Getting an accurate price for negotiation
One more time! The only way to know what something is worth is to use accurate recent sale data accurately. You need a Comparative Market Analysis. Anything else is folly.
Lance wrote:
Many buyers lack the skills and experience needed to meaningfully evaluate comps. But anybody with a web browser (or iPhone app) can look up a home's value on Zillow or check the assessed value online. These are the anchors that most buyers care about, far more important than asking price. So when a buyer asks why the asking price is 20 percent above both Zillow and the tax assessor, there better be a very good answer. "The tax assessor is wrong" simply doesn't cut it anymore.
The tax assessor is wrong. OK, it doesn’t cut it. It just happens to be true. I don’t have a bone to pick with tax assessors. They have a huge job to do and, at least, they set foot in houses unlike Zillow. Lance is entirely wrong that buyers care about assessed values or Zillow values. They may say they do, in surveys, but they don’t out on the streets.
Just for fun, I matched assessed values with sale price on properties that closed May 25 and May 26:
Assessed/Sale/Town corrected 3:30 5/31
$292,800/$300,000/Melrose
$396,400/$318,000/Needham
$326,800/$366,000/Medford
376,700/$360,000/Arlington
$317,700/$375,000/Waltham
$310,600/$373,000/Medford
374,000/$435,534/Melrose
$464,300/$472,000/Melrose
$424,900/$479,000/Newton
$512,900/$502,000/Sudbury
$521,000/$515,000/Lexington
$554,700/$570,000/Acton
$556,700/$562,000/Wayland
$515,200/$615,000/Wayland
$408,700/$640,000/Melrose
$533,000/$659,000/Belmont
$607,000/$670,000/Belmont
$579,000/$750,000/Lexington
$820,000/$685,000/Concord
787,000/$850,000/Lexington
$784,500/$845,000/Sudbury
$795,600/$860,000/Winchester
$1,013,200/$889,000/Wayland
$739,000/$939,900/Waltham
$848,000/$1,020,000/Brookline
Do you see a pattern to rely on here? I sure don’t.
Nor do I think either tax assessment or Zestimates should be the anchor for buyers. Any buyer who anchors on anything other than experience seeing houses for sale is making a mistake.
When I am doing a CMA, tax assessment is the last thing I look at, after I completed a market study. It has some use as guide to what the town thinks is a comparable property. If all my comparable properties have assessments that are close to one another and close to the house for sale, I have a pattern that I can use. If the target house is assessed much higher or lower, I have something to look twice at. (Usually discrepancies in assessed value have to do with the lot size and house condition.)
The second to last thing I look at is Zillow’s Zestimate. Zillow admits their accuracy rate: 26 percent are within 5 percent of actual sale price. 48 percent are within 10 percent of actual sale price. 72 percent are within 20 percent of sale price. The median error is 10.3 percent.
So, around here, Zillow’s median accuracy is within $30-40,000 plus or minus . How can you anchor to this moving target? Why is it helpful at all to have a figure that could be wrong by as much as $60-80,000 about half the time? Buyers are making huge mistakes using assessed value or Zillow Zestimates as measures to guide for negotiation. I have a feeling asking prices are probably closer!
Buyers, step away from your I-Phones and no one will get hurt, especially you. Look at houses for sale, lot of them. Keep track of their quality and what big repairs or upgrades they need. When it comes to negotiating on the one you want, that is the information that will matter. Even if you want to avoid agent-types, like me, do your own market study Don’t rely on generalized, inaccurate measures like tax assessments and Zestimates.
