Automated Valuation System

What is an Automated Valuation System? It is a process whereby computers, using proprietary algorithms (aka “secret formulas”) provide an estimate of value of your property.

The first ones used were by localities, and this is where many of your assessed values were derived.

Then, public web sites started offering them. Perhaps you’ve heard of a “Zestimate”?

Now, even banks are getting in on the action. If you apply for a short sale or a refinance, the bank is likely to, as part of their process, go to their secret, proprietary database and do their own estimate of your property.

Is this good or bad? And, how accurate are they? WELL, sometimes they are right on the nose. Sometimes they are WAY off. Where I live, in Loudoun County, the assessment values are supposed to be within a 10% margin of error. TEN PERCENT? Well, if you need to sell, and you could only get 90% of what you were expecting, would you be satisfied with that? Probably not. If your home's estimated value was $1,000,000; but the "real" value was $900,000... would you be happy paying taxes on an extra $100,000? Again, probably not.

A friend of mine has been relocated and asked me recently what I thought the value of her home would be if she decided to sell. I told her right at about $600,000… perhaps just a bit over that. That was not what she wanted to hear, but she knows and trusts me. Maintaining 3 homes (she also has an investment property) is rather expensive, so she decided to refinance. Her appraisal came in at $605,000.

The estimates were very close... and therefore, likely, very accurate....as accurate as you are going to get before you have a buyer. The appraiser and I are both actively engaged in the real estate market, we have access to some of the most accurate and current data available, and we’ve both seen the house with our own eyes, driven the neighborhood, maybe even seem some of the comps in person.

Her “Zestimate” is $629,000. Her county assessment is roughly $568,000. Those were both created by automated value systems. Why such a difference? Who knows, since the formulas are “secret”. But, really, BOTH are within that "allowable margin of error" that many atuomated valuaton systems usually allow. 

A little something to remember:  The public web sites that offer FREE real estate tools and advice are not being operated as a public service, they are designed to draw web site traffic and then sell advertising space to people like REALTORs. Would you ever click “get a professional estimate” if the web site told you that your house was worth half of what you expected or wanted? No. So, to sell advertising space they have an incentive to err on the high side. You like what you see, you request a consultation. The web site can then accurately report that they provided a “good lead” to the agent – someone who wants to sell. If the agent does or does not get the listing, well, that has to do with whether the agent can “sell” YOU. If you are someone that shoots the messenger, you will probably hire any agent that gives you the highest estimate of value.

On the other hand, the tax assessor needs to provide an estimate upon which to base your real estate taxes.  They really want a fair estimate, since they are part of the equation that “balances” the local budget.  However, their system is not perfect, can be based on inaccurate facts about your home or others, and is a "snapshot" valuation provided at a particular point in time.  In Loudoun, they are reassessed each year, as of January 1.  So, how relevant is this estimation in November?  If the market has been stable, and it was a good estimation to start with, it may still be reasonable.  But, markets are fluid and change rapidly. And, as I pointed out, the estimation may not have been accurate to begin with - and their "target" for accurate is within a 10% margin of error.

So, who to believe? I guess it depends, are you betting your prosperity on it? A full time professional that is competent, confident and trustworthy is going to be your best resource. But, do some homework of your own.

I recommend that rather than ask a computer what your home is worth, ask a computer what the sales prices have been for the homes that recently sold in your neighborhood. The more recent the sale, the better. Look for commonalities. We all know that every home is unique, as is every buyer, seller and transaction. So don’t look for what’s different; look for the things that are the same. Those with the most things in common will give you a fairly good idea of what your home might sell for. CLICK HERE to be routed to a web site where you can get this information for the Washington DC area (DC, most of MD, Northern VA and the panhandle of WV).

Then, give me a call. If I don’t service your area (I work the Dulles area – most of Fairfax & Loudoun Counties), I have contacts throughout the DC region and I’d be happy to match you up with an agent you can trust.

For more information, consider these web sites:

REAL ESTATE INSIGHTS: http://www.therealestatewhisperer.blogspot.com/

LOUDOUN COUNTY LIVING: http://www.livinginloco.blogspot.com/

INFORMATION ON NEIGHBORHOOD SALES: http://www.20175homesales.com/

MY MAIN WEB SITE: http://www.vickychrisner.com/

Or reach out to me directly for more information:

Vicky Chrisner, Keller Williams Realty

Ofc: 703-669-3142

Cell: 703-738-7432

Email: VChrisner@KW.com

I am Thankful For ....

I wanted to write and post a blog today on why I am thankful for my business… and, true to my nature, my first draft was very comprehensive and too wordy, so I trashed it, looking for a simpler thought to share…. and then I recalled this….

One day last year my daughter and I were driving down the road, and she started talking about the parent of one of her friends. It prompted me to ask “Rachael, do you know what mommy’s job is?” She nodded. “What?” I asked.

“You sell houses, help people and make new friends.”

(Long pause and big smile.)

Yep, it’s exactly what I do…. And I love it… I am so grateful that I somehow have managed to make a living selling houses, helping people and making new friends. What a lucky lady I am!

I am thankful for my clients, my associates, and my friends and family that support me personally and professionally every day. I would be nothing without you all.

Have a wonderful Thanksgiving

and

May God Continue To Bless You!

To Sell Now or Wait

Like many, you’ve probably been thinking about moving up to a larger home or downsizing, or perhaps even relocating. But, the market has meant declining house values, and you’re concerned that if you don’t get enough for your home, you’ll not be able to afford what you really want in your NEXT home.

Did I hit the nail on the head for you? You’re not alone. It’s always easiest to focus on the scary, negative thoughts – fear is a powerful emotion, in fact, THE most powerful emotion we have as humans. But, as humans, we have the ability to overcome illogical fear if we’re willing to. Let me point out some things you may not know, or may not have put together.

SUPPLY AND DEMAND: Because of a decrease in supply for much of this year, home values in some areas have started to rebound slightly, and are making the sales process (when you price “right”) easy for sellers. But, that won’t last forever… banks are holding a plethora of homes in inventory (either they’ve stalled the foreclosure process or they haven’t released foreclosed homes for sale, for a variety of reasons). We expect inventory to pick up after the first of the year – if that happens, it puts downward pressure on prices for YOUR home. And, if you’re trying to wait out the storm, you could be there a long while.

COMPARE THE SUBMARKETS: If your current home's value is less than $500K in Loudoun or $750K in Fairfax County, it's likely that supply is low, and demand for your home is high. 

However, at higher price points in the same area, that's not the case.  So, if you are "trading up" you may benefit from a seller's market when you sell and a buyer's market where you buy. 

If you're relocating, you'll soon realize that our Washington DC submarket is quite different from other areas of the country.  Many areas have massively depressed home prices allowing you to scoop up amazing deals.  While buyers markets are found in many areas, some of the best opportunities include Detroit, Michigan, most of Florida, the Las Vegas area and far more.

So, whether you're moving up or relocating, you have a very good chance of benefitting from seller market conditions when you sell, and buyer market conditions when you buy.  Can it really get better than that?

INTEREST RATES: Let’s face it, Americans buy with loans… therefore, the interest rate for loans impacts you as both a seller and a buyer. Right now, the fed’s rate is 0% and it can not go any lower. To artificially DEFLATE interest rates and spur more home buying activity, the fed has been buying mortgage backed securities. This has resulted in a “typical” 6% interest rate being reduced to an average hovering around 5%.

What does this mean in dollars? Well, for every 1% increase in interest rate, if you want to keep your payment identically the same, the price of the home must be 10% less. So, buyers that can pay $500K for your home today with a 5% interest rate, will only be able to pay $450K for it at a 6% interest rate. I bet you’d like to keep that $50K in your pocket, wouldn’t you?

And, this won’t last forever either. In fact, the fed has announced it will be phasing these purchases out and no longer plans to buy these mortgage backed securities after the first quarter of next year. That means if you are thinking of putting your house on the market in the spring, that could be a very poor decision.

EXPANDED TAX CREDIT: You’ve heard of the “First time home buyer tax credit” of up to $8,000? Well, that is coming to an end November 30th. BUT, it's being extended!  And, it gets better… the new version of this program is not just for first time home buyers any more! If you are a first time home buyer you can still get up to $8000.  Or, if you’ve owned a home for 5 of the last 8 years, this NEW credit’s for you, too! Plus, the income limits are being increased…. Allowing people with higher incomes ($125K for one person, $225K for a married couple) to take advantage of the maximum credit. If this passes, it will expire APRIL 30th.

This affects you as a buyer and as a seller. You may be eligible as a buyer; but even if not, your buyer may be eligible, and certainly many buyers in the market will be eligible, spurring activity and urgency to buy before April 30th of next year.

Check out the highlights of this bill: http://www.realtor.org/fedistrk.nsf/files/government_affairs_tax_credit_ext_chart_110409.pdf/$FILE/government_affairs_tax_credit_ext_chart_110409.pdf

** As an aside, please know that the National REALTOR Association worked hard to make this happen.  Your national, state and local REALTOR associations are always looking out for you, property owner rights, and small business owners, as well as for our economy overall.  This bill is only one example of the fruits of our labor.

***

Still not convinced? Call me for a personal consultation. I will be glad to help you sort through this, and other economic news, as well as to discuss your family’s specific situation and help you strategize to make the most of what’s available to you.

www.VickyChrisner.com

Ofc: 703-669-3142

VChrisner@KW.com

Update: Why This Is Still A Buyers Market

With the $8000 tax credit almost gone, why is this STILL a good time to buy?

PRICES (More House For Less)

Some submarkets have “hit bottom”. In the Washington DC metro area, the industry professionals and economic experts believe that pricing for the lower half of the market (generally, under $500,000 in Loudoun; under $750,000 in Fairfax County) are as low as they are going to go, and many are predicting prices will start to increase, and in fact, in some areas, we’ve already seen that.

INTEREST RATES (Low Rates = Affordability)

The Fed’s rate is 0%, which is as low as it can go. To artificially deflate interest rates, the federal government has been purchasing mortgage backed securities. They intend to phase this out by the end of the first quarter of 2010.

This effectively means that interest rates are artificially low right now – hovering around 5%. After the first quarter of next year, interest rates are expected to increase to an average of 6%. For every 1% increase in interest rates, to keep your payment the same, you must purchase a home that has a price that is 10% less. In other words, if today you can comfortably buy a home that is $500,000; by next spring you may only be able to afford a home that is $450,000. That makes a substantial difference in the amenities of the home you can buy.

TAX CREDIT – Extended and Expanded

Last, but certainly not least, the tax credit dubbed the “first time home buyer credit” is being extended, and expanded.... and it's not just for first time home buyers anymore!

First time home buyers can still get a maximum of $8,000 in tax credits. However, many more will find advantages as eligibility is expanded to anyone who has owned a home for 5 of the last 8 years, and income limits are increased.  To take advantage of this new program, you must be under contract by April 30th and will have until July to actual settle on the property.

Read highlights of this bill:                                                                                                  
http://www.realtor.org/fedistrk.nsf/files/government_affairs_tax_credit_ext_chart_110409.pdf/$FILE/government_affairs_tax_credit_ext_chart_110409.pdf

No one expects further extension or expansion beyond that point.... so take advantage of the gift while you can!

***

Still not convinced? Let’s talk. Let me show you what homeownership in the long run can do for your personal wealth, the continued affordability of your housing expenses and the quality of life for you and your family.

Vicky Chrisner

www.VickyChrisner.com

703-669-3142