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The Law Blogger is a law-related blog that informs and discusses current matters of legal interest to readers of The Oakland Press and to consumers of legal services in the community. We hope readers will  find it entertaining but also informative. The Law Blogger does not, however, impart legal advice, as only attorneys are licensed to provide legal counsel.
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Thursday, May 30, 2013

Internet Real Estate Appraisals and Divorce

Ever look-up your home on one of the real estate databases like Zillow or Trulia?  Chances are, you'll find the values lower than you expected.  What's up with that?

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.

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Anonymous said...

Excellent post

May 30, 2013 at 3:58 PM 
Blogger supriyawebmaster said...

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June 11, 2013 at 8:35 AM 
Blogger Jim Zaspel said...

Thank you for sharing this information. The information was very helpful and saved a lot of my time.

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June 21, 2013 at 3:41 AM 
Blogger john graham said...

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June 24, 2013 at 9:56 AM 
Anonymous betty said...

The lesion which we can learn from this blog which is also an absolute truth is every information that we read on the Internet is not always reliable as the data is not current. Therefore, in order to prevent any inconvenience, a licensed real estate appraiser must use recent comparable sales.

June 26, 2013 at 12:48 AM 
Blogger joseph wilson said...

It is really a nice post. thank you for sharing.

Professional Civil Engineering Service

July 15, 2013 at 5:41 AM 
Blogger McCarthy and Co Estate Agents said...

It's an interesting piece of information. As estate agents in Torquay we prefer to rely on real life valuations of properties rather than on a contrived valuation based on average sales figures for other houses in the locality. Thanks for highlighting the flaw in doing the latter.

July 16, 2013 at 6:30 PM 
Blogger Desh Bandhu said...

When it comes to putting your home on sale than the first impression factor is really what can get you good offer for your house and for that you need to work a little bit on the factors discussed above.

July 20, 2013 at 4:20 AM 
Anonymous Home For Sale In Mcallen TX said...

I didn't know about Zillow and Trulia. Impressive blog and beneficial info. I appreciate to the blog owner work.

September 12, 2013 at 8:08 AM 
Anonymous Illinois Home Appraisers said...

Its quite shocking to hear about Zillow and Trulia. I will suggest people that don't put your blind faith on the things that you see on the internet. You should prefer to rely on real life property inspection than on any online site.

September 16, 2013 at 8:22 AM 

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