to a relative) where someone did not want to take any capital gains. So I did not use this house in my comparison. I found 5 other houses in similar neighborhoods and similar age to mine, similar lot size, and averaged the $ per square foot and got what I thought was reasonable value. The bank appraiser came up with a slightly higher number than me, so I was good.

Just spend about an hour looking around Zillow, then drive to the houses you pick as comaparble, and you should get a pretty good idea of what you should offer.

[Deleted]

Zillow keeps saying my model house is worth 420k when every one that sold in the last year was 500k+.. Like others have said, Zillow can't handle unique areas, so get with a realtor to pull real comps.

[Peace77]

Have you seen the inside of the home? If the inside features are better than average, average, less than average or in need of major repairs--this can also affect the price and value.

[tskeeter]

May 2, 2012 9:16:12 GMT -5 gooddecisions said:

...And zillow's values are based on recent sales, so...

I wouldn't rely on a "zestimate" to determine my offer on a home. The Zillow valuation calculation can not take into account many factors that affect the value of a house. One example would be things like the view. One house can have a spectacular valley, mountain, and city lights view. The house across the street can have almost no view and back up against a steep eroding bank cut into a hillside. If the houses are the same floor plan, zillow would place the same zestimate on both houses. But the house with the views is obviously worth more. Another factor that Zillow does not accommodate well would be differences in construction quality and finishes. You can have a very upscale home within a couple of blocks of much more modest homes. Zillow will consider the modest home to be a valid comparison for the upscale home simply because they are located close to each other.

Where the information on Zillow is worth while is the recent sale information. Look up the most recent sale price for homes that are truly comparable to the home you are considering, and if the sales are recent enough, use those sales to help determine how much you are willing to offer,

"Zestimates", asking price, tax valuation, and similar price information is not really relevant. The only relevant information is what houses that are actually comparable sold for in the recent past.

[kgb18]

Good point peace.

I went on Zillow just out of curiosity. It's definitely not right for my neighborhood. I put in our street address and got information for my neighbor's house. The map shows our house at a different address. The property it says is our address is actually a trailer home (Not that there's anything wrong with that) and it's listed as a higher value than our house, which I know can't be correct.