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Elk Grove appraiser

New construction and the smell of a new car

October 1, 2012 By Ryan Lundquist 3 Comments

Do you like the smell of a new car? I do. While I would never put one of those “new car smell” air fresheners in an old car, there is something exciting about driving a brand new car off the lot that nobody else has driven before.

As new construction has been starting to take off again in the Sacramento area, I’ve been getting questions from home owners and real estate agents about using new construction sales for “comps” in appraisal reports. Can appraisers use brand new houses for comparison when appraising homes that are 4 or 5 years old, but literally right next door?

Owner: The new construction two blocks away is by the same builder.
Me: That’s great to know. Thank you.
Owner: These houses are just the same as ours, but they’re even selling without rear landscaping or built-in pools, which makes ours superior.
Me: Would you pay the same amount for a used car as you would a new car?

New construction sale vs all other sales in neighborhood

A real-life example of new vs. old: The 3200 square foot “new construction sale” above at $400,000 sold significantly above other sales that were built by the same builder just a few year prior. In my research I selected sales from a wide square footage range as well as a larger market area well beyond the immediate streets built by this builder. As you can see, there are always some sales in the entire market area that compete at the higher end of the market for various reasons, but even those have not touched the same level of this newly constructed house. There was one other sale at $400,000, but I didn’t include it since it sold directly from the builder (not on MLS). From the looks of it, all other similar-sized sales in the immediate neighborhood sold about 20% less than the newly constructed sale. However, it’s important to consider that the new sale may have superior updates and some of the older sales were distressed and therefore sold at discounted levels.

This is only one example, but in this neighborhood in Elk Grove it’s an important value issue. In short, there is almost always a price premium for new homes. Just as buyers pay more for brand new cars, we see the same thing in real estate. Appraisers can definitely use brand new sales as comps, but if the subject property is older in age, there is probably going to be a downward value adjustment given.

NOTE: Every market is different. There are surely reasons why new construction sometimes won’t sell above other sales. That’s why I said there is “almost” always a price premium. For example, we might see buyers in classic neighborhoods pay more for homes with era elements instead of a cookie-cutter new tract houses.

Question: How else are new homes and new cars similar?

If you have any questions or Sacramento home appraisal or property tax appeal needs, let’s connect by phone 916-595-3735, email, Twitter, subscribe to posts by email (or RSS) or “like” my page on Facebook

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Filed Under: Appraisal Stuff, Market Trends Tagged With: appraiser in Sacramento, appraiser use new houses as comps, Elk Grove appraiser, Home Appraiser, House Appraiser, new construction in Sacramento, new construction price premium, new houses vs old houses as comps

Are websites like Zillow accurate? My last five appraisals vs. Zillow

March 7, 2011 By Ryan Lundquist 7 Comments

Are websites like Zillow accurate? Let’s compare my last five appraisals with Zillow estimates. These are all subdivision non-custom homes in the Sacramento area. I won’t give the property addresses of course because that would violate client confidentiality.

1) House in Tracy: Zillow high by 9.2%
Zillow said $295,000, whereas my appraisal was $270,000. The condition of this house makes a huge difference in market value. Actually, if this house was in decent shape, $295,000 would be a bit on the low side (quick sale value). 

2) Elk Grove House: Zillow low by 1.4%
Zillow said $207,000, while my appraisal on this 95624 property was $210,000. Not too shabby. Pretty close.

3) Elk Grove House: Zillow high by 6.25%
Zillow said $170,000, while my appraisal on this 95758 property was $160,000.

4) Rancho Cordova House: Zillow high by 41.6%
Zillow said $177,000, but my appraisal on this house in the 95670 zip code was $125,000. Zillow most likely used an area as square footage that should not have been used since Tax Records shows this property with a much larger square footage than it actually has. Zillow was also unaware of condition issues. Even if the property was pristine, $177,000 would still be on the high side since remodels are typically $150-160K right now for this area. The market is fairly patchy too in this neighborhood as some streets show much better than others.

5) Sacramento Property: Zillow high by 30% 
Zillow said $94,000, but my appraisal for this property in the 95824 zip code came in at $72,000. Remodeled or flipped properties tend to sell closer to $100,000 in this neighborhood. The subject is average in most regards- not a fixer.

Conclusion: It’s really hit and miss with Zillow. As I said in a previous article, websites like Zillow seem to have greater accuracy in tract markets with ample sales, but even then they are only so good because they cannot sift through value indicators like condition, important neighborhood boundaries, the difference between distressed sales and regular sales, upgrades, and a local appraiser’s knowledge of the market area.

Will websites like Zillow replace real estate appraisers some day? Personally, I’m not so concerned because: 1) These websites are not very accurate and therefore probably not a good source for making legal or lending decisions. 2) Lenders and other users of appraisal services need to use real humans who can do a professional and accurate job – and humans carry E&O insurance (ding, ding, ding). The bottom line is that it all comes down to money. Lenders probably can’t sue an online “machine” for messing up their value, but they can sue a human.

What do you think?

If you have any real estate appraisal, valuation consulting, or property tax appeal needs, contact me at 916.595.3735, www.LundquistCompany.com or via Facebook.

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Filed Under: Appraisal Stuff, Resources Tagged With: 95624 zip code, 95758 zip code, 96570 zip code, accurate appraisals, appraiser in Sacramento, appraisers in Sacramento, Elk Grove appraiser, Lundquist Appraisal Company, Rancho Cordova Appraiser, reliable appraisals, Sacramento Appraisal Service, sacramento appraisers, Sacramento Real Estate Appraiser, Zestimates, Zillow Estimates, Zillow vs real estate appraiser

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First off, thank you for being here. Now let's get into the fine print. The material and information contained on this website is the copyrighted property of Ryan Lundquist and Lundquist Appraisal Company. Content on this website may not be reproduced or republished without prior written permission from Ryan Lundquist.

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The information on this website is meant entirely for educational purposes and is not intended in any way to support an opinion of value for your appraisal needs or any sort of value conclusion for a loan, litigation, tax appeal or any other potential real estate or non-real estate purpose. The material found on this website is meant for casual reading only and is not intended for use in a court of law or any other legal use. Ryan will not appear in court in any capacity based on any information posted here. For more detailed market analysis to be used for an appraisal report or any appraisal-related purpose or valuation consulting, please contact Ryan at 916-595-3735 for more information.

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