Editor’s Note: In the November issue of the Housing News Report, we took a look at the new data-drive home search — “pre-diligence.” Here’s an excerpt from the article on “pre-diligence” written by Peter G. Miller.
The biggest consumer item on any shopping list is the place where we live. Homes are not only huge investments but they also reflect our preferences, finances, and status.
And yet while homes are crucially important they get less attention than other consumer goods. You can instantly get a Carfax report for virtually any vehicle, consumer reviews grade every refrigerator, and endless reports describe diner experiences in tens of thousands of restaurants.
But when it comes to homes the situation is different: You can get such things as termite inspections, appraisals and home inspections but such traditional checks and reports lack context, they do not get to the information that buyers increasingly want in a changing world. After all, what’s the value of a home with a great roof if the neighborhood has poor schools, pollution and a tendency to flood?
Government reports and academic studies are filled with information any home buyer can look up, but such data is often hard to find and difficult to understand. Clarity is not the hallmark of much research, and the practical, understandable and actionable information that buyers want is often hard to find if not impossible.
Hallmarks of Good Home Disclosure
The type of information we’re talking about will help purchasers make better-informed decisions regarding where to buy, decisions which may allow them to save tens of thousands of dollars by finding homes with lower insurance costs, less exposure to natural disasters and a greater potential for appreciation. Moreover, such data offers important benefits that buyers, sellers and real estate brokers want:
First, the data has to be independent. Whether the information comes from an online source or through a seller or broker, the information must be the same. Like an appraisal or termite inspection, the information cannot vary according to who orders the report, it is simply the information for a given property.
Second, public information is not static, it evolves as new data becomes available. Instead of poring through complex government reports and unfamiliar websites, the information needs to be assembled in a way that’s clear, concise and understandable.
Third, pre-diligence data should not require a degree in physics to read, it should be plainly written and presented.
Forth, background data such as those offered by HomeFacts.com are not a substitute for an appraisal, home inspection or similar on-site examination. Instead, they looks at the bigger picture, the picture which involves more than bricks and mortar.
Fifth, we want pre-diligence information to be organized in such a way that it provides an easy way to compare communities in different counties and states with objective measures.
New Tool For Brokers, Realtors, Consumers
But what about real estate brokers? Will they want buyers to have more property information?
You bet. Many brokers and sellers will soon automatically provide independent pre-diligence reports when a home is listed, at open houses and with MLS listings. It will be a way to add credibility from an independent third party to property presentations and marketing programs.
Savvy brokers will use pre-diligence reports because they understand the value it brings. The information is objective and beyond their control. It can provide a competitive advantage, especially when other brokers do not offer such reports. Most importantly, successful brokers know all about the famous clothing retailer, Sy Syms.
Syms said “an educated consumer is our best customer.” He meant that when consumers are empowered with independent information they’re better able to make decisions in their best interests. If one clothing store freely gives out such information while others don’t then where do consumers shop? Who are they most likely to trust? The same principle applies to real estate brokers and the homes they show.
Save Time, Energy and Money
There is truth to the idea that we live can reflect what we earn. We know that different ZIP codes show different household incomes as well as different real estate values for similar homes. Newspapers and magazines have long published articles regarding how much a given dollar amount will buy in different cities.
If you look at typical incomes and home prices you can also get an idea of affordability – an idea with some interesting twists. For instance, one recent study found that school teachers could more readily buy a home in California than in Salt Lake City, even though real estate prices are much higher along the Pacific coast. Why? Not only are real estate prices higher in California, teacher incomes are much greater. When you compare income to housing costs California homes are actually more affordable for teachers because they can earn relatively more than in Utah.
The catch is that “affordability” is not necessarily associated with the high incomes. One has to compare income with such costs as healthcare, transportation, utilities, housing and groceries. It’s entirely possible to have a location with a high income and low affordability – think of San Francisco, a place where homes typically sell for nearly $1.2 million and just 14 percent are regarded as affordable.
Lifestyle Home Searches
“Affordability” issues really translate into “lifestyle” questions, not how much income you have but how you prefer to spend it. For instance, would you rather live in a place with 6,500 people per square mile or 2,500? How about a big city with 30,000 people per square mile?
Or, what about this: Would you pay a premium to live in an area with top-flight school districts? What if the premium in one state is a lot lower than in another?
Crime and Sex Offenders
Unfortunately, along with the good stuff every community has its share of problems. Crime is an issue of great concern and with reason: According to RealtyTrac, the latest FBI statistics “put the number of property crimes in 2013 above 8.6 million and the loss, not including arson, at around $16.6 billion.”