Friday, June 09, 2006


Money Magazine Evaluates Online Appraisers

This article by Money magazine tested six of the leading online appraisers on the accuracy of their appraisals. Here's an excerpt:

The market value of a house is what a buyer will pay for it. An accurate estimate comes as close as possible to the market price. Here’s how we compared six popular online appraisers:

  • We contacted real-estate firms around the country and asked for prices for just-closed single-family home sales;
  • We plugged those addresses -- two for each test city (Seattle, Minneapolis-St. Paul, Scottsdale, Ariz., Baltimore, Cincinnati and Portland, Ore.) into each appraisal site to get estimates of values. These cities were chosen to give the AVMs the best possible shot: Zillow.com, the only site that posts its confidence ratings by region, shows these as among its most accurate metro areas.
  • We worked quickly to gather the online estimates before the sales were recorded and picked up by the AVMs. After all, 100% accuracy is no trouble at all for an AVM that has the real sales price. But at least one of the estimates -- RealtyTrac's estimate for the house called "Seattle 2" -- already had incorporated the price of the recent sale.

The results? Electronicappraisal.com, which charges $29.95 for an appraisal, did the best, but none of them did terribly well:

At $29.95 for a report, Electronic Appraiser is not cheap. But it appears you get what you pay for -- a full report with mapped (but not interactive) comparables, a rundown of census data for the county, including contact information for schools, churches and businesses -- and a roughly 50% chance that your estimate is within 5% of the likely sales price. Being right just half the time might get a human appraiser fired. Yet, in the world of online AVMs, this is top performance.

The article didn't test certified appraisers or realtors on their predictive skills, but a certified appraiser in the article implied that appraisers expect their predictions to be within 5% of the final sales price.

Friday, June 02, 2006


Beware of Fake FSBO Seminars

This website illustrates a tactic listing agents sometimes use to "convert" FSBOs: offer useless advice and make the FSBO process seem so complicated that they'll give up.

The website is pitched at real estate agents who want to be "FSBO Warriors." The author offers to teach the agents how to host FSBO seminars. At the seminars, Warriors are supposed to give each attendee a free book entitled "Guerrilla Tactics for Selling Your Home. Save the Commission! And Make an Extra $50,000 to $100,000." The $50,000 to $100,000 in expected savings is, of course, unrealistic for the vast majority of FSBO sellers, but the author says this:

The statement that the homeowner could make $50,000 - $100,000 or MORE definitely gets their "greed button" going. In other words, the seminar must be exciting and shrouded in "mystery."
The author then reveals the true purpose of the seminars:

At the end of the seminar, you can offer the attendees a $1,000 Investor Package. Many of the people who come to your seminar will be investors and they are always looking for new and exciting systems for real estate investing. Don't worry ... I know what I am doing. All of these are hooks and bait for sellers, buyers, and investors. As I stated earlier, because I used to hold seminars for sellers - not for buyers, I know what will happen.

Next, create a mailing list of all the attendees ... these are your future home sellers, your future listings! Be sure you build the best relationship you can with them. Why?

They'll be listing with you - IF you play your cards right. You must be in constant contact with your list by mail and/or by e-mail. They may even come to your seminar several times. You want them to buy the book - that's very important.

Why? First of all, the book contains your contact information. So, if they have your book, they will be reminded of you and you will be first on their minds. Second, the book contains a ton of information - some of it puzzling to FSBOs.

Remember, "the book is the hook." If you don't sell books, you'll have NO hooks! You cannot do one thing and not the other.

  • This is the perfect mousetrap for your future business ...
  • The FSBOs will need your expertise!
  • They will be willing to pay 7% commission for your knowledge!
  • Why? Because you will make MORE money for them than any other agent!
  • That's the scoop!
Pretty sleazy, huh?

Thursday, June 01, 2006


Lies, Damn Lies, and the National Association of Realtors

The Freakonomics Blog recently posted this item:

The National Association of Realtors has started a blog. The lead item today is headlined “The Cost of Selling without a REALTOR®: $31,800.” Pretty scary, huh? Here’s the lead: “Real estate professionals do more for sellers than make the transaction easier. They make them money. In fact, the average seller who uses a real estate professional makes 16 percent more on the sale of their home than do sellers who go it alone. That’s an average of $31,800 per home.” Unfortunately, there’s no supporting data. So it could be that a Realtor actually brings in, on average, $31,800 more per home sale. Or it could be that a few dozen, or few hundred, or few thousand Realtor-sold multimillion-dollar homes skews the average very high compared to FSBO’s, which tend to be cheaper. Or it could be a few dozen other factors.

I believe I've discovered how the National Association of Realtors (NAR) came up with their surprising statistic. The 16% figure probably comes from an NAR study which found that the median 2005 sales price for a home that was sold by an agent was $230,000, compared to only $198,200 for a FSBO home.

But the NAR is guilty of comparing apples with oranges. While $230,000 is about 16% higher than $198,200, it doesn’t follow that hiring an agent will boost a home’s sales price by 16%. There are many possible reasons that FSBO prices are relatively low. One is that FSBO properties include a disproportionate number of mobile homes and manufactured homes, which usually sell for less than detached single-family homes.


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