- This topic has 13 replies, 10 voices, and was last updated 17 years, 1 month ago by Bugs.
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April 10, 2007 at 9:08 AM #8802April 10, 2007 at 9:32 AM #49650BugsParticipant
It is apparent that the people in the room don’t agree with Zillow’s Zestimates. Zillow is easy to use, but beyond identfying what a property’s general attributes are it isn’t reliable enough upon which to base any decisions.
Think of Zillow in terms of it’s entertainment value.
It could be that the house in Glendale was never really worth the $1.9, or it could be that upon purchase the debtor started a major remodel that didn’t get beyond the demolition. There could be any of several reasons for the differences.
The same thing for the Covina house. Unless you’ve seen it you don’t know what it really is.
Buying a property is the easy part, Buying it at a price that will result in a profit of sufficient amount to justify the risk of purchase + resale is the hard part.
April 10, 2007 at 9:53 AM #49651MarketSavyParticipantThank you Bugs for your great inputs!
However the Glendale house was sold for $1.9 mil (a proven value) in 2006, and given yoy housing price increase in LA published recently, this housing should be worth even more in 2007. I still need helps!
April 10, 2007 at 9:58 AM #49654startingoutParticipantI’m not sure I see where these buyers are being “stupid.”
If the buyer managed to buy a house that’s worth $1.9 million (if that is really what it’s worth, just because someone paid that price for it in 2006 doesn’t mean it’s worth that price in 2007) for only $1.15 million (a difference of $750,000), I would call that person a savvy buyer.April 10, 2007 at 10:19 AM #49656hipmattParticipantZillow isn’t always accurate and is a lagging indicator most often. Anyways a home on Zillow for 1.9million could easily be worth 900k in a few years anyways, so 1.15 seems pretty smart.
April 10, 2007 at 11:50 AM #49669BugsParticipantYou are making a number of assumptions here, any of which could prove unfounded. The Zillow Zestimate is probably heavily influenced by the 2006 sale price.
I took the liberty of looking this property up in the public records. It is reported as a yr2005 home of ~3,800 SqFt on a relatively small (11,400 SqFt) subdivision lot. The other properties on this block were all built between 1920 – 1950 and represent a wide variety of ages and sizes. So we aren’t talking about a custom home on a large lot that is part of a conforming tract of similar homes. This thing is an orphan.
According to the public record – which may or may not be accurate – there are no sales of similar age within the prior year within a 1 mile radius. Again, public records reports only 2 sales of comparable age/size in the city of Glendale within the last year and a total of 5 such sales going back as far as 04/2005. Those 5 sales demonstrate a range of about $1,100,000 – $1,650,000. As far as I can tell all of these other properties have lot sizes that are larger; the two higher priced homes are on 1 acre lots and may have a view amenity.
I don’t know how much this home is worth, but I don’t see any data that would make obvious a conclusion that this home was EVER worth the $1.9mil. Based on what I’m seeing I wouldn’t even assume the recent sale price at $1.15mil is crazy-low. Bear in mind, we don’t even know what kind of condition or buildout this property currently has. If – as sometimes happens with foreclosures – this home has been stripped of its interior or squatters have taken up residence that bid might be very fair. Or not. My point is that we just don’t know and we can’t tell from here.
April 10, 2007 at 12:11 PM #49673Bob GParticipantIMHO, the buyer is taking a risk at 1.15 million. Look at the actual sales price in 2002:
11/25/2002: $345,000What the chances prices will retrace to this level?
Another thing. You need an annual salery of almost $400 k to $ 1/2 million to afford a 1.9 million dollars house payments. Could everyone that makes this much please raise your hands? I don’t, maybe I’m an underachiever.
April 10, 2007 at 12:27 PM #49676DoofratParticipantRemember too that the same person who paid $1.9 million for this house a year ago just lost this house, so I wouldn’t put too much “value” on what this person was willing to pay for the house in 06′. In addition to the ideas that Bugs presented, the buyer could have gotten caught up in a bidding war, or it could be fraud. Stop looking at it logically, buyers do some crazy stuff during periods of mania. You could almost look at this house as a parallel to the whole market and see that what somebody pays for something doesn’t mean it’s worth that.
April 10, 2007 at 12:38 PM #49677Diego MamaniParticipantI agree that the OP implicitly made many incorrect assumptions, which explain his confusion. Let’s state the main principle:
Prices are set by the market, and they fluctuate over time. House prices are NOT determined by Zillow, not by the homeowner, not by replacement cost, not by the government, not by “fairness”, not by the present value of future rent income, and not by what the last buyer paid.
Like someone wrote above, a house price today is what someone (not related to the seller) is willing to pay today (of course allowing for a couple of months to properly market the property).
April 10, 2007 at 12:45 PM #49678CritterParticipantHome prices are also NOT set by what the previous buyer still owes on the property and needs to “clear” to get out from under his debt load including any outstanding HELOCs and sales costs.
In addition, home prices are NOT set by what the present owner needs to fund his/her retirement.
April 10, 2007 at 1:13 PM #49672Alex_angelParticipantZillow does nothing more than price comparisons and past sales and tries to predict trends. To be quite clear that home is not worth 1.9 or even 1.15 million. If is easily a 700k home but jacked up on the current inflated market.
Remember. Zillow does not have people sitting there trying to judge prices. It is done on pure raw data.
Zillow has caused as many headaches for the real estate agents and buyers. It is very inconsistent where it over prices some homes and under prices others.
Please remember these words next time.
A HOUSE IS ONLY WORTH WHAT SOMEONE IS WILLING PAY FOR IT.
April 10, 2007 at 4:41 PM #49700Cow_tippingParticipantThere have been cases where zillow was high by the whole asking price of a house. Z says its woorth 500K, its on the market for under 250K. BTW in march 06 Casey Serin paid 330K for a house which now is on the market as a foreclosure from the bank for 199K and its freaking high at 199. It may prolly sell at 150 in the next few months if the bank gets serious and drop its price fast … else it will sell for even less. So 06 spring prices can be up to 50+% high for today’s market.
Cool.
Cow_tipping.April 11, 2007 at 8:55 AM #49767MarketSavyParticipantThank you all for your comments! I have learned quite a lot from here.
However, I am still confused by the present value of which one is true, $1.15 mil or $1.93 mil? Shoudln’t the recent sale price be the closest market value, rather than the next to last sale? Pls help me to monitor this value together, and hope zillow will adjust soon on this. Otherwise, zillow should change name to http://www.ownerfeelgoodbutcantsell.com
I agree with the majority of you here that prices will continue to fall, just according to very simple economic sense.
April 11, 2007 at 9:29 AM #49774BugsParticipantLike I said, I wouldn’t assume this house was ever worth the $1.9mil or even close to it. The prior sale is just one piece of data and all the other obvious data contradict it.
It’s a bit unlikely that a buyer who purchased the property at an auction intends to live there. There’s probably a flip involved somewhere.
Having looked over the attributes of the other sales in Glendale that came up in public records I would imagine that a broker would relist that property somewhere in between the $1.15 and the $1.9mil. If they split the difference they could probably consider themselves to have done extremely well.
There are probably a couple of MLS listings on this property at various price ranges from the last year or so. Auction is usually somewhat of a last resort for a lender. If you had your broker look the listing history of this property up you might get a pretty good clue as to what the market really thinks about this property.
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