Thursday, September 12, 2013

Revisiting Zillow

The Brevard County Property Appraiser is giving some property owners in Cocoa Beach a huge discount on their property tax. Yesterday I began one of my periodic checks of Zillow and the Property Appraiser to gauge the accuracy of their estimated market values compared to actual selling prices of recently sold Cocoa Beach properties. In past exercises both Zillow and the PA were wildly off in their estimates. This time around Zillow performed better but the Property Appraiser was still way off.

First Zillow. To start my comparison I printed the first page of recently recorded condo sales over $50,000 in Cocoa Beach from the Property Appraiser's site. Of those 25 sales, I chose not to include ten because of type of transfer or suspicious prices. I then searched Zillow for those 15 remaining sales and was able to find ten. Of those ten, Zillow's estimated value was within 13% of selling price on the date of the sale for all. That's much better than their performance when I checked in October of last year. Selling prices of four properties on last year's list were from 20% to 99% higher than the Zestimate.

Does the improved accuracy make Zillow a useful tool for buyers or sellers? Not really. Of the ten recent sales, six sold for more than the Zestimate and four for less. A buyer or seller looking at the Zestimate has no way of knowing where it lands within the deviation. Our list of ten included one that had an estimated value 13% higher than selling price and one that was 17% below actual selling price. To be fair, property sellers' guesses of fair value are usually worse than Zillow but at least they are consistently on the high side.

Now to the Property Appraiser and the great deals that office is giving property owners. Of the 15 recent sales that I used, the PA's market value averaged just 73% of the selling price with a couple under 60%. Even some non-homesteaded owners were enjoying tax discounts in the year of sale of as much as $2500. There is a possibility that some buyers, depending on date of closing, may be able to lock in an "assessed value" at the highly discounted number. If they do and homestead the property, the Property Appraiser will be limited to annual increases of value of 3% or less. Homesteaded properties in Florida can only have their "assessed value" increase by the lower of 3% or the CPI rate for the previous year. In the last ten years the CPI has exceeded 3% only four times. The PA's approach with market value according to their mandate is to estimate "the most probable price which the property should bring in a competitive and open market under all conditions requisite to a fair sale, with the buyer and seller each acting prudently and knowledgeably, and neither being under duress to act, and represents the estimated net proceeds to the seller." This means the "market value" should be a number reflecting what a seller will walk away with after selling expenses not including paying off any debt.

This discrepancy in valuations will likely correct over the next couple of years. At any rate, for now, Hooray for our side and for owners who are benefiting from the glitch. There may be a few owners of under-valued second home properties who are ready to move and in a position to transfer their homestead and take advantage of the situation.

"A man who says he is willing to meet you halfway is usually a poor judge of distance." ____Unknown