What's wrong with Zillow.com

Previously I posted a message about a new website, Zillow.com, that allows users to estimate the value of their home. I did warn users that the site was not particularly accurate but it is fun and interesting. After using the site myself and seeing and hearning many references to the site as a means for actually determining the value of something, I would like to explain why this site is not accurate and why it should never be used to determine home values. On a side note: many detractors of real estate agents and practicioners say that sites like this are proof of why we don't need the MLS or Realtors - I would say just the opposite.

So here goes: Zillow and other "do-it-yourself" appraisal websites all work the same way, they get access to public records of home sales from the county recorder offices and then plot those sales records on a map - you put in your address and then, based on your location, they determine the value of your home based on sales of homes near yours. Sounds great, right? Well, what if your home has 1 bathroom and the home next door has 2? the home next door should be worth more, but zillow.com doesn't know how many bathrooms a home has, all they know is the final sales price. As any mildly intelligent person knows, many factors affect the value of a home: style, condition, # of bedrooms, # of bathrooms, age, mechanicals, upgrades, etc. Zillow cannot factor any of these things into their estimate.

Here's an example: There is a house for sale in a suburb of Chicago that Zillow estimates is worth $387,000. It is a ranch home with 3 br / 1 bath and needs lot of work. This value is based on recent sales of 6-7 homes in the immediate area. I have looked up all of the homes that zillow is listing as comps on the MLS. None of these homes is even similar to the subject home, different style, different # of bedrooms and bathrooms, condition, updates - all different. Most are 2 story homes with updates, 4 bedrooms and at least 2 bathrooms. By looking at the actual comps on the MLS, I would estimate the value of the subject home to be much, much lower, closer to $300,000. That's a big difference.

savings and rent v. buy calculators

Great link for anyone who is interested in calculating how much they should be saving for retirement and also the cost/benefit of home buying.

http://www.choosetosave.org/

Determining Tax Liability for a Home Sale (From MSN Home)

The law makes the first $250,000 of profit on the sale of a home tax-free if you meet a couple of tests. The quarter-million-dollar limit is for single returns; it doubles to $500,000 if you're married and file a joint return with your husband or wife.

You qualify for tax-free profit on your home sale if:

1) You owned and lived in the house for two of the five years leading up to the sale; and

2) You did not sell another house -- and claim tax-free profit on the deal -- in the two years leading up to the time you sold this house.

If you pass those tests and the selling price of the house was below the tax-free limit for your filing status, it is certain that you have no profit to report. So the IRS doesn't want to hear about it.

If you sold a home and do not meet these criteria, things get a little more complicated and you will likely have to pay taxes on the gain - however, there are a number of ways to minimize this obligation and it is worth visiting an accountant for professional advice.

Spring Buying & Selling Strategies (Chicago Tribune)

The spring real estate season is about to get under way, and anybody who expects to take part--as a seller or a buyer--needs an action plan.

http://www.chicagotribune.com/classified/realestate/realestate/chi-0603120440mar12,0,7328588.story?coll=chi-classifiedrealestate-hed

Estimate Your Home's Value (Zillow.com)

Check out Zillow.com. This is an online real estate site that essentially compiles home sale information from public records and publishes it online. You can enter your home address and it will give you an estimate of value. I checked out my home - it wasn't in there - but some of my neighbors homes were. It is fairly accurate, but of course can't take into consideration condition, type of home, number of bedrooms, etc, etc. But it is interesting to see what it comes up with. I wouldn't recommend using it for a hard and fast appraisal but it can give you a general idea. It's certainly the best online database I have seen yet.

Median Housing Prices For Chicago, By Neighborhood

From the Chicago Tribune

http://www.chicagotribune.com/media/acrobat/2006-01/19350762.pdf

you may need a password to access

median = half above and half below. Unlike an average, a median is less sensitive to extreme highs and lows ( just a note on statistical use.... :) )

Mortgage Rates 2/21/06

Today's rates on 5/1 ARM Loans

guaranteed Rate 6.054

CitiMortgage 6.074

US Bank 6.169

LaSalle Bank - ABN AMRO 6.185

Wells Fargo 6.230

First American Bank 6.231

Washington Mutual 6.308

Chase Manhattan 6.319