"Julie, this is Sonjah's friend . . . ," the call began, "the one who is buying direct from a neighbor in my building near the lake . . . we're using his lawyer." (Ah, yes, that one.) "He didn't want to work with a Realtor to save the commission," she added for good measure, "remember?"
(How could I forget?)
"We're in contract and the inspection went fine - thank you for the referral btw," she continued, (you're welcome), "but I'm
concerned because the 'Zestimate' on my purchase price has dropped $30,000 in the last month!"
With all due respect to Zillow (and it certainly has its place), the 'Zestimate' is a mathematical algorithm based on nearby comparable sales only. This program doesn't make distinctions between what's been updated and what hasn't, doesn't visit the home in person, doesn't identify a preferred location over one that may be half a mile away - yet a world apart - doesn't give more value to the number of offers that may push a purchase price well beyond its list price, AND cannot quantify
what a home may be worth to you."
In short, 'Zestimates' are often incorrect.
(But let's put that aside for the moment.)
"So the bank appraisal is a better measure of value?" she asked earnestly. "The condo came in at the purchase price."
"Not necessarily." I responded. "It's important to understand that an appraiser is given a copy of the purchase offer before
they visit the subject property. Their job, with respect to a purchase, is to justify the lender's loan amount; that's it (not to
protect your dollars). Thus, purchase appraisals almost always come in 'at,' or 'slightly below' the purchase offer; rarely does
the 'appraised value' ever land above. While objective in theory, appraisals are still just one person's opinion about a
specific property's value on a given day.
"Oh," she said, still fuzzy on the concept, "so how do I know the real value?"
"That's easy," I said, "VALUE" is defined by what a qualified Buyer is willing and able to pay, OR in other words: What's the property worth to you?
"Hmmm," she responded, undoubtedly less than thrilled with my answer, "I suppose it would it seem like bad faith to go
back in and renegotiate the price now?"
"Probably," I advised, "but whether your question does, or doesn't fall into the 'bad faith' category, the release of one's
appraisal and loan contingencies have everything to do with whether the property appraised at the offer price - not on
the 'Zestimate' - and whether the underwriter approved the promised loan - based on the appraisal, (NOT on the
'Zestimate'), I continued. "As your property appraised 'at value,' I suspect you'd have NO grounds to go back and
renegotiate the price now, regardless of what Zillow says."
Are you catching my theme here?
Listen, I'm not dissing Zillow - the site's impressive and its forever changed the landscape of Real Estate (see what I did
there?), but if you're looking to Zillow to quantify what the "value" of any home is to you - may I respectfully state that you are looking in the wrong place. (Where's a mirror when you need one?)
So whether a market is up, down or somewhere in between, ask yourself the following questions:
Finally, even if the Seller doesn't want to work with a Realtor, as a Buyer, you may absolutely decide to hire your own, if
for no other reason than to steer you cleanly and clearly through the mind field that real estate transactions typically lie
within. While a lawyer can comfortably handle the paperwork (In fact, it took MANY of them to create the California
Residential Purchase Agreement), it's unlikely that a Real Estate attorney is going to know the market as intimately as your
local Real Estate area specialist does (that's moi!). Moreover, expecting a lawyer to advocate for both parties IS a serious
mistake; that's not how lawyers are trained. (I know, I married one.)
Because, if you don't understand your rights (and why should you? Real Estate transactions come along once a decade), I wouldn't expect the other party's lawyer to politely point them out for your consideration. And what's more, if you're not
properly represented, chances are you'll miss some serious issues that may cost you far more than any perceived gain.
Make sense - and cents? (I hope so.)
So give me a call - preferably before you've gone into contract on your neighbor's condo down the hall, no matter how
great . . . seriously. We'll even talk "value."
How can I help you?
Check out my Instagram at: piedmontrealtorgirl
Julie Gardner, has been writing The Perspective for 12 years and has published more than 500 essays. She is also a frequent contributor to the Sound Off column in the Real Estate section of The San Francisco Chronicle.