Market Assessments Inevitable Deer | Note from Jim | February 2023
Charlottesville market, assessments, inevitability of tech, a deer, and the beating of a dead horse
This month: the market, assessments, ChatGPT inevitability, dusty renovations, and a deer story. Questions? Please ask by replying to this email. Or call 434-242-7140.
The Market Abides
I started practicing real estate in 2001. Every year, I’ve noted how the market is weird, and every year that’s been a truthful statement.
Every market is unique, different, and interesting. And in every market, my buyer clients need to buy homes and my seller clients need to sell homes.
What I’m seeing right now in early February 2023:
I feel like a broken record.
There are not enough houses to satisfy the buyers who want to buy houses in Charlottesville and Albemarle across all price points, there aren’t enough homes on the market at prices to satisfy first-time home buyers’ demand, and new construction is awfully expensive.
Most sellers still have significant equity, even if they aren’t able to realize the massive gains that they have been able to last year.
Quick inventory context: # of single-family homes listed in the City of Charlottesville from 1/1 - 2/8
2018 - 35
2019 - 52
2020 - 47
2021 - 31
2022 - 39
2023 - 18
Sellers who want to sell and don’t need to sell, probably aren’t going to sell. Those who do will likely do pretty well.
Real Estate Assessments in Charlottesville & Albemarle
A client emailed:
“I just received my Notice of Real Estate Assessment from the county and thought it might be interesting to have you explain your thoughts about this. At first, I’m excited because my asset’s value has increased and yay me! Then I take a second to think, oh this means my taxes are going to go up, not so yay. I know last year I called in to see about questioning it and got nowhere, so probably won’t attempt that again.”
Assessments go up. Assessments go down. In Albemarle and Charlottesville, properties are reassessed every year. This year, Albemarle was up 13.46% and Charlottesville up 12.33%. Some localities reassess less frequently: Madison County looks to reassess every six years. Imagine that shock.
A few thoughts on real estate assessments
Virginia Code says that real estate assessments are supposed to be 100% of fair market value. In reality, sometimes assessed values are higher than market value, sometimes lower, sometimes close enough to be considered accurate.
Assessments are a backward-looking valuation, and given the recent market shift, the value that was placed on a house today, looking at yesterday’s data, might be inaccurate. This was the case also when assessed values and market values were declining.
One key point is that people using Zillow’s zestimate as an argument, for or against an assessment, are using a completely not transparent, often not accurate, valuation, that often will necessarily shift much faster than assessed values.
I don’t remember people complaining about declining assessed values as vociferously as they are complaining about increasing ones. I’ve seen discussions on Twitter, Reddit, and Nextdoor (god help me).
If your assessment feels off, ask me. I would be happy to run some quick comps for you to help you get a better feel as to whether appealing would be reasonable. I believe the appeal process is free.
Real estate property assessments pay for our schools. In Albemarle County, 50 % of the budget goes to schools, and 42-47% of that comes from property taxes.
Real estate assessments directly affect localities’ budgets. Simple.
More on this next month, but we need to build a community that is prepared for the future; more of the same is not how to get there. To do that, we need local governments that are a) competent b) funded c) able to actually execute.
ChatGPT was Inevitable
And no one should be surprised. It’s a tool that we’re going to use. Simple.
I’m going to try to not write about ChatGPT for a year because the tech is moving too fast, evolving too quickl,y and I’m not an expert. I do know that it is a tool that is going to change how many of us work, and it’s a tool we’re going to use; exactly how is an evolving discussion.
30 years ago, my summer job was as in the Management Information Services (MIS) division of a company, and I remember helping with a demonstration for a new “natural language” search. It was pretty cool stuff at the time. Today’s world is utterly incredible, and all I can think about are the ships talking on Star Trek and Wall-E.
Every day brings a new AI arms race announcement.
Quora opens its new AI chatbot app Poe to the general public. I’ve tried this, and it’s pretty darn good.
“Zillow launched a new AI-powered feature called “natural language search” that can now interpret home shoppers’ colloquial lingo, much like how they would talk to friends and family. Zillow is the first company to implement such a search engine.”
Through this evolution, here’s hoping that we don’t lose our humanity as we depend more and more on computer-generated thoughts and conclusions. I’d welcome any suggestions on who/what you’re reading about this topic.
I know this - AI marketers are going to over-promise and under-deliver, and the use cases that are implemented are likely not yet fully developed today.
I got distracted by the AI. “How many AVMs are in use in the US?” — AVM = Automated Valuation Model (a Zestimate is one; lenders and others use them too)
As of 2021, the exact number of Automated Valuation Models (AVMs) in use in the United States is not publicly available. AVMs are used by a variety of organizations, including banks, mortgage lenders, real estate companies, and government agencies, and their use has become increasingly common in recent years.
AVMs are automated systems that use algorithms and data from public records and other sources to estimate the value of a property. They are often used as a quick and cost-effective alternative to traditional property appraisals, and they are especially useful in real estate transactions where time is of the essence.
While the exact number of AVMs in use in the US is not known, it is safe to say that they are widely used and play an important role in the real estate industry.
I also asked, “Are there any regulations or laws governing the use of AVMs in the US?” and “Are there any organizations that provide guidance on the use of AVMs?” with a great disclaimer, “This conversation may have been edited by the sharer. This bot may make incorrect statements. It does not have knowledge of events after 2021.”
But will AI be able to do this?
When a Renovation Dusts Things Up
My wife and I went out of town earlier this year, and while we were gone, had the cabinets painted in our kitchen. Short summary: they look great, the contractor did great work, and we came home to a house covered by a fine layer of white dust everywhere as the HEPA filter they used to capture the dust didn’t work.
What did we do? Breathed. Got frustrated. Cleaned. And had a discussion with our contractor. He did the right thing. Offered his crew to clean. Offered a cleaning crew. Asked what he could do to make it right.
We had our ducts cleaned, and cleaned the house ourselves.
We stayed calm, he stayed calm, and he worked to make it right.
Everyone makes mistakes; how we own and rectify those mistakes (and learn from them) is what matters.
And I’ll continue to recommend our contractor to anyone who needs a kitchen or bathroom done.
Do people beat dead horses?
When I tell my clients that they should use a local lender, here’s another example.
We’re at the closing table with the attorney and lender. The attorney and lender are talking about how the 1040s the buyer had provided had a “preview” watermark, and they needed a copy without said “preview.”
Closing could have been delayed.
Lender steps out, calls his reasonable underwriter, and the underwriter agrees that this condition can be satisfied post-closing.
The transaction was recorded four hours later, right on time.
An out of area lender would have been a very, very different experience.
My wife and I went to Reykjavik for a few days in January; it was an amazing escape.
One of the great things about being empty nesters is the ability to reconnect, and do things like talk about a trip on New Years Eve, book flights on 1 January, and leave just over two weeks later. I had more to write and share, but the best thing I can share is this:
Don’t waste time talking about doing things. Do them while we’re young (ish).
In the heart of the City of Charlottesville on the morning of closing, we did the final walkthrough. We were walking around making sure all was well when my client looked out the kitchen window and asked, “Is that a dead deer?” It was, and I started thinking about how I was going to have the carcass removed.
A few minutes later, I was still at a bit of a loss when her husband arrived and removed it himself with his trailer.
You never know what you’re going to find in a walkthrough.
Did I tell you the story about the deer at the three-way stop? That’s a good one I might tell next month; I can’t remember, and Substack’s search function is terrible.
Every transaction has a story
Sean Tubbs’ monthly property transaction summary is one of the best things I read every month; the narrative he is telling with each City of Charlottesville transaction is fascinating and insightful.
Next Month — thinking generationally, the algorithm and the heart, mistake on advising a price, and the right guidance.
What I’m Reading
6 doctors swallowed Lego heads for science. Here's what came out. “Editor's note: This episode contains frequent and mildly graphic mentions of poop. It may cause giggles in children, and certain adults.”
Meet the Latest Housing-Crisis Scapegoat — hint: it’s (not) hedge funds.
A Simple Plan to Solve All of America’s Problems — we need an abundance agenda. I heard Derek Thompson on Scott Galloway’s podcast; it’s an excellent discussion.
What I’m Listening To
Some of My Best Friends Are … “Eve L. Ewing Into the Multiverse”
Non-partisan justifed rage — worth the 50 seconds to watch.
A client sent me this - Patton Oswalt on parenting.
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