Let’s face it, home sellers are often skeptical about prices, market conditions or the necessity to stage a property to get it sold. While they may not be willing to believe you, many younger clients are willing to believe the information they see online.
Recently I was speaking to a young woman whose family was facing foreclosure for failure to pay their condominium association fees. They had two severely disabled kids. Even though they had medical insurance, the bills had overwhelmed them. They were under the mistaken impression that if they continued to keep up their mortgage payments they could keep their home. Sadly, the homeowners association was enforcing its right to foreclose. The question is whether they could stay in their home possibly through a loan modification?
The family’s existing loan was at Chase with the initial loan amount being $290,000. The family had paid the loan down to $275,000. The question was whether Chase would agree to take a principal reduction under the Home Affordable Refinance Program (HARP).
I went to the Chase Home Evaluator site and its AVM (automated valuation model) put the family’s property value at $354,000. Although failure to pay their homeowner association dues may prevent these owners from qualifying, it would seem that using the Chase tool could be a powerful argument for adjusting the principal or at least letting them refinance the loan to a lower interest rate where they could then cover the association dues.
Using third-party AVMs to price your listings
While you may not be a fan of Zillow or some of the other models that provide you with an estimate of an owner’s property value, these tools can help you persuade sellers to be more realistic on their price. Here are some of the online models that you can use to persuade both sellers and buyers to be more realistic:
1. Chase Home Evaluator
As mentioned above, this site provides a quick estimate for how much a property is worth in today’s market. Using a basic three-bedroom, two-bath house in California, they put the value of this property at $365,000. This is up almost $30,000 from the beginning of 2012.
EPropertyWatch is operated by CoreLogic, a company that operates a significant share of multiple listing service systems in the United States. As a result, you would expect its AVM to be more accurate since it relies on the most recent MLS data. It placed the value on the property above at $317,000, down $13,000 from the beginning of 2012. The challenge with this particular data point is that ePropertyWatch priced an identical house just two doors away that has been not been updated, and does not have a new master bedroom and bath, at $335,000.
Zillow has the most widely known AVM model, known as "Zestimates." Zillow puts the value of the property at $335,200.
So based upon these AVMs, which price is right? The range is from $317,000 to $365,000. As a seller, I would want the $365,000 price whereas the buyer would jump on the $317,000 price.
For example, I could make a very strong argument for the Chase value since this is based upon what it believes it would loan. Zillow works with a variety of mortgage lenders; however, they’re not about to suggest that Zestimates are a substitute for an actual appraisal. You could also make an equally strong argument for the CoreLogic ePropertyWatch number, especially if it is operating the local MLS in that area. If that is the case, it would have access to the most recent comparable sales as they occur.
The point of using each of these third-party sites is to cast doubt on which value is right. Each of these AVM-generated prices is only an "estimate" of value.
To illustrate this point, it’s common for sellers to point to their Zestimate as the value of their listing. While you can argue that they need to look at the actual comparable sales from the multiple listing service, using these third-party sites as additional resources gives you a powerful way to overcome the pricing objection.
Here’s what to say:
"Mr. and Mrs. Seller, the Zestimate you are using is a computer-generated price that, according to Zillow, varies 7.5 percent in either direction. For a $200,000 house, that’s a range between $185,000 and $215,000. Two other comparable resources are Chase Bank and CoreLogic’s ePropertyWatch. Again, these tools are merely computer estimates of your property. You can see that there is a $30,000 discrepancy in the various prices. With your permission, let’s take a look at the actual comparable sales from our local multiple listing service, which is still the best way to determine the price where you should list your property."
At this point, discuss the actual comparable sales. If the numbers from all three sites plus your MLS are pretty much in agreement, you have an incredibly strong argument for your price. If there is a discrepancy and at least one of the AVM prices agrees with your assessment based upon the comparable sales, then emphasize that model as being the one the sellers should follow.
Part of the reason that agents have trouble with AVM prices is that sellers love to research them. Once they see a value, that number tends to stick with them. Using multiple AVM models coupled with your MLS data is one of the best ways to get the seller unstuck if their price is unrealistic.
Bernice Ross, CEO of RealEstateCoach.com, is a national speaker, trainer and author of the National Association of Realtors’ No. 1 best-seller, "Real Estate Dough: Your Recipe for Real Estate Success." Hear Bernice’s five-minute daily real estate show, just named "new and notable" by iTunes, at www.RealEstateCoachRadio.com. You can contact her at Bernice@RealEstateCoach.com or @BRoss on Twitter.
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