Odd Real Estate Ad:

MLS AR6060519, Arlington County, Va.: "Location, location, location! For sale at recent appraisal price!"

Wow, you'll let me buy the house for what an appraiser you hired says it worth? Gee, thanks. (The county appraisal is over $70K less, and in many cases these appraisals are themselves inflated, because they are based on value as of last Summer, which was the top of the market in Arlington). And the listing is now three months old, and since then prices have fallen a bit in the region, including, from what I can tell, Arlington (According to data from this site, the average sell price in Arlington went down between May and July from approximately $594K to approximately $524K, with the averages going down a similar amount. That seems way too dramatic to me for two months, and I'm sure at least in part reflects a change in the mix of properties sold, but we're clearly not in an uptrend).

What would lead the listing agent to think that this is a good way of creating interest in the property?

And while we're on the subject of real estate listings, a huge percentage of them have typos or spelling errors(today I saw "closeing"). For the three percent the sellers' agents get, do you think they could run their text through a spell check? Also, lots of listings have inaccuracies or misrepresentations, ranging from misstating the square footage to claiming that a house well over a mile from the metro is "walking distance."

In case you're wondering, I'm just browsing the listings, not in the market yet.

John Jenkins (mail):
In case you're wondering, I'm just browing the listings, not in the market yet.

[D]o you think they could run their text through a spell check?

The internet is a harsh mistress.
8.18.2006 10:51am
DavidBernstein (mail):
If I were gettingi 25K for this post, you can bet I'd be using the spell check more regularly!
8.18.2006 10:53am
Professor Bernstein, I wouldn't buy in that area--Lyon Village, Lyon Park and Ashton Heights (in price order) are much, much nicer and not that much more expensive, as well as truely metro-accessable (not important for you, I realize, but extremely valuable for resale as it puts somthing of a floor under the price).
8.18.2006 10:57am
Realist Liberal (mail):
Professor Bernstein, I was shocked by some of the same things as you. My wife and I recently bought our first home (which is in the highly inflated real estate market of the Bay Area of CA). The other thing that struck me was the sheer arrogance of the real estate agents. We put a bid on one house and when they countered with incredibly unreasonable terms we said no. The seller's agent acted like we were crazy actually said "You should be honored that we are considering your bid because we could get better ones from other people."
8.18.2006 11:05am
Pete Freans (mail):
The puffing that is used to describe properties is comical. "Handy-man specials" and "Creampuffs" for example are code-words for shantytowns. And a neighborhood that's for "young professionals" is really an area that is in the early stages of gentrification (that is, pack heat and make sure there are bars in the windows).
8.18.2006 11:15am
Erin Arlinghaus:
We are trying to sell our Minneapolis duplex in a tough (for sellers) market. The first Realtor we hired made over a dozen errors in constructing our MLS entry and newspaper advertisements. The square footage was wrong. He undercounted the <b>number of bathrooms!</b> He described it as "totally remodeled" —- we'd done some work, but not that much. He described the washer/dryers as "on the main level" when in fact they were in the basement. He failed to mention features we'd asked him to highlight, like refinished maple floors and a custom stained-glass window. And finally, he TWICE listed the duplex in the "single-family home" classification in the newspaper, and failed to note it as a duplex in the open-house directory.

I chalk much of this up to incompetence (and arrogance, since in several cases he went against our specific instructions). Many of these errors made the house sound bad, rather than good. The mis-listing as a single-family home kept the intended audience (people interested in buying a rental property) from even showing up to the open houses.

We had had the foresight to include a "We are allowed to fire you" clause in the contract, but the mistake of hiring that guy probably cost us two months.
8.18.2006 11:26am
The other day I was looking for a used car, and the used car salesman has similarly silly arguments for why I should buy one of his cars. It made me wonder whether you can really trust a used car salesman!
8.18.2006 11:31am
Peter Wimsey:
I, too, am amazed at the number of typos that appear in MLS and other real estate ads. As David points out, these guys are being paid a lot of money and should at least be able to spell the one ad they write correctly. Particularly considering that the ad is basically boilerplate anyway.
8.18.2006 11:58am
NickM (mail) (www):
The "walking distance" line is puffing. In Southern California, it's common to call anything within 2 miles of the beach "walking distance".

8.18.2006 12:01pm
wph (mail):
The main curiousity here is why, "For sale at recent appraisal price" might be thought attractive. My guess would be that it's because last year, so many houses sold above the appraisal that even the seller appraiser could create with a straight face, and went above the listing price. The realtor, whose attitudes would be shaped by this recent history, must view sale at an appraisal price as a real steal - you couldn't get that a year ago, after all.

i think this shows that in many markets, there is something of an adaptive expectations effect - people expect old market conditions to exist even after the fundamental reasons for those conditions have ended. This would be especially true when those prior conditions were favorable, and psychological biases come into play that make people reject information that does not conform to their interests or prior beliefs.
8.18.2006 12:08pm
Matt Barr (mail) (www):
No professional appraiser is basing anything on anything that happened last summer.

Among the many reasons appraisers are more reliable than Zillow, assessed value and so on is that they account for trends in the market.

A couple years ago Fitch Ratings said it would discount portfolios of mortgages across the board where automated valuations were used in lieu of appraisals in certain "soft" markets because, unlike appraisers, they couldn't "see over the hill" and account for a market decline. A couple months ago they removed the "soft market" qualification and said that they would scrutinize automated valuations on a case by case basis. The point being that where the rubber meets the road, the secondary market investors, professional appraisals are rightly considered the most reliable opinions because they do account for market trends (and don't base their poinions on year-old data).

Also, what wph said.
8.18.2006 12:27pm
kimsch (mail) (www):
I've noticed some where the number of bedrooms is wrong. One house I saw, very small, approx 1000 sq feet said it had 5 bedrooms. With another home I was recently looking at, the listing agent's website said the home was 2 bedroom (which seemed wrong to me). When I looked it up at after having ascertained the MLS number from the listing agent's site, I found that the house was listed there with a more reasonable 4 bedrooms.
8.18.2006 12:27pm
Matt Barr (mail) (www):
By "poinions" you can tell I'm not getting 3 percent for these comments.
8.18.2006 12:28pm
Hattio (mail):
Any economic theorists out there who could explain when the bursting bubble effect will come to rural areas where the homes have increased in value, but not at the rates hot markets did? I live in an area that has experienced price increases like everywhere else, but not as severe or as rapid. A major employer in the area (200 jobs in an area of 20 to 25,000 people) has announced it will be closing its doors soon....and prices are still rising. I keep thinking I'll wait longer to buy. But who knows?
8.18.2006 12:30pm
AnonWanna-Be Buyer (mail):
David --

Please keep up the great posts about the housing market in DC. And let me know when you're in the market: you've become my bellwether for deciding when to jump in myself!
8.18.2006 12:31pm
DavidBernstein (mail):
Anon, my guess at this point is that Fall 2007 will be an excellent time to start looking. However, I am under what I will call "family pressure" to buy a house, and will therefore likely do so before I think it's entirely wise economically.
8.18.2006 12:38pm
SenatorX (mail):
We "bubble sitters" know that "Location,location,location" is one of the most comical red flags for any listing. In my daily revues of the listing in my area I don't even bother looking at the listing when I see that. I automatically move on.

Funny how obvious the bubble has been for some (like DB) when I am now seeing headline after headline in the MSM about "experts surprised by sharp housing decline"!! EXPERTS! Either idiots or mendacious (like the NAR). I don't' see squat selling in my area and plenty of reduced prices and yet when I am looking CNN money RE pages I keep seeing 31% price increases in my Gainesville Fl area. Is this a few high end properties selling and skewing the numbers or what? Or maybe they mean insurance cost appreciation...
8.18.2006 12:44pm
Preferred Customer:

[i]n many cases these appraisals are themselves inflated, because they are based on value as of last Summer, which was the top of the market in Arlington

I don't know how county appraisals work in Arlington, but in Alexandria they are based on a complex formula that a) represents much more of an average than a true assessment of an individual home's worth, and b) lags well behind the market (meaning that it's unlikely to be based wholly on last year's prices). Other jurisdictions I've lived in seem to intentionally discount the value of the house in assessments in order to discourage taxpayers from challenging the assessments (though Alexandria assured me that they don't do that, the assessed values of properties in our area are suspiciously low).

Thus, generally what a government jurisdiction says a house is worth and what a person will pay for that house are (almost) entirely unrelated. I assume that the same is true in Arlington.
8.18.2006 12:45pm
I am currently in escrow on a house (no bubble sitting here, because I found some motivated sellers willing to sell for far below the average sq. ft. price on the market). While I was shopping, I too was shocked at how many MLS listings contained spelling mistakes. Even more surprising to me were the bad directions contained in a couple listings. As my realtors said, "if you can't find the property you can't buy the property."

Perhaps there was a bubble market in real estate agents, too.
8.18.2006 12:54pm
Houston Lawyer:
In Texas attorneys can act as their own agents and keep the Buyer's agent's 3% commission. I love telling real estate agents I'm an attorney and watching them deflate.

I'm sure these guys moonlight as proofreaders for Chinese menus.
8.18.2006 1:11pm
Delurking (mail):
Less than 2 miles is "walking distance". Prof. Bernstein and NickM, what do you consider "walking distance"?
8.18.2006 1:17pm
DavidBernstein (mail):
The metro's own website, when it gives directions, considers .6 miles or under to be walking distance. For the average person, seems about right to me, but I'd say no more than 1 mile. 2 miles is at least 30 minutes walking, briskly. I doubt more than a handful of Washingtonians walk even a mile to the metro.

BTW, one consistent annoyance is that many realtors think that the Ballston Metro is located at the Ballston Mall, and they right, e.g., less than a mile to metro, when it's really less than a mile to the southern tip of the Ballston Mall, and well over a mile to the metro.
8.18.2006 1:33pm
DavidBernstein (mail):
Make that "write."
8.18.2006 1:34pm
these guys are being paid a lot of money

Mostly gals. =)

I've noticed some where the number of bedrooms is wrong.

I noticed that oftentimes, "what counts as a bedroom" is somewhat exaggerated - i.e. if it could be converted into a bedroom, it's a bedroom.

my guess at this point is that Fall 2007 will be an excellent time to start looking.

I concur. Right now buyers and sellers are in standoff mode. Sellers think they should get the same prices as last year (and a lot of 'em want to cash out at the top), and buyers think prices should be way lower. Never the twain shall meet, and thus there's a lot of stuff sitting there on the market for a long time. Next year, things may well have changed for the better, from a buyers perspective.
8.18.2006 1:44pm
Professor Bernstein, I agree with your posts re: metro walks and Ballston, and, again, highly reccomend that you limit your search to east of Glebe in the Lyon Village/Park/Ashton Heights areas, which are much, much nicer, IMO, that those to the west of Glebe and north of 50.
8.18.2006 1:50pm
Porkchop (mail):
What area of Arlington is that listing in? There are a lot of nice areas in the county (in addition to the ones listed by anonassociate).

"Nicer" is a very subjective term (Doh!). What are your criteria? Easy Metro access? (If you want that, you have to be in north Arlington or else live near Crystal City/Pentagon City.) Schools? Big yard (or none at all)? Active civic association (or not)? Close to restaurants and shops (or far from the yuppie-scum latenight barflies and bush-and-lawn-urinators)? Pet-friendly neighbors?

I've lived in Arlington for the past 28 years, and my criteria for "nice" have changed a great deal over time.
8.18.2006 1:53pm
guest (mail):
I have little to add other than to put pressure on the "family" to see if you can try to rent for a year or two.

I ended up doing exactly that when my eldest was very young (starting when she was 3 weeks old!) and it turned out for the best. We kept most of our things in storage while we waited for the right moment in the housing market, which kept our lives minimal and actually helped quite a lot on the baby-rearing front.
8.18.2006 2:01pm
Porkchop (mail):
Really, anonassociate, living in the wilderness west of Glebe isn't that bad. 15-20 minute walk to Ballston Metro, easy access to I-66, big yard, good schools -- we even have indoor plumbing! The Professor might want to get really daring and go out as far as East Falls Church -- there are some incredible houses out there well within the most restrictive definition of "walking distance to Metro."
8.18.2006 2:04pm
I was writing based on the assumption that the Professor would want a quick walk to work (GMU Law School at the corner of Kirkwood and Fairfax). If one wanted to live in Arlington, and didn't otherwise care about Metro access (or proximinty to GMU, as the case may be), the areas up by Yorktown would be ideal--expensive, but on a par with Orange line houses and quiter, more trees and slightly better schools. No knock against Bluemont, etc., but I wouldn't even live where I do--Lyon Village--if I didn't want to walk to the Metro, save on parking, get away with a crappy second car, etc.
8.18.2006 2:08pm
I thought that comments about 'walking distance' were considered a form of housing discrimination against the disabled. Any experts?
8.18.2006 2:11pm
Prof (mail):
8.18.2006 2:24pm
DavidBernstein (mail):
Granite is the new black.
8.18.2006 2:27pm
I went to the web site of OBRE for the State of Illinois, and as best I can tell other than taking a pre-approved couse and passing a test there are no other educational requirements (e.g. college degree)that are necessary to become a real estate agent. I don't know if this is true of other states, but chances are their requirements are similar. This sets the bar for entry pretty low as evidenced by the typos, misstatements, etc., cited above.
8.18.2006 2:28pm
NickM (mail) (www):
Personally, I don't mind a 10 minute walk, which usually will end up being 0.5 to 0.75 miles, and if it will get me free parking rather than paying exorbitant rates, I may up that to 15 minutes. [I recently parked 6 blocks from a convention (with a lot of walking inside) for 5 days straight in order not to pay for parking.]

My favorite ads are the ones that describe a home almost a mile from an elementary school as "walking distance".

I doubt many people take the phrase seriously anymore.

8.18.2006 3:01pm
Ian Argent (mail):

My favorite ads are the ones that describe a home almost a mile from an elementary school as "walking distance".

In fairfax county anyway, that's the definition of walking distance to a school - they don't bus inside a mile radius of the school, as I know from personal experience. My brother had to walk just about a mile home during a blizzard because of this (I missed out due to not going to the same school he did at the time; instead I got to ride 4 hrs instead of the normal .5 hrs).
8.18.2006 3:31pm
In my experience, most real estate ageents are touched in the head. For the most part, they simply email links to websites that the public has access to. Several agents tried to sign me &my wife as clients using this strategy only. We're in our early 30s, so they should know we understand how to surf the web.

At one point we got a call from an agent offering to show us a house that we had already seen &put an offer on thorugh a different realtor. First, she acted as though we had betrayed her ("But I sent you the link!"). When we politely told her that simply sending links wasn't enough to get our business, she hung up on us.

I doubt that realtors will be around in anything near their present form in a decade or two.
8.18.2006 3:42pm
John Armstrong (mail):
2 miles is walking distance unless you're fat and/or lazy. Come up here to New Haven and try to find remotely affordable housing within 6/10 of a mile from campus. I'm just over 2 miles from my department and I do it carrying a packed laptop bag in 20-25 minutes (depending on walk lights) twice a day.
8.18.2006 3:53pm
Alfalfa Male:
I have my real estate license, although it is now inactive. I'll offer a small defense of Realtors. Often, it is the newspaper office who screws up the ad. Our local paper screws up about one-third of all ads. One thing they really like to do is change the time for scheduled open houses.

Now I'll offer a gripe about Realtors. Have you noticed any who are now charging a "negotiation fee"? The top Realtor in our town charges such a fee on top of her 3% commission -- and she gets it!
8.18.2006 3:58pm
2 miles is walking distance unless you're fat and/or lazy.

Or it's snowing, or it's 100 degrees and 95% humidity and you have to wear a suit because the starchy old farts in your office doesn't believe in "business casual"...
8.18.2006 4:39pm
Have you noticed any who are now charging a "negotiation fee"? The top Realtor in our town charges such a fee on top of her 3% commission -- and she gets it!

No, but I thought "negotiation" was one of the things I was paying her the 3% for. She ain't getting any more on top of her 3% from me, that's for sure. Plenty of realtors out there will take less, and all you really need is someone who can drive you around and open the lockboxes for you.
8.18.2006 4:40pm
Houston Lawyer:
In Houston there is no walking distance unless the walk is covered and air conditioned. Although I lived less than a mile from my last office, I wouldn't walk to work. A business suit will not withstand the damage of one thunderstorm and an umbrella won't help you when the rain is coming down sideways.

Almost as bad as the real estate agents are my neighbors who think that they can easily sell a house even if they don't cut the grass for months at a time.
8.18.2006 5:46pm
Seamus (mail):

BTW, one consistent annoyance is that many realtors think that the Ballston Metro is located at the Ballston Mall, and they right, e.g., less than a mile to metro, when it's really less than a mile to the southern tip of the Ballston Mall, and well over a mile to the metro.

The mall is actually called Ballston Common Mall. It used to be called Parkington, and didn't get its present name until years after the Ballston Metro station opened. You can't really blame Metro for having named the station after the neighborhood.
8.18.2006 6:16pm
Seamus (mail):
But of course you can blame the real estate agents for being clueless about the difference.
8.18.2006 6:20pm
John Noble (mail):
Appraisals are approximations of fair market value based on recent sales of comparable properties. In an up-market, properties are listed above the appraised value, on the assumption that FMV is rising. 2-3 years ago, buyers in some parts of Arlington and Montgomery County were offering more than the listed price, and bidding up the price within the seller's 48-hour window to accept an offer. Even in a flat market, properties will be listed above the recent sales price of comparable properties just so there is room to come down in negotiating the final sales price. When properties are listed at the appraised value (setting aside the subjectivity of adjusting for differences between the comparables), you're looking at a popped bubble. -- John Noble
8.19.2006 6:40pm
David Chesler (mail) (www):
If I understand correctly, in Massachusetts "walking distance" is not permitted in listings, because it's too flexible -- people walk hundreds, or even thousands, of miles!

I'm a city boy and I enjoy walking, but I found that in practice out here in suburbia if it's more than about 1/4 or 3/8 of a mile, it's likely worth the savings in time to drive, bike, or get a lift, especially if there are children or packages involved.

In town, where driving is less of an option due to parking, the cutoff seems to be about 1.5 miles, on the basis that if you've got to walk to the bus stop and wait for the bus and walk from the bus stop (or subway) it's going to be half an hour, so you may as well walk -- again if you're healthy but need the exercise and aren't shlepping and aren't in so much of a rush that you'll pay for parking if needed.

The question isn't "can you walk it?" but "will you walk it when your goal is to get there in a reasonable amount of time in order to get on with the rest of your day?" (A related question is "How many places that my kids, at age X, would want to go, can they go under their own power?" but that takes into account crossing streets, safety, and the different set of places they'd want to go to.)
8.21.2006 5:33pm