patrick.net

What is the sq ft of the house, and what are the going price of similar houses in the neighborhood?
As for what they put in home repairs in the last 4 years, don't for get that remodeling has been a high retail mark up business for most the last 10 years.
What were the improvements, were they physical additions, or remodel and refurb jobs?
Most home improvement jobs are a lot cheaper now than 4 years ago.
You can get a marble counter now for 1,000 or so, they were at least 5 to 10K.
Labor is cheap now, especially construction labor.

What was the value of the house in in 1972 new, 1985 and 1999?

I would plot a line from three values and project what it would have been ignoring the bubble.
Then consider the work done in today's prices, and then consider the usage value from there.
What you spend is not always relate to the value it adds.

Fixing Curb appeal by adding a 5K landscape overhaul adds a lot more value, then spending 25K on a drop ceiling in the den with recessed lighting.

T'nounce has much more experience than I do and much more practical knowledge. I just wanted to offer what I've noticed on Zillow: they refer to public records and use their proprietary algorithms, but they are subject to the "garbage in garbage out" principle. For instance, my house is listed with 2 extra bedrooms (don't I WISH I had 5 bedrooms!!!) and two other houses on the street are listed with 5 beds, but one is the 5-bed plan and the other is a 4-bed home with a 1-bed mother-in-law unit out back. I think the values of imaginary bedrooms vs. a real bedroom vs. a possible rental unit should be very different, but we're all lumped in pretty much the same.

Interestingly, despite fairly uniform Zestimates of ~$250k in the neighborhood, a much nicer/newer/bigger house than mine has been sitting forlornly at $210k with no takers since January. (At least 4 homes are bank owned and just sitting vacant, not for sale, not rented, just sitting.) I'm inclined to believe Zillow needs a lot of improvement before you can really rely on it.

Answer to the original thread: they are total junk. Worthless generalized information that seems to make "experts" out of amateur real estate appraisers. A prime example that the internet, in many ways, is like junk fast food when it comes to knowledge.

I forgot to mention, house is about 1760 sq feet. It was a complete remodel. Floors, walls, lighting & fans, electrical, bathrooms, master bedroom, kitchen, new roof, HVAC, added an extra garage space. Originally the house was around 1450 sq/ft. They did a nice job on the remodel too, lots of nice details, new windows all the way around, etc. The yard needs a little work but it's not bad and it has automatic irrigation built in with good solid fences, etc. It was not a cheap remodel, that's for sure.

I don't really expect that the improvements increase the value that much. And this deal may fall through anyway, we're not sure yet but it would be nice to get a sense of what we should expect to offer on a house in the future. From what I can tell, the best way to do that is to go by what houses are selling for in the area right now. The problem is most of the houses that are selling are foreclosures, so it's hard to gauge exactly what the market will bear.

The impression I get is that, for the most part, the online estimators only give you a rough ballpark number only and even then they can be way off.

Nomograph says

RayAmerica says

the internet, in many ways, is like junk fast food when it comes to knowledge.

Kinda like AM talk radio. Care to SuperSize that, RayRay?
a4adam says

My wife and I bid on a short sale in Vacaville, CA.

Don’t waste your time on short sales. There are so many REO’s in that area that you should focus on them or regular, well priced sales.

That is the problem really. All the REOs we've looked at needed LOTS of work—more than we wanted to do. And in the area we want to buy, regular sales have been few and far between. The only houses we've seen that we liked were short sales. It wasn't by design that we chose a short sale. Regardless, this is the last short sale we bid on. I would rather continue to rent than bid on another short sale.

a4adam says

I forgot to mention, house is about 1760 sq feet. It was a complete remodel. Floors, walls, lighting & fans, electrical, bathrooms, master bedroom, kitchen, new roof, HVAC, added an extra garage space. Originally the house was around 1450 sq/ft. They did a nice job on the remodel too, lots of nice details, new windows all the way around, etc. The yard needs a little work but it’s not bad and it has automatic irrigation built in with good solid fences, etc. It was not a cheap remodel, that’s for sure.
I don’t really expect that the improvements increase the value that much. And this deal may fall through anyway, we’re not sure yet but it would be nice to get a sense of what we should expect to offer on a house in the future. From what I can tell, the best way to do that is to go by what houses are selling for in the area right now. The problem is most of the houses that are selling are foreclosures, so it’s hard to gauge exactly what the market will bear.
The impression I get is that, for the most part, the online estimators only give you a rough ballpark number only and even then they can be way off.

My theory is they dont have a way to determine what the price should be with so many REOs on the market. One REO might sell for 150,000 and another on the same block can sell for 250,000. And yet a regular sale is 350,000 on the same block. The one selling for 150,000 is in a bidding war, the one for 250,000 is a hunk of junk and the one for 350,000 is in great shape. I guess the only thing you can do is go look, there are alot of proprties that look sweet online and then you go look and find a termite dump. To me a termite dump for 250,000 has way less value than a 350,000 nice house but some others welcome the cheap price and can make all the repairs

To a first approximation, Maintenance on your home *maintains* the value. It doesn't add. "Maintenance" comes from the word "maintain".

If someone spends $100 on new paint and such, it won't increase the value of the house, it just will keep the value of the house from falling because of its poor condition. So a new roof doesn't necessarily increase the value of the house, it just maintains the old value. (Assuming it is of equal quality to the original.)

That is why you really can't take statements like, "We just put $100,000 into this house." as meaning that the house appreciated $100k. It is in better condition, and therefore should sell for more than a house in poor condition. But money in might only bring it up to average condition.

Just something to keep in mind.

Short answer is 'no', Zillow and the like don't give you good information. There are two kinds of valid value appraisals -

1) The county assessor. However, people don't seem to understand that they calculate TAX value not MARKET value, although in CA with the ridiculousness of Prop 13, those two are roughly equal right around time of purchase. After that, they potentially diverge.

2) "Fee appraisers", which are the people you/the banks pay when you buy a house, to determine what you can borrow. I can tell you from experience they pretty much match the offered purchase price (what the buyer offered) in many cases - although you may have seen news recently especially in FLA where RE agents are complaining they are not matching market value (i.e. not just rubber stamping sales prices).

The online stuff and their 'proprietary algorithms' are really nothing new to professional appraisers, and I believe they are also suspect. I can tell you from first hand experience that tax assessors in most states already apply varying degrees of sophisticated 'algorithms' and have for many years. These involve varying numbers of characteristics (# bdrms, # baths, construction materials, age, quality of construction, lot size, etc etc.) and comparable sales. I have been at conferences where they have presented quite complicated methods of calculation (think math PhD's presenting m'more accurate valuation algorithms) but the old school appraisers will tell you more sophisticated equations don't in practice come out with a more accurate result. There is often or almost always some judgement on the part of the appraiser especially with atypical properties. Although in many States, the assessors do 'mass appraisal' which means it is nothing BUT the equation and no real judgement comes into play, that of course is again for TAX assessment, not MARKET assessment.

The truth is a house is worth what someone will pay. Calculating online can be useful IF they use something like the tried and true tax assessment equations plus comps, but it is only one data point. For example I would never take a Zillow report to a seller and say, "see, it's only worth this". As a seller I would laugh at you. There is no silver bullet, values change day to day based on market forces that cannot be fully calcuated. My advice is look around the area A LOT and look at what you can get for similar price - then make your offer accordingly.

mersenne says

That is why you really can’t take statements like, “We just put $100,000 into this house.” as meaning that the house appreciated $100k. It is in better condition, and therefore should sell for more than a house in poor condition. But money in might only bring it up to average condition.

It depends. If you're making repairs or replacing appliances with ones of equal quality, than you're not necessarily increasing the value of the house. If you're expanding (i.e. finishing the basement to add a family room) or upgrading the quality of the appliances/fixtures/cabinets, you will increase the value but not on a direct 1:1 ratio.

Zillow is out-of-whack, but closer than it used to be.
Get a property profile from a title company, it usually tells ya about the house and may have some comps. But it's a start, then you can research nearby sales to see what the value may be. But I agree with this statement 100%:

pkowen says

The truth is a house is worth what someone will pay

pkowen says

My advice is look around the area A LOT and look at what you can get for similar price - then make your offer accordingly.

Thanks for the info, this pretty much sums up my observations as well.

Too bad the short sale process is so jacked up, it's almost impossible to buy a house this way. The wife and I have decided if this one falls through, we'll probably wait until next year sometime and try again.

a4adam says

Too bad the short sale process is so jacked up, it’s almost impossible to buy a house this way. The wife and I have decided if this one falls through, we’ll probably wait until next year sometime and try again.

I agree a short sale is a problem to start with but if you got time it's possible make an offer. There is gonna be loan issues and multiple offers to screw it up for months.

Value is best determined by comparibles on the same street or block. Thats the only way you can price it.

The only thing I use Zillow for is to find out how many bedrooms and bathrooms the house has since that information was taken from the county records. I can't count the number of times I have showed up at an "open house" dog and pony shows only to walk around and see that there are 4 bedrooms and 3 bathrooms, but the county records on Zillow say that it's only a 3/2.......I confront the used house salesperson running the open house and tell them that this extra bedroom and bathroom are not permitted so they can't advertise it as such unless that is disclosed and an appraiser will never add that to the value of the house. Of course after I bring it to their attention they admit to this.......if there is no permit, it didn't happen and so that extra square footage and bathroom means nothing. I wouldn't touch a place with unpermitted bedrooms and bathrooms.

Nomograph says

Kinda like AM talk radio. Care to SuperSize that, RayRay?

It never ceases to amaze me how you seem to know so much about me. You've accused me in the past of being an avid watcher of Glenn Beck from whom I get all my talking points. After I pointed out to you the fact that I don't even own an idiot box and that I have never even seen Beck on TV, you at least backed off on that one. Now you're at it again. You assume I'm an avid AM talk radio junkie. This is typical behavior of the left. They compartmentalize everyone that disagrees with them into stereotypical little pigeon holes. In this case, because I am a conservative, I "MUST" be getting my ideas from AM talk radio. Wrong again. But if it makes you feel better, or superior, to think that all conservatives are stupid robots that have no ability to properly analyze an issue without being programmed by some talk show host, feel free. Fortunately for you this is still a free country where not only is ignorance allowed, it's celebrated, as you obviously could provide ample personal testimony and often do on this site.

a4adam ... short sales are a miserable way to go that should be avoided if possible. Typically, short sales take up to 6 months to complete. Your offer can be superseded by a subsequent offer at any time, or it can be turned down without even a counter offer after you’ve wasted about 3 months, etc.

I've purchased numerous properties over the years (bought my first when I turned 21) and have a lot of experience with rehabs, rentals, etc. On any property that you might be interested in that needs work, make sure you visit the property at least twice and take extensive notes on what needs to be done. Get advice from people you know and trust. Don't get caught up in the emotion of it but approach it from a business perspective. Take your list to the local box store and price out materials. On work you can't do yourself, get 3 estimates. Also, there are almost always a few surprises that were latent and you could not have known about. Even General Home Inspectors often miss these. Once you add up all the expenses, you will probably be amazed at how fast it all adds up, but at least you'll be able to make a wise decision. Pay particular attention to the foundation, roof (layers, any bowing, sags, etc.), HVAC, plumbing and electrical, siding & windows. Look for adequate ventilation and any signs of mold or mildew particularly in the attic area. Also, check out the lay of the land for proper drainage, etc. TALK TO THE NEIGHBORS and try to find out everything you can about the subject property, neighborhood, etc. Hope this helps.

All estimators are junk.

No one can predict the future value.

No, but they can estimate current value. :)