My husband and I were driving around one weekend, looking at open houses. I was struck by the comment of a woman selling her home as a FSBO. I’m familiar with prices in the area, and knew her price was high. What she said though was, “There are several homes for sale on the street, and this one is much lower than the comps.”
I’m sure this lady was sincere in what she said- she just didn’t understand the difference between having the lowest listed price on the street, and the price that comparble houses were selling for. Calculating comps for us mere mortals without access to the MLS is not easy however.
I have found several sites that I have found useful. If the number is only my imprecise estimate, I suspect it’s closer than a lot of the overgenerous estimates done by “professionals” these days. Some of my sources aren’t useful beyond the Phoenix metro area, but I imagine that comparable ones could be found for other areas.
I start with the website of the National Association of Realtors. (http://www.realtor.com/) It allows you to search by general price range, square footage, number of bedrooms- but it is lacking a lot of really useful data. (Like property address and number of days on the market) For this I go to ZipRealty. Although I am not fond of Realtors as a group anymore, I have appreciated ZipRealty’s approach. They allow you to register on their site for free. They provide you with the address of properties, number of days on market, and generally better property descriptions, and exact square footage. Armed with this information, I head off to Zillow.
Zillow is my favorite site for estimating property value. It requires no registration. You just type in the property address, and it will show an aerial photo of the area, give you a value estimate, list comps (and map them). It graphs the property’s value for the last 10 years. Zillow allows you to click on neighboring properties to determine their values. It also frequently can provide you with former sales dates and prices.
Zillow does have some drawbacks. It may not have the proper square footage if a property has been added on to- which can underestimate the value. Another difficulty is that sales have been so slow in our area, there is very little recent data, so some of the comps date back to last year at the height of the frenzy- this can skew prices higher. Zillow won’t take into account that you have $100K more in upgrades than your neighbor. I also know that in this area, a neighborhood 100 yds away may not be comparable- I have seen Zillow use comps from nearby homes that I don’t believe were genuinely comparable. It also may not list new neighborhoods.
Even with it’s problems though, if you take a time to look at the comps listed, and other homes in the area, as well as the time sold, you can start seeing a pattern and make a fair estimate.
It gets trickier to determine values in newer areas not covered by Zillow. For this I turn to the Arizona Republic. They have a nifty page where you can enter a street name and a zip, and they will list the selling price of all homes on that street for the past couple of years. If you can find when the home sold and the date, you can kind of extrapolate to the current value. I also like to take homes listed here and compare them to Zillow to give me another comparision. The Arizona Republic also has a page that posts the weekly sales in the valley by zip code, and compares them to the last few weeks as well as last years sales.
I have been using my valuation method for the last few months, trying to find the best possible value to purchase. Conclusion?
We are going to wait. Given the current trends, even homes currently listed below my estimated value, could be worth even less 6 months from now. I think it could be possible that even with 10% to 20% down, a severe downturn could leave you upside down on a property.
It is going to be difficult to know exactly where real estate is headed until the end of the 2nd quarter. Once school starts and the winter doldrums begin, that is when the market here is going to be looking at more downward pressure.
In the meantime- keep an eye on values- now you know how.
