Real Estate Mysteries

My wife and I are planning to exit California in about four more years. This is our plan but we know that it is contingent on a few different things, some of which are out of our control. At this point, we are just watching housing prices in our neighborhood. Watching housing prices is like watching the value of the stocks in your long-term investment portfolio. The ups and downs are about enough to get you seasick if you take your eyes off the horizon.

Flip House

Sitting on the sidelines and watching real estate prices is not a sport for the weak. The problem with watching real estate prices on Zillow and other places is that much of the numbers are nonsense. The posterchild for this is the “flip house” around the corner from me.

About two years ago, Zillow said a house around the corner from us was worth about $450K. (Note: Zillow does not know that said house sat empty for the previous two years and treated it as comparable to others occupied homes in the neighborhood.)

Blog dog on patrol

One day, I was walking the “blog dog” and noticed some intense work happening at this particular house. Over the course of about two weeks, the house was renovated inside and out. The house was then staged with furniture, photographed, and put up for sale at $150K above the Zillow price. Folks, the workmanship of the flip was really sketchy (no way there were any permits pulled) but the online photos made the house look great. After one false start, the house had an offer and sold at $590K. How does a house go from abandoned and empty for two years to the highest per square foot in the neighborhood on the basis of a shoddy flip? You literally could see defects just from standing on the sidewalk. A year later, the new owners renovated the house—probably due to poor workmanship.

Other Prices

I get regular solicitations from some local realtors claiming my house is worth X, or Y, or Z but I don’t get where the numbers come from. My next door neighbor’s house was comparable to ours on Zillow but after they redid their front yard, getting rid of about half their lawn and the beautiful tree that once stood there, Zillow awarded the homeowner by boosting the home’s value by $75K in one month. I would guess they spent all of about $12K on their front yard. Again, go figure?

Zillow algorithm valuing your home

I know our place needs some work but trying to figure how to get the most bang for our dollar and avoid substandard work sometimes looks like a daunting task. Nevertheless, it’s a chore that will probably begin picking up momentum in 2020. As we get closer to our departure date, I think we need to consult a real estate oracle to help us get the most bang for our home improvement bucks.

Lastly, per Zillow, today the flip house is now $42K above the purchase price.