# Unreasonable or artificially-inflated house prices? **URL:** \ **Category:** In My Humble Opinion\ **Created:** [November 6, 2016, 11:00pm UTC](https://boards.straightdope.com/t/unreasonable-or-artificially-inflated-house-prices/770913 "2016-11-06T23:00:53Z")\ **Posts on this page:** 20\ **Page:** 2
**Author:** ![BwanaBob](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/bwanabob/32/2985_2.png) [@BwanaBob](https://boards.straightdope.com/u/BwanaBob)\ **Post date:** [November 7, 2016, 6:09pm UTC](https://boards.straightdope.com/t/unreasonable-or-artificially-inflated-house-prices/770913/21 "2016-11-07T18:09:48Z")
> [@Orwell](#): > > Where in the world did you get this idea? If you are talking about appraisals, you are completely mistaken. > > When preparing an appraisal, it is improper to choose and analyze sale comps without researching and considering buyer and seller motivations, time on the market, other sale factors, property condition, etc. If a house sold due to atypical buyer or seller motivation, and doesn’t represent an indication of market value, it should not be included as a comp, or if used, adjusted appropriately. And it is also improper to average the comparable sales. You reconcile the sales by applying more weight, or consideration, to the more pertinent and reliable sale indications. Any appraiser who averages the comps is not applying accepted appraisal methodology. I guess I’m not surprised. We dealt with a rather unscrupulous realtor (yes he was one and the board of realtors would do nothing for us about him). In the sizeable community in which we lived, an organization owned 8 houses similar to mine, which were used for perks in that organization. Said organization went under and dumped the 8 houses at below “market” value. We were told those house sales had to be considered when pricing/running comps. I countered with “there aren’t going to be anymore of those bargains happening, they were a fluke”, to no avail. We were also told that prospective buyers were going to have the expectation that our house should be priced much closer to the bargain rate rather than the predumping price. ---
**Author:** ![Riemann](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/riemann/32/3133_2.png) [@Riemann](https://boards.straightdope.com/u/Riemann)\ **Post date:** [November 7, 2016, 6:26pm UTC](https://boards.straightdope.com/t/unreasonable-or-artificially-inflated-house-prices/770913/22 "2016-11-07T18:26:46Z")
> [@BwanaBob](#): > > I guess I’m not surprised. We dealt with a rather unscrupulous realtor (yes he was one and the board of realtors would do nothing for us about him). In the sizeable community in which we lived, an organization owned 8 houses similar to mine, which were used for perks in that organization. Said organization went under and dumped the 8 houses at below “market” value. We were told those house sales had to be considered when pricing/running comps. I countered with “there aren’t going to be anymore of those bargains happening, they were a fluke”, to no avail. We were also told that prospective buyers were going to have the expectation that our house should be priced much closer to the bargain rate rather than the predumping price. Well, the value of your house is not _determined_ by what the appraiser says, the appraiser is just making an estimate. The value is determined by what the market will bear - what people are prepared to pay. You are under no obligation to list at the appraiser’s price. You can list it for what _you_ think it’s worth. Whether you sell it will depend on how potential buyers decide to weigh the 8 sales. If I were a buyer in that situation, it would depend on the state of the overall market. If the market’s hot and trading in high volume, I might ignore them. In a slow market they create an overhang of supply in that area that may hold prices down for some time. If you are prepared to wait a few years, you will probably get the price you want. If you want to sell quickly, you’ll have to cut your price. In short, you may disagree with the appraiser’s opinion, but appraisers don’t set the market, they estimate it. Aggregate supply and demand is what determines prices. ---
**Author:** ![Orwell](https://avatars.discourse-cdn.com/v4/letter/o/dfb087/32.png) [@Orwell](https://boards.straightdope.com/u/Orwell)\ **Post date:** [November 7, 2016, 7:01pm UTC](https://boards.straightdope.com/t/unreasonable-or-artificially-inflated-house-prices/770913/23 "2016-11-07T19:01:51Z")
> [@BwanaBob](#): > > I guess I’m not surprised. We dealt with a rather unscrupulous realtor (yes he was one and the board of realtors would do nothing for us about him). In the sizeable community in which we lived, an organization owned 8 houses similar to mine, which were used for perks in that organization. Said organization went under and dumped the 8 houses at below “market” value. We were told those house sales had to be considered when pricing/running comps. I countered with “there aren’t going to be anymore of those bargains happening, they were a fluke”, to no avail. We were also told that prospective buyers were going to have the expectation that our house should be priced much closer to the bargain rate rather than the predumping price. I’m a little confused. Are you talking about a real estate agent (realtor), and not an appraiser? Were you listing a house, or having a house appraised? I know in some markets, the same person can act as an appraiser and an agent, but they are really two different activities, with different procedures and regulations, and different oversight boards/commissions. ---
**Author:** ![Voyager](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/voyager/32/133_2.png) [@Voyager](https://boards.straightdope.com/u/Voyager)\ **Post date:** [November 7, 2016, 7:08pm UTC](https://boards.straightdope.com/t/unreasonable-or-artificially-inflated-house-prices/770913/24 "2016-11-07T19:08:58Z")
> [@BwanaBob](#): > > I guess I’m not surprised. We dealt with a rather unscrupulous realtor (yes he was one and the board of realtors would do nothing for us about him). In the sizeable community in which we lived, an organization owned 8 houses similar to mine, which were used for perks in that organization. Said organization went under and dumped the 8 houses at below “market” value. We were told those house sales had to be considered when pricing/running comps. I countered with “there aren’t going to be anymore of those bargains happening, they were a fluke”, to no avail. We were also told that prospective buyers were going to have the expectation that our house should be priced much closer to the bargain rate rather than the predumping price. The same kind of thing happened during the crash. People under water dumped their houses for below market price, which dragged down other houses. If you are looking to buy in an area, and saw that a lot of houses sold for a low price, wouldn’t you try to get the price of a new house on the market lowered also? Might not be fair, but I bet it would cause some downward pressure anyhow. ---
**Author:** ![Orwell](https://avatars.discourse-cdn.com/v4/letter/o/dfb087/32.png) [@Orwell](https://boards.straightdope.com/u/Orwell)\ **Post date:** [November 7, 2016, 7:17pm UTC](https://boards.straightdope.com/t/unreasonable-or-artificially-inflated-house-prices/770913/25 "2016-11-07T19:17:23Z")
> [@Voyager](#): > > The same kind of thing happened during the crash. People under water dumped their houses for below market price, which dragged down other houses. If you are looking to buy in an area, and saw that a lot of houses sold for a low price, wouldn’t you try to get the price of a new house on the market lowered also? Might not be fair, but I bet it would cause some downward pressure anyhow. Yeah, it almost certainly would, at least temporarily. But, over a slightly longer period, housing markets tend to reach equilibrium, with sellers naturally trying to get the highest price, and buyers shopping around and negotiating for lower prices. Listing agents have varying strategies of obtaining listings. Some will allow sellers to over-price a listing, hoping to either attract someone who pays too much, or figuring on lowering the listing price down the road. Others will encourage sellers to be realistic from the start, where a sale will occur in a normal amount of time. Still others will allow a seller to list too low, hoping for a very quick sale with little work or time involved. ---
**Author:** ![Musicat](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/musicat/32/20189_2.png) [@Musicat](https://boards.straightdope.com/u/Musicat)\ **Post date:** [November 7, 2016, 7:39pm UTC](https://boards.straightdope.com/t/unreasonable-or-artificially-inflated-house-prices/770913/26 "2016-11-07T19:39:32Z")
In an area where house prices are about the same, there is a large number of properties/sales to draw from, and the geographical area is compact, Zillow should be a valid yardstick. Taking 100 sales in a $95K-$115K range, adding and dividing by the number will give you a useful mathematical average. Where this falls down is areas like mine, where one ZIP code encompasses 40 square miles, including luxury waterfront homes ($1-2Mil) and $50K teardowns. And there aren’t 100 sales in 5 years. Add a $1Mil home to a $100K home, and the average price is about $550K. This is about as useful as, they say, tits on a bull. It reminds me of Darrell Huff’s _How to lie with statistics_ book. There is a sign advertising 50% rabbitburgers. When asked how he can sell them so cheap, the proprietor says, “Well, I mix horsemeat in, too, but it’s equal amounts. One horse, one rabbit.” ---
**Author:** ![Nawth\_Chucka](https://avatars.discourse-cdn.com/v4/letter/n/c57346/32.png) [@Nawth\_Chucka](https://boards.straightdope.com/u/Nawth_Chucka)\ **Post date:** [November 7, 2016, 7:45pm UTC](https://boards.straightdope.com/t/unreasonable-or-artificially-inflated-house-prices/770913/27 "2016-11-07T19:45:59Z")
> [@Musicat](#): > > In an area where house prices are about the same, there is a large number of properties/sales to draw from, and the geographical area is compact, Zillow should be a valid yardstick. > > Taking 100 sales in a $95K-$115K range, adding and dividing by the number will give you a useful mathematical average. > > Where this falls down is areas like mine, where one ZIP code encompasses 40 square miles, including luxury waterfront homes ($1-2Mil) and $50K teardowns. And there aren’t 100 sales in 5 years. Add a $1Mil home to a $100K home, and the average price is about $550K. This is about as useful as, they say, tits on a bull. > > It reminds me of Darrell Huff’s _How to lie with statistics_ book. There is a sign advertising 50% rabbitburgers. When asked how he can sell them so cheap, the proprietor says, “Well, I mix horsemeat in, too, but it’s equal amounts. One horse, one rabbit.” It’s similar here in 84075, there are $500K homes newly-built as well as sinky little former farm houses; mine falls somewhere in between, being built in 1971. And a frustrating problem in that there’s 4 sales in less than a year of 4 houses next to each other (one of which is for sale again in under 2 years), they were all listed much higher than I understand mine is worth and none of their sale prices are showing in the public record. Was there a divorce plague on that block? I drive past them every day, they’re nicely kept, not obvious foreclosures. They should be a great source of info but offer only mystery. ---
**Author:** ![usedtobe](https://avatars.discourse-cdn.com/v4/letter/u/ec9cab/32.png) [@usedtobe](https://boards.straightdope.com/u/usedtobe)\ **Post date:** [November 8, 2016, 12:16am UTC](https://boards.straightdope.com/t/unreasonable-or-artificially-inflated-house-prices/770913/28 "2016-11-08T00:16:06Z")
Did you zoom in enough that Zillow showed its estimates of each house’s worth? You do not need to do any calculation to get an estimate - Zillow does one all by itself. ---
**Author:** ![Musicat](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/musicat/32/20189_2.png) [@Musicat](https://boards.straightdope.com/u/Musicat)\ **Post date:** [November 8, 2016, 12:51am UTC](https://boards.straightdope.com/t/unreasonable-or-artificially-inflated-house-prices/770913/29 "2016-11-08T00:51:15Z")
> [@usedtobe](#): > > Did you zoom in enough that Zillow showed its estimates of each house’s worth? > > You do not need to do any calculation to get an estimate - Zillow does one all by itself. Zillow’s estimates are based on ZIP codes. This means the value estimates in my ZIP code are off by 200-300% for low end properties (too high), and 200-300% off (too low) for shorefront mansions. In other words, worthless and wildly misleading for 90% of all properties. I’m sure everything would be OK if ZIP code boundaries were drawn by values appropriate to the real estate market, but they are drawn by the postal system, which has no concern for such niceties and never expected them to be used that way. ---
**Author:** ![Eva\_Luna](https://avatars.discourse-cdn.com/v4/letter/e/e495f1/32.png) [@Eva\_Luna](https://boards.straightdope.com/u/Eva_Luna)\ **Post date:** [November 8, 2016, 1:58am UTC](https://boards.straightdope.com/t/unreasonable-or-artificially-inflated-house-prices/770913/30 "2016-11-08T01:58:03Z")
Zillow lists our unit as the garden unit downstairs from us, which has one fewer bathroom (no master bath) and probably 20% less square footage and no parking spot. And it’s a garden unit which was last purchased as a short sale. I requested that the info be corrected, and more than a year later it still hasn’t happened. ---
**Author:** ![Musicat](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/musicat/32/20189_2.png) [@Musicat](https://boards.straightdope.com/u/Musicat)\ **Post date:** [November 8, 2016, 3:14am UTC](https://boards.straightdope.com/t/unreasonable-or-artificially-inflated-house-prices/770913/31 "2016-11-08T03:14:15Z")
> [@Eva\_Luna](#): > > Zillow lists our unit as the garden unit downstairs from us, which has one fewer bathroom (no master bath) and probably 20% less square footage and no parking spot. And it’s a garden unit which was last purchased as a short sale. > > I requested that the info be corrected, and more than a year later it still hasn’t happened. Zillow seems to be insulated from any attempts for correction, even if serious. I had a vacant land property listed not long ago, and they mixed it with a FSBO waterfront home nearby, giving wildly inaccurate numbers for both sale prices and both addresses. I got many inquiries, most of which (wisely) doubted the Zillow price. I was unable to communicate with Zillow about it, making two property owners upset. There was no way it could be fixed, apparently, since it is entirely automated. ---
**Author:** ![quimper](https://avatars.discourse-cdn.com/v4/letter/q/7c8e57/32.png) [@quimper](https://boards.straightdope.com/u/quimper)\ **Post date:** [November 8, 2016, 10:06pm UTC](https://boards.straightdope.com/t/unreasonable-or-artificially-inflated-house-prices/770913/32 "2016-11-08T22:06:28Z")
> [@Eva\_Luna](#): > > Zillow lists our unit as the garden unit downstairs from us, which has one fewer bathroom (no master bath) and probably 20% less square footage and no parking spot. And it’s a garden unit which was last purchased as a short sale. > > I requested that the info be corrected, and more than a year later it still hasn’t happened. You might have to keep reporting it. I also seem to recall a ‘chat now’ button that could be useful. It took two years for Zillow to finally correct my listing (price was off by an order of magnitude, leading to a fuckton of ‘sell house NOW’ spam and cold calls) and not surprisingly, the flood of realtor spam slowed to nearly nothing. ---
**Author:** ![elfkin477](https://avatars.discourse-cdn.com/v4/letter/e/a9a28c/32.png) [@elfkin477](https://boards.straightdope.com/u/elfkin477)\ **Post date:** [November 9, 2016, 5:22am UTC](https://boards.straightdope.com/t/unreasonable-or-artificially-inflated-house-prices/770913/33 "2016-11-09T05:22:42Z")
> [@TimeWinder](#): > > The local realtors don’t set the price, the sellers do. Many, many, many sellers have an inflated idea of the value of their property, and ignore the realtor’s advice. After a while, they realize it’s too high and come down. Realtors are supposed to try to rein in your dumb ideas so they and you make the biggest profit possible. That’s why they show sellers comps etc. ---
**Author:** ![Riemann](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/riemann/32/3133_2.png) [@Riemann](https://boards.straightdope.com/u/Riemann)\ **Post date:** [November 9, 2016, 5:48am UTC](https://boards.straightdope.com/t/unreasonable-or-artificially-inflated-house-prices/770913/34 "2016-11-09T05:48:10Z")
> [@elfkin477](#): > > Realtors are supposed to try to rein in your dumb ideas so they and you make the biggest profit possible. That’s why they show sellers comps etc. The direct financial incentive for realtors is to make your house sell, at any price, as quickly as possible, not to make you the biggest profit possible. ---
**Author:** ![Nawth\_Chucka](https://avatars.discourse-cdn.com/v4/letter/n/c57346/32.png) [@Nawth\_Chucka](https://boards.straightdope.com/u/Nawth_Chucka)\ **Post date:** [November 10, 2016, 2:45am UTC](https://boards.straightdope.com/t/unreasonable-or-artificially-inflated-house-prices/770913/35 "2016-11-10T02:45:40Z")
> [@elfkin477](#): > > Realtors are supposed to try to rein in your dumb ideas so they and you make the biggest profit possible. That’s why they show sellers comps etc. > [@Riemann](#): > > The direct financial incentive for realtors is to make your house sell, at any price, as quickly as possible, not to make you the biggest profit possible. I would say both are equally correct; supposed to versus incentivized to do most quickly; the hard part is knowing which you have on your hands before you sign a contract w/ them. ---
**Author:** ![Pantastic](https://avatars.discourse-cdn.com/v4/letter/p/3bc359/32.png) [@Pantastic](https://boards.straightdope.com/u/Pantastic)\ **Post date:** [November 10, 2016, 3:15am UTC](https://boards.straightdope.com/t/unreasonable-or-artificially-inflated-house-prices/770913/36 "2016-11-10T03:15:15Z")
> [@Riemann](#): > > Well, the value of your house is not _determined_ by what the appraiser says, the appraiser is just making an estimate. The value is determined by what the market will bear - what people are prepared to pay. You are under no obligation to list at the appraiser’s price. You can list it for what _you_ think it’s worth. Whether you sell it will depend on how potential buyers decide to weigh the 8 sales. To a degree the appraiser does determine the sell value of the house, at least if you’re using a mortgage in my state. The bank is required to go to a pool of appraisers and one is picked at random, and the bank isn’t allowed to write a mortgage based on more than the appraiser thinks the house is worth. It means that the appraised value is a cap on how much of a mortgage a buyer can get, and in my experience most buyers don’t have a few thousand dollars to spare to cover a gap after making a down payment, closing costs, and moving costs. It’s not hard and fast, but if you’re paying an actual appraiser (not just getting an estimate from an agent) you will likely have a really hard time selling for more than he says. ---
**Author:** ![Tastes\_of\_Chocolate](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/tastes_of_chocolate/32/3232_2.png) [@Tastes\_of\_Chocolate](https://boards.straightdope.com/u/Tastes_of_Chocolate)\ **Post date:** [November 10, 2016, 4:53am UTC](https://boards.straightdope.com/t/unreasonable-or-artificially-inflated-house-prices/770913/37 "2016-11-10T04:53:51Z")
A couple of posts have mentioned correcting Zillow’s description of their house. Unless you are about to sell it, is there any reason at all to correct Zillow?? ---
**Author:** ![Caffeine.addict](https://avatars.discourse-cdn.com/v4/letter/c/f475e1/32.png) [@Caffeine.addict](https://boards.straightdope.com/u/Caffeine.addict)\ **Post date:** [November 10, 2016, 2:28pm UTC](https://boards.straightdope.com/t/unreasonable-or-artificially-inflated-house-prices/770913/38 "2016-11-10T14:28:33Z")
> [@Nawth\_Chucka](#): > > I would say both are equally correct; supposed to versus incentivized to do most quickly; the hard part is knowing which you have on your hands before you sign a contract w/ them. A good realtor should pull a lot of comps and have them ready for you to review when you meet. When y wife and I sold our house in 2014, we picked a realtor who sold primarily in our immediate area. He came to our initial meeting with a few pages of comps which matched up to my informal research. We went over the comps and discussed things for a while before coming up with a price. Our house sold pretty quickly after that which wasn’t uncommon in our neighborhood assuming things were priced right. ---
**Author:** ![Orwell](https://avatars.discourse-cdn.com/v4/letter/o/dfb087/32.png) [@Orwell](https://boards.straightdope.com/u/Orwell)\ **Post date:** [November 10, 2016, 3:03pm UTC](https://boards.straightdope.com/t/unreasonable-or-artificially-inflated-house-prices/770913/39 "2016-11-10T15:03:53Z")
> [@Caffeine.addict](#): > > A good realtor should pull a lot of comps and have them ready for you to review when you meet. When y wife and I sold our house in 2014, we picked a realtor who sold primarily in our immediate area. He came to our initial meeting with a few pages of comps which matched up to my informal research. We went over the comps and discussed things for a while before coming up with a price. Our house sold pretty quickly after that which wasn’t uncommon in our neighborhood assuming things were priced right. A also recommend that sellers interview three listing agents from different brokerages. Ask each to bring a market analysis, and have them explain their listing and marketing strategies, as well as their commission schedule. After you have talked to three, you should have a good handle on the market, as well as pertinent pricing and marketing periods. You should also have a feel for which agent will work best in your situation. Be upfront with each that you are talking to other agents, and don’t sign any listing agreements. Commissions are negotiable, too, at least to a degree. ---
**Author:** ![Quercus](https://avatars.discourse-cdn.com/v4/letter/q/7ab992/32.png) [@Quercus](https://boards.straightdope.com/u/Quercus)\ **Post date:** [November 10, 2016, 8:41pm UTC](https://boards.straightdope.com/t/unreasonable-or-artificially-inflated-house-prices/770913/40 "2016-11-10T20:41:12Z")
> [@Nawth\_Chucka](#): > > Admittedly, I ask this question w/ some optimism; I’d like to be rid of this house (too big for m) and to sell it for a healthy profit. But I suspect the recent listing prices are overly optimistic, even for those people w/ little connection to reality, real estate agents. > Two houses on my street, sharing my ZIP code (84075 for those who want to poke around) and roughly the same age as mine have gone on the market in the last month for nearly double the square footage price paid for my house 5 years ago. Now, the economy IS in far better shape and this city’s schools have become quite popular in those five years, I’ll grant that. > But those two houses haven’t sold and I’m afraid that if I tried to list mine at a similar price it would only end in disappointment and wasted resources. > Is it reasonable to believe those home prices are nearly realistic? > I should point out we’re a bedroom community for a local air force base, eBay, Overstockdotcom and Adobe. But Silicon Valley we are not. You might be getting ahead of yourself, here: if I understand you, the neighboring houses have been on the market for a month? I’m no expert, but being on the market for one month is maybe not enough time to conclude it’s crazy overpriced. [Previous page](https://boards.straightdope.com/t/unreasonable-or-artificially-inflated-house-prices/770913.md?page=1) [Next page](https://boards.straightdope.com/t/unreasonable-or-artificially-inflated-house-prices/770913.md?page=3)