Internet Real Estate Appraisals and Divorce
Being in the divorce industry, we here at the Law Blogger contract for dozens of real estate appraisals every year. There are a few licensed real estate appraisers that most of us divorce lawyers know, trust and hire.
Over the past few years, some divorce lawyers have strayed from the concept of having clients pay for an appraisal from a licensed real estate appraiser. Most appraisers charge between $300 and $500 depending on when the appraisal needs to be completed.
First, lawyers started relying on a basic "market analysis", usually performed via a realtor's drive-by; not an in-home inspection by a licensed appraiser. Then, from 2008 until just recently, foreclosures had to be factored in or out of the appraisal.
In the last few years, real estate listing and estimate web sites have popped-up. The two most popular are Zillow and Trulia. These sites provide quick estimates of the basic value of a home; the problem is the data is too quickly obtained.
These sites seem to under-value real estate by 20 to 25%. Here's why: the sites use a "secret sauce" that we here at the Law Blogger have learned includes, at least in part, using a distance parameter and simply taking the total square footage of all the homes recently "sold" in that geographic area and dividing that number by the total of the reported sale proceeds. This calculation yields an average sale per square foot; simply multiply the target property by this average square foot price and, viola, you have an instant estimate; never mind that it will almost always be too low.
The reason the estimate is too low is that the web site formulas catch "dollar sales" and other recorded transfers such as short-sales, and divorce settlements, and lump these nominal net proceeds into the square foot average thus driving that average significantly south.
Also, the Internet estimates do not take a seller's motivation into account, nor are the unique characteristics of a specific home, such as location, taken into account. For example, a lake-front home is averaged in with non-riparian residences, distorting the intrinsic value of living on the water.
Another problem with these sites is that the data is not current. A licensed real estate appraiser must use recent comparable sales.
The lessons here folks: you get what you pay for in appraisals just like anything else; and don't always believe what you read on the Internet.