Zestimate vs. Adjusted Comparables
You are preparing a CMA for a 1,650 sq ft, 3/2 ranch built 1998 on a 0.18-acre lot with an original kitchen, a 6-year-old roof, and a two-car garage. It backs to a four-lane arterial with a 35 mph speed limit and has a privacy fence. Market is balanced, 4.2 months of supply; average DOM 38. Three recent sales: A) 1,700 sq ft ranch, updated kitchen, backs to greenbelt, sold $432,000 with $8,000 seller credit; B) 1,600 sq ft ranch, original kitchen, backs to arterial, sold $395,000 after 71 days as an estate sale; C) 1,720 sq ft ranch, updated kitchen, interior lot, sold $425,000, conventional, 22 days. A pending sale D) 1,640 sq ft, original kitchen, arterial, list $389,000, pending in 6 days with $10,000 appraisal gap waiver. Seller wants to list at $419,900 'because Zillow says so.'
1. Build an adjusted comparison grid and derive a supported value range. State your adjustment assumptions.
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Assumptions, stated explicitly so the seller can challenge them: GLA $95/sq ft; updated kitchen $15,000; greenbelt or interior lot superior to an arterial lot by $20,000; seller credit adjusted dollar-for-dollar because the subject will not offer one.
Comp A: $432,000 - $4,750 (50 sq ft superior) - $15,000 (updated kitchen) - $20,000 (greenbelt vs arterial) - $8,000 (credit) = $384,250. Comp B: $395,000 + $4,750 (50 sq ft inferior) = $399,750. No adjustment for estate sale or 71 days because there is no evidence of a condition difference; weight it lower for motivation and market time. Comp C: $425,000 - $6,650 (70 sq ft superior) - $15,000 (updated kitchen) - $20,000 (interior lot) = $383,350. Pending D: list $389,000, similar condition and location; supports the upper end but is not a closed sale and includes an appraisal-gap waiver.
Adjusted indications cluster around $383,000 to $400,000. The most similar comps on condition and location are B and D, while A and C require large kitchen and lot adjustments. A defensible list range is $394,900 to $399,900, with an expected negotiated value near $385,000 to $395,000. Do not average mechanically; explain why B carries weight despite its longer DOM.
2. The seller insists on $419,900 based on an automated value. How do you present the gap and the risks?
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Show the arithmetic rather than asserting an opinion. $419,900 is roughly 5% to 9% above the highest adjusted closed indication and about 8% above the pending list price. In a balanced market with 4.2 months of supply and 38 average DOM, that gap is likely to be tested by the market.
Risks to explain:
- Appraisal risk: a buyer may agree to $419,900, but the lender's appraiser may support only $385,000 to $400,000. Unless the buyer has a large gap waiver, the deal can fail or be renegotiated.
- Market-time risk: overpricing at launch suppresses showings; the listing may go stale and later reductions may not recover the initial traffic.
- Arterial-lot stigma: buyers who will accept traffic noise are a narrower pool, so the price must be sharp relative to interior-lot and greenbelt homes.
- Automated-value error: the model may not know about the original kitchen or the arterial frontage. Provide the seller with the adjustment grid and the source of each comp.
Offer a test: list at $399,900 for 10 to 14 days, review showing traffic and feedback, and pre-agree on a reduction trigger. If the seller still chooses $419,900, document the advice and the seller's written instruction.
3. How much weight should the pending sale with the appraisal-gap waiver get?
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Use it as corroborating evidence, not as the primary indicator. A pending sale is not a closed sale: it can fall out, and the contract price may include concessions or terms that are not yet visible.
The gap waiver changes the signal. A buyer willing to waive $10,000 of appraisal risk may pay above what an appraiser would support, so the $389,000 list price is not automatically market value. It is evidence of demand at that price point, especially because it went pending in six days.
Reasonable use:
- Verify the contract price, financing, concessions, and whether the gap waiver is real and funded.
- Treat the pending as an upper-bound data point that supports a list price near $395,000 to $399,900.
- Give it less weight than closed comps A, B, and C, and explain that a quick pending at $389,000 is more consistent with a value below $400,000 than with $419,900.
If the pending closes, re-run the CMA; until then, label it clearly as pending and unverified.