Getting Rid of Zillow’s “Zestimate”

I am sure by now we have all been to the Zillow home search website and while browsing around you may have noticed under the actual purchase price of the home is Zillow’s estimate of the actual value of the property. Now this may seem fantastic if your dream home is actually overpriced according to this “zestimate.” The problem is how inaccurate these estimates can be, and usually are. These estimates are a nightmare for real estate professionals especially when over 90% of home buyers begin their search online. I have had to experience it plenty of times and I know it is a common issue among other professionals. We must explain to our clients why the Zestimate is so far off from the purchase price. I’ll tell you why this zestimate can be a nightmare if you are in my profession.

Zillow is a fantastic website for home buyers to begin their search. It allows you to pull up a map and view all the available homes in the area and even see the price of homes that have recently sold. The problem comes in with Zillow’s estimate of the current value of the home when this estimate has not been properly done. Zillow simply takes the average of homes available and sold in the area and slaps an estimate on that home, that’s it! No further research goes into the property before this estimate is put up for the world to see, that’s why at times you can see a huge discrepancy in the estimate and the actual purchase price.

When a home is having a proper estimate put on the property we conduct a BPO (Brokers Price Opinion). This is where you actually send a real estate professional to the property to see the condition, land, upgrades, etc. We then pull comps of all the current homes on the market, homes currently in escrow, and homes sold in the previous few months. We use these comps to compare the subject property to and from there we can make an educated guess on the value of the property in question. Is it a similar process? Sure, but it is much more in depth and thorough. Not to mention it is done by a real estate professional that is familiar with the area.

I read an article recently that mentioned replacing the zestimate with these types of BPO’s. Zillow will have a local real estate professional run a BPO on the property in order to get a more accurate idea and provide a much more informative estimate of the home. I do hope this is the case and we can stop giving buyers a false idea of the market with these “zestimates.” I got to experience how terrible these can be with one of my listings. The Zillow estimate was around $850,000 but after a couple BPOs the property was valued around $450,000. That’s a $400k price difference!! I hope Zillow will realize this as they have received plenty of backlash about this feature since it was created.

What do you think about Zillow and their Zestimate? Do you have a favorite home search website you like to use?

For an amazing home search website focused on the Reno/Sparks area check out my website: http://jeredlehman.com

Bank of America and Their 3% Down Payment Mortgage!

Wow! This is surprising and definitely a telling sign of the current market. In some pretty large, and important, news for potential home buyers, Bank of America has decided to offer mortgage loans with as little as 3% down. Now, as I have discussed in a previous post, low down payment mortgages are nothing new as you remember the FHA loan only requires 3.5% down. The surprising news comes in when it was revealed that Bank of America will not require the usual monthly insurance premium with this loan! Just so you have a better understanding, let’s talk about this insurance premium real quick.

Your typical conventional loan requires a 20% down payment. As we discussed, the FHA loan requires only 3.5% down, but with this low down payment comes a monthly insurance premium on top of your mortgage payment. This premium is required as a safety net for the bank basically in case you default on your loan. With such a low down payment, it is a higher risk for the bank if the home goes underwater with a shift in the market or if the borrower bails on the payments all together. This FHA insurance premium is currently at .85% annually. What this comes out to is an insurance premium of about $2,050/year or $170/month on a $250,000 home, on top of your monthly mortgage payment. This illustrates how significant the Bank of America loan is without requiring this mortgage premium.

Now the important question to consider here is, is this good news for the market and potential buyers? Or is this a sign of banks repeating the same mistakes as the previous housing bubble and allowing people to get into loans they may not actually be able to afford. With companies like Quicken heavily promoting their “Rocket Loans” it makes me a little nervous to think we may be seeing the same mistakes being repeated. I would love to know what you think about this topic. Please leave me a comment on here or anywhere on my social media and share your opinions with me.

For more information about this loan check out the article here:
http://money.cnn.com/2016/02/22/real_estate/bank-of-america-low-down-payment/index.html?iid=Lead