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Lifestyles of the Rich and Zesty
Posted by Marlow Harris under Real Estate
[5] Comments
Zillow announced an upgrade to their site a few days ago, one which increases the number of homes with Zestimates and also significantly changes their models and algorithms to attempt to give a better ultimate home value.
The new algorithm takes into account owner and agent-edited facts that have been made by their community of users.
Since everyone’s daughter is the prettiest girl at the prom, I’m sure it will be difficult for some homeowners to hold themselves back from gushing all over themselves and their granite countertops.
And what effect could this have on a home’s valuation? Artificially pumping up the value is one side-effect. And altering the tax structure of a particular home, or even a neighborhood is another.
In our county, the tax assessor’s office estimates a value based on neighborhood metrics and past sales. Most assessors have never set foot on to the property.
“Posting home-improvement information on Zillow would effectively let the assessor in your front door to discover such goodies like granite countertops, premium appliances, marble baths and other improvement” says David Ruble, a principal at Olympic Consulting Group in an article by John Cook in “New Zillow service triggers a tax alarm: Aid to valuations — and assessors?”
King County Assessor Scott Noble has indicated that his office may employ the Zillow service and could be used as a tool to make sure that homeowners are paying their “fair share.”
“If the particular individual is doing a major remodel off the books, sure we will utilize every tool to pick up those changes because it is only fair to spread the burden among all,” he said.
We had an interesting case here several years ago, way before Zillow, and it involved a very high-profile real estate developer who had appeared on the TV show “Lifestyles of the Rich and Famous” (See $25K In Taxes? On This Dump? by Jean Godden, Seattle Times).
The owner, being interviewed by the shows host, showed off the handsome 17th-floor penthouse atop Market Place Tower, 2033 First Ave. Included on the program was footage of a spectacular 50-foot pool that cascades over the building. Asked by “Lifestyles” what he’d take for the place with its lofty ceilings, marble floors and unobstructed views of the city and Puget Sound, the owner mentioned a price of $4.75 million.
Nothing wrong with that, however, those same owners had just filed an appeal with the King County Board of Equalization to lower the valuation of the condo. The Assessor, looking at comparable sales, figured the place was worth $2,358,400. The owner, in his appeal to the County Assessor, maintained it was only worth $839,000.
But the Assessor’s office obtained a tape of the “Lifestyles” program and argued against lowering the assessment. Case closed.
It’s only common sense to assume that the local taxing authority will check Zillow prior to any tax appeal and prudent homeowners will take pains to make sure their home looks as homely as possible, perhaps even altering facts to make their home appear less valuable.
This is perhaps the opposite effect of what most people would think would happen, but it’s a definite possibility.
My one problem with the ability of the owners to “correct” the data on their home and thereby influence the Zestimate is that human nature is to embellish. Also, there is no real mechanism to correct for the negative features (“We enjoy the buzz of the overhead power transformer”). Therefore, I tend to disagree and think Zestimates will most likely continue to err on the high side.
Thanks for the informative post.
My tax valuation for 2007 went up by 10%, so I’m going right in to Zillow and removing those photos, taking out the “Make Me Move” number I put in there and editing the other comments I made. Who needs the grief and the higher tax valuation?
Until you’re ready to sell, then those pictures get retaken professionally with backlighting and go right back on Zillow? I can’t imagine the assessor will use Zillow for anything more than as a tool to use in the rare cases when the board of equalization hears a homeowner’s tax appeal (like the “Lifestyles” VHS tape was used in ’94 in Jean Godden’s article). It just wouldn’t be scalable for them to do otherwise. Besides, what’s the problem with the county having accurate data — regardless of its source — on the homes that comprise tax base? I like the idea of equitable taxation.
Since Zillow is going to allow home owners to enter facts such as home price, do we think that oenwers will be tempted to imflate the price of their homes? What I am saying is that they feel so good living in their homes that owners might feel that the price showed in Zillow does not reflect what they believe the values of their homes is.