Thank you for the comment and for the link to the fabulous blog I didn’t previously know existed! Our dilemma, of course, is that the consumers (our clients) think they carry a lot of weight.

We’ve been following this over at the UCR Sloan Center for Internet Retailing, and so far, Zillow doesn’t have a very good answer to the discrepancies.

See for yourself: http://sloan.ucr.edu/2008/03/09/why-are-zillow-zestimates-so-wrong/

Professor Donna L. Hoffman
UCR Sloan Center for Internet Retailing

Thanks for the reply. Yes, Ramona is a buyers market. But there are so many “vanity” listings (”Excuse me buyer, but Flip this house told me that kitchen remodel is worth x amount of $$ and I will recoup every penny”, [poor listing agent]).

Why buyers would not take 100K profit today (based on a strong methodology to the offer, i.e historic norms) but rather wait 12 months in the hope of bubble pricing returning is beyond me.

I think my offers are in line with the historic variables (rent vs own, standard appreciation rates, etc). I am just trying to use some principals that I think all buyers should have:
1. Stay within about 30-40% of your NET income each month for mortgae payment (with tax incentive this is about $2500 for me)
2. Offer should be based on a above average appreciation rate of 5% per year (pre-2001). Sounds like a great deal, but only for sellers that did not use their house as a ATM.

BTW……….
Here is another topic for your blog. I have been looking for a home for the past few months, researching my target areas, developing a method for offering prices and working on a short list. I also have been working on the financing front as well. I do not want to waste an agents time or effort so I am doing this work since I know what I am interested in. (Yes, I do respect an agents time and would feel guilty going on ride alongs). When my short list and price gaps get to about 70K or so I will then interview a few agents.

So what I would want from what I want in a agent is really be an agressive negotiator and handle the rest. How do buyers agents approach a situation where the house hunter has done all of teh ground work (literally has found the house) and want to hand off the rest of the process to a professional agent?

I really like your suggestion but unfortunately we don’t have the data we’d need to execute on it (i.e. all listings and REO’s.) I have passed this thread on to our statisticians - let’s see what they come up with. This is a highly unusual scenario and so it may not make sense to add this complexity to the algorithm if it’s very seldom applied. And because real sales are now competing with REO’s, they should start to inform the algorithm that prices have dropped further but in this case, Kris’ argument holds and the drop in Zestimates could lag the drop in home prices until REO’s stop making the market.

Kris -

Thanks for fishing me out. I totally agree that software can never replace a local expert when it comes to setting sales prices or deciding offers.

I think the Zestimate should start including REOs when they become a more significant fraction of the local housing market. In socal we have as many foreclosures as sales. REOs will have a strong say in prices for some time. As such, Zestimes should account for them. Perhaps a simple weighting factor on REOs, where they are weighted proportional to the fraction of homes on the market that are REO.

reo_weight = reos_for_sale/total_homes_for_sale

If all the homes are reos, then an reo gets full weight. if no homes are reo, then a new reo gets zero weight.

So, when can you have this change in?