How My Lake Home Broke Zillow’s Zestimate

Congratulations Realtor, you’ve won my listing!

I loved everything about your presentation, from the analytics you showed me to your proven track record at selling lake homes. In fact, I only had one problem, and it was a big one: your suggested list price was vastly different from what I thought my property was worth.

You said we should list at one price, but Zillow told me a different story.

Since I got the information from a popular accredited source, I was sure it must have been true. But I am so glad you took the time to explained to me how the site’s home valuation tool worked and for showing me how my lake home broke Zillow’s Zestimate.

Lake Home valuation model, man holding home sign

For starters, I knew the tool used physical attributes — like my home’s square footage and our lot size — to help determine its value. I also knew that public tax information was taken into account.

What I didn’t know was that public information and user-submitted data were factored in, too.

I thought this information could be helpful, and to your point, it could be.

But after discussing how much I thought my home was worth based on my years of living there, you made a great point by suggesting my emotional attachment to my lake home could cause me to draw some biased conclusions about how much it was actually worth.

However, I was sure that past sales records of the homes in my neighborhood and nearby “comparable homes” were solid data points.

Thank you for taking the time to help me understand how many of these records and tools used by Zillow often don’t apply in niche markets (like lake real estate).

The Zestimate was not designed for unique properties and unique markets.

One thing that stuck with me is how you said Zillow has never been in my lake home, nor any of the homes mine is being compared to.

Zillow couldn’t possibly account for the upgrades we made to the kitchen a few years ago, nor could the Zestimate tool put an appropriate value on how pristine our view of the waterfront is!

And, those “comparable” homes being used to determine the value of my home?

Well Zillow certainly couldn’t know that our dock was 10 years newer than the dock next door, or that even though our properties are located right next to one another, our neighbors have an obstructed view of the lake, thanks to a patch of endangered trees running through their backyard.

As someone who loves to see the data, I also appreciated you showing me Zillow’s Accuracy Rating report, which I now have a copy of thanks to you!

Since we live on Smith Mountain Lake, you pulled up our county (Franklin County, Virginia), and we saw that the area had a Zillow Accuracy Rating was a “2”.

Of course, I took that to mean we had the second-best accuracy rating, but then you explained being number two wasn’t necessarily a good thing.

What having a “2” rating really meant was that Zillow’s Zestimate was considered “fair” rather than good or best. What it further meant was only 63 percent of Zestimates fell within 10 percent of the actual sales price.

That meant more than a THIRD of Zestimates here were off by more than 10 percent!

Then you explained the Zillow median error rate in a way I could relate to easily: I imaged all the homes on our street as if they were in a single room, lined up in order from most accurate to least accurate Zestimate.

If the median error rate were 7 percent, the middle home would sell for anywhere from $465,000  to $535,000, a range of $70,000.

That’s quite a difference.

Fortunately, you were sure not to pick on Zillow exclusively, but instead you showed me the valuations from several sites, so I could see how widely the estimates varied.

It was icing on the cake to learn that in 2016 Zillow’s CEO sold his home for 40 percent less than its Zestimate.

I don’t think I understood exactly how important it was to work with a lake real estate agent until that moment.

I had spoken with two other agents already, but unlike you, neither lived, worked and played in our lake market.

Only you were actually a lake resident, had been in many of the houses for sale around us, and were prepared with a ton of local data that the others couldn’t provide.

I also appreciated that you didn’t scold me for trusting the Zestimate. You kindly explained that Zillow was a great place to start and that my homework was not in vain.

That’s how I knew to trust you and how I knew choosing to work with you was the right choice.

I knew you would appropriately price our lake home according to our market, not based on some figure determined by a computer.

You are a true lake expert, and I am looking forward to working with you!

Sincerely,

Your New Forever Client

Company Growth: Lake Homes Realty Now Working from Top to Bottom of U.S.

Lake Homes Realty is now operating in Maine, Florida and Michigan, bringing the company’s market footprint into 18 states!

“Entering these states has been a milestone of Lake Homes Realty,” said company CEO Glenn S. Phillips. “This is really an exciting time for our brokerage.”

This expansion is driven by the Inc. 5000 company’s aspirations for opening operations in 10 new states within the year, a goal that was announced at Lake Homes Realty’s 2017 annual Agent Summit.

Lake Homes Realty company growth brings brokerage into 18 states.

It would appear the company is well on its way to reaching that goal, if having added five more states to their footprint since this time last year is any indication of Lake Homes Realty’s successful expansion.

The company began its accent up the eastern coast last year with the addition of operations in Pennsylvania and New York.

With Maine operations now open, Lake Homes Realty extends into the country’s north-most part.

And with further expansion into Michigan and Florida, Lake Homes Realty is now working from the top to the bottom of the eastern United States.

“We able to better serve our lake real estate sellers, buyers and our own agents with each state we enter,” Phillips said. “We have seen success in the markets we are already established, and we look forward to seeing the same in Michigan, Maine and Florida.”

Lake Listings are Live!

Phillips emphasized lake listings in these new markets are live now on LakeHomes.com, the core of the Lake Homes Realty business model.

The site provides a one-stop shop for lake homes and land, currently featuring more than 65,000 properties. In the last year alone, more than 2 million people have made use of the site and its features.

“What’s so exciting about our company is that we are a national brokerage, and because of this we are currently able to pull lake real estate listing data from almost 100 MLSs across the country to provide the most comprehensive collection of lake property in local markets,” said Phillips.

In this way, the site is tailored to cater to the niche market’s unique buyers and sellers.

“Niche real estate markets, like lake real estate, are different from traditional markets in that buyers and sellers are looking for a specific type of property,” Phillips explained. “LakeHomes.com facilitates an easier and more convenient shopping experience for these potential clients.”

Though Lake Homes Realty has a strong online component, Phillips reinforced the company’s belief in the power of local agents and the importance of marrying that power with the power of technology.

“A combination of those two key components is critical for success as a real estate company, and we can’t wait to see what great new agents and success our journeys in Maine, Florida and Michigan will bring.”

Lake Property and Shoreline Ownership

Person holding set of keys with house keychain in the air

Every lake home buyer has the same question when it comes to shoreline ownership. Do you own this land, or lease it? The choice does not always belong to you.

Who Legally Owns the Land?

The owner of the lakebed and the shoreline property may have stipulations on the way they can legally offer building lots. Most owners of major, developed lakes in the United States are public utilities. Utilities such as power companies or government agencies like the U.S. Army Corps of Engineers.

In fact, some estimates show that these kinds of shoreline ownership accounts for about 90 percent of the approximately 41 million acres of lakes and reservoirs in the United States.

When a public utility builds a lake because it needs water for industrial use, such as hydroelectric power, cooling of industrial power plants, etc., the public utility, within Federal Energy Regulatory Commission (FERC) agreements, retains possession of much of the land around the lake, including shoreline areas.

The FERC may allow the public utility to only lease shoreline lots to homeowners. In other cases, the public utility is able to actually sell the lots to homeowners.

Whether they lease or sell the lot is based on the individual public utility’s agreement with the FERC regarding a particular lake. Additionally, highly detailed state or local lake protection ordinances contain restrictions covering many concerns. These concerns include how many homes can be built along shorelines, how close to the water they can be, and how wide visibility buffers must be between them.

Things to Consider with Leased Land and Shoreline Ownership

Potential lake home residents are cautioned to read the fine print on land lease documents. For instance, a lease may stipulate that if “improvements” are not made within a certain number of years, the lease could be terminated.

This means that a person who intends to eventually build a retirement home on leased land, let’s say in 40 years, may not be allowed to do so. This is because the lease could stipulate that “improvements” or building of the home must occur within 5 years.

Land leases can run for a maximum of 99 years, while some lake leases are much shorter. Sometimes running 35 or less. A mortgage lender will typically not issue a mortgage to buy or build your lake home for longer than the length of the lease on the lot. For instance, seeking a 30-year mortgage to build on a lot that is leased for 25 years is futile.

Person holding house and keys in hand while homebuyer signs leased land contract

Consideration for inheritance must include the length of the property lease and whether it is renewable. With many leases, after the lease term expires and there is no renewal option, all land and “improvements” (inclusive of houses and other structures) revert back to the organization who has issued the lease to the person.

So don’t build a lake home on leased land with no ability to renew. Also don’t expect your heirs to automatically have ownership of the lake home.

At some lakes, ownership of the ground might be an option when deciding to build a new home or purchase an existing home. There is usually more opportunity for this on a privately-owned lake, although many publicly-owned lakes offer ownership as well.

Some public utility officials say the trend at public utility-owned lakes is moving more toward selling the lots, rather than leasing them. But, only if it is allowed in the FERC agreement.

Floodplains and Your Shoreline

Keep in mind that whether leasing or buying land to build on, power companies by law must retain ownership of the floodplain. In practical terms, a floodplain is a certain number of feet of land extending from the shore of a lake.

This boundary is determined by federal and state agencies. It is vital for storm runoff, vegetation diversity, water quality, wildlife habitat, and aesthetic qualities.

Turn to an Expert

There can be many complications when it comes to purchasing or leasing property on a lake. This is why it is always best to enlist the help of a real estate agent. Specifically one who focuses on lake real estate.

A true lake specialist will be very familiar with all of the details of their lake. They will be glad to walk you through all available options and what each will mean to you as a buyer.