June 23, 2017

Long-term mortgage rates down slightly this week

WASHINGTON (AP) – June 22, 2017 – Long-term U.S. mortgage rates dropped slightly this week.

Mortgage buyer Freddie Mac says the benchmark 30-year, fixed-rate mortgage averaged 3.90 percent, down from 3.91 percent last week. The rate stood at 3.56 percent a year ago and averaged a record low 3.65 percent in 2016.

The 15-year, fixed-rate home loan, popular with homeowners seeking to refinance their mortgages, also blipped lower – to 3.17 percent from 3.18 percent. A year ago, the 15-year rate was 2.83 percent.

The rate on five-year, adjustable-rate mortgages decreased to 3.14 percent from 3.15 percent. It was 2.74 percent a year ago.

Mortgage rates have remained low even though the Federal Reserve has been raising short-term rates: The Fed last week ratcheted rates higher for the third time in six months.

To calculate average mortgage rates, Freddie Mac surveys lenders across the country between Monday and Wednesday each week. The average doesn't include extra fees, known as points, which most borrowers must pay to get the lowest rates. One point equals 1 percent of the loan amount.

The average fees on 30-year, 15-year and five-year adjustable mortgages were unchanged at 0.5 point.

June 19, 2017

The zero-down loan? It’s making a comeback

NEW YORK – June 16, 2017 – Buyers may soon be able to bring less to closing. They were blamed for precipitating the housing crisis years ago, but major lenders are giving no- and low-downpayment loans another shot.

Several major lenders are reportedly offering loans with just 1 percent down. Navy Federal, the nation's largest credit union, offers its members zero-down mortgages in amounts up to $1 million. NASA Federal Credit Union markets zero-down mortgages as well.

Quicken Loans, the third highest volume lender, offers 1 percent downpayment options, as does United Wholesale Mortgage. And the Department of Veterans Affairs has offered zero-down loans to eligible borrowers for many years.

Also, Movement Mortgage, a large national lender, has introduced a financing option that provides eligible first-time buyers with a non-repayable grant of up to 3 percent. As such, applicants can qualify for a 97 percent loan-to-value ratio conventional mortgage, which is basically zero from the buyers and 3 percent from Movement. For example, on a $300,000 home purchase, a borrower could invest zero personal funds with Movement providing $9,000 down. The loan also allows sellers to contribute toward the buyer's closing costs.

So far, the delinquency rates on these low- to zero-down payment loans have been minimal, according to lenders. Quicken Loans says its 1 percent down loans have a delinquency rate of less than one-quarter of 1 percent. United Wholesale Mortgages told The Washington Post that it has had zero delinquencies from the borrowers on its 1-percent down loan since debuting it last summer.

For Movement's new loan product, the lender will originate the loans and then sell them to Fannie Mae, which remains under federal conservatorship. Fannie officials released the following a statement:

"(We're) committed to working with our customers to increase affordable, sustainable lending to creditworthy borrowers. We continue to work with a number of lenders to launch (test programs) that require 97 percent loan-to-value ratios for all loans we acquire." They add that there "is no commitment beyond the pilots," which are "focused on reaching more low- to-moderate income borrowers through responsible yet creative solutions."

During the housing crisis, zero-down loans were among the biggest losses for lenders, investors and borrowers. However, housing experts say the latest versions are different from years ago. Applicants must now demonstrate an ability to repay what's owed. They also must have stellar credit histories and scores, and lenders require a lot more documentation to prove borrowers are in good standing.

Also, many of the programs are charging higher interest rates. For example, Movement's rate for its zero-down payment option in mid-June was 4.5 percent to 4.625 percent, compared with 4 percent for its standard fixed-rate mortgages.

Some critics say that the borrowers who really could benefit from such options aren't able to qualify for them. Paul Skeens, president of Colonial Mortgage Corp. in Waldorf, Md., told The Washington Post that "it seems like people without excellent credit scores and three months of [bank] reserves don't qualify."

June 16, 2017

The Craigslist scam: Still around, still a problem

ST. AUGUSTINE, Fla. – June 15, 2017 – An apparent scam that has been making the rounds on Craigslist recently could catch people who are looking for a cheap place to rent, but officials and industry professionals say there are plenty of red flags that should warn them off.

"It's just this crazy scam where people take our listings from online and use our photos," Endless Summer Realty broker Robin Arnold said.

A property he has listed was a subject in one of two email conversations provided to the St. Augustine Record in which a potential renter responded to an ad on Craigslist and got a suspicious response. In both cases, the homes advertised on the popular listing site turned out to be for sale and the emailed answer to the initial inquiry was written by someone posing as the legal owner with a story about why he or she was out of town and would have to conduct any transaction over email.

The ads, though, contained pictures and well-written descriptions of the homes.

Noah Bailey, an agent with RE/MAX who was the listing agent on the other house, said those things are pretty easy to get from online listings.

"They basically just take your verbiage, take your pictures," he said. "It's something that's pretty common."

Both men said they were aware that their listings had become subjects of the scam and had either reported it to the owner of the property or to Craigslist.

"Typically, we are the first person to get the heads up," Bailey said.

Arnold said this is the only one of his properties that has been used in the scam recently, though he recalled a rash of them a couple of years back. Bailey said his listings seem to get used about two to three times a year.

This month, Arnold had received about 25 calls on his current listing from people interested in renting the home.

"They'll pull it up and go do a drive-by and see my sign in the yard," he said, adding that he lets the callers know the ad was a potential scam and tries to educate them about what to watch for.

Though the email chains provided to The Record never progressed to discussion about an exchange of money, Bailey said the scammer will likely promise to mail keys in exchange for a wired deposit.

The emailed answers both contained the legal property owners' names, though they appeared to be copied and pasted from online tax records because they were inserted into the email, by way of introduction, in all capital letters with the last names appearing first.

Both men said things like that are among the many warning signs on the path to an exchange of money that should scare people off.

The to-good-to-to-be-true, advertised rates are too, they said. In both cases, the homes listed had three bedrooms and were in desirable neighborhoods and carried advertised rates of under $1,000, with one as low as $750.

Bailey said he wasn't aware of anyone actually falling for the scam and that the people he interacts with typically catch on once they realize the house is actually for sale when they see his sign.

"Most people, I think, kind of wise up when they see something like that," he said.

But St. Johns County Sheriff's Office spokesman Cmdr. Chuck Mulligan said some people have fallen for similar ads. Though he had no recent example of long-term rental scams, he said he could recall about three or four instances in the past two years where someone lost money after paying a deposit or advance rent when responding to a fake vacation rental ad. Those homes are typically advertised for shorter stays for people coming from out of town.

"And then they get here and find out that the homeowners are there and the homeowners are not the ones that advertised the property," Mulligan said.

Another variation that was common, he said, were scams involving foreclosed-on properties during the recession.

Mulligan said people that are looking for rentals on Craigslist or any e-commerce site should always look for warning signs and take steps to protect themselves. First, he said, Florida has very open public records laws, and it is easy for people to determine who the legal property owner is.

"They should do some of that research," he said, and suggested they search for the address online and see if it is listed for sale.

Mulligan also warned that any transaction in which the person asks that money be wired via Western Union or any other service, or asks for payments in an unusual form, like a gift card, should also raise suspicions.

Another warning sign can be the tone of the email.

Most of the scams, Mulligan said, originate from outside the country and the person composing the response is usually not a native English speaker, and they often give themselves away with awkward word usage.

If any of those things pop up throughout the course of a transaction, Mulligan said, people should think twice before they part with their money. "They should pause and then do some more research to ensure they are actually dealing with the homeowner," he said.

Though Craigslist does provide a way for users to flag ads as spam or "prohibited" no one at the organization responded to an email requesting information about how that process works and how ads get taken down.

June 9, 2017

86 Millennials may see a 2017 home-buying turnaround

WASHINGTON – June 8, 2017 – Housing advocates have been wringing their hands as they watch the nation's homeownership rate slowly slip during the Great Recession from 70% to less than 64% today.

Homeownership in America dipped to 63.6% in the first quarter of 2017, virtually unchanged from 63.7% the fourth quarter of 2016. The homeownership rate was 63.5% in 2015, according to the U.S. Census Bureau's recent Quarterly Housing Vacancies and Homeownership report.

However, the future growth of homeownership potentially lies in a different statistic buried in the sea of housing data gathered by Uncle Sam, experts say.

An analysis of the Census report by Trulia determined that owner households formed at double the rate of renter households in the first quarter of 2017. This is a clue that points to the possibility of a Millennial homeownership turnaround this year after a decade of gradual decline, Trulia concluded.

"Strong renter formation is one of the reasons why the homeownership rate has continued to drop since the onset of the housing crisis, so any sign this trend is reversing is something to take note of," said Ralph McLaughlin, chief economist at Trulia.

One of the major impediments to homeownership is the inability for young Millennial renters to afford a down payment.

Seventy percent of renters recently surveyed by Zillow said saving for a down payment is more of an issue than debt on the path to becoming a homeowner. Millennial home buyers are typically buried in college loan debt.

The Midwest held the highest homeownership rate in the first quarter, at 67.6%, while the West held the lowest at 59%, the Census report shows.

Homeownership rates in the first quarter were also highest among homeowners aged 65 and older, at 78.6%, and lowest for homeowners aged 35 and younger, at 34.3%.

Here are other findings of the Census report:

  • Non-Hispanic White Alone homeowners, as defined by the Census, held the highest homeownership rate in the first quarter, as well: 71.8%. (The concept "race alone" includes people who reported a single race alone-for example, Asian-as opposed to more than one race.)
  • Asian, Native Hawaiian and Pacific Islander Alone homeowners held the second-highest homeownership rate at 56.8%.
  • The Hispanic homeownership rate in the first quarter was 46.6%, according to the report. In 2016, the Hispanic rate markedly rose for the second straight year-a new emerging trend.
  • African-American homeowners held the lowest rate at 42.7%, though still higher than the year prior.

The homeowner vacancy rate was 1.7% in the first quarter, while the renter vacancy rate hit seven percent, the Census report shows.

Homeowner vacancy rates were highest outside metropolitan statistical areas (MSAs) and inside principal cities at 2.2%, followed by in suburbs at 1.3%.

Renter vacancy rates were also highest outside MSAs at 8.7%, followed by inside principal cities at seven percent and in suburbs at 6.5%.

According to the report, 87.3% of the nation's housing was occupied in the first quarter, with 55.5% owner-occupied and 31.8% renter-occupied.

The median asking sales price for vacant for sale housing in the first quarter was $176,900. The median asking rent for vacant for rent housing, over the same period, was $864.

Regardless of the Census data, a survey by the National Association of Realtors (NAR), reported that nearly eight out of 10 Americans still believe that buying a house makes good financial sense.

Here's why:

″ Long-term wealth. Owning a home is one of the best ways to build long-term wealth. Historically, a homeowner's net worth has ranged from 31 to 46 times that of a renter, reports the Federal Reserve Survey of Consumer Finances. Homeownership today still represents a family's primary means of financial advancement.

″ Freedom. Homeowners are free to renovate, redecorate and modify their homes as they wish. If you want to paint the walls or make a simple landscaping change, there isn't a landlord to stop you.

″ A family investment. For many, homeownership is a lifestyle choice-a place to raise a family, build memories and be part of a larger community.

Breakout: Finding out more about millennials

Want to know how to reach millennials as potential clients? Be sure to attend the ed session, "Delighting Our Millennial Customers," on Aug. 16 at Florida Realtors 2017 Convention & Trade Expo.

June 5, 2017

Homebuyers: How to win the downpayment challenge

LOS ANGELES – June 2, 2017 – Saving up for a downpayment is the biggest hurdle for many would-be homebuyers, particularly those looking to make the leap from renting to owning.

More than two-thirds of renters consider setting aside money for a downpayment the No. 1 obstacle to buying a home, according to a recent survey by real estate data provider Zillow. That edged out other concerns, including job security and a thin supply of homes on the market.

While there are home loans that require as little as 3 percent down, rising home prices, especially in expensive coastal states, keep driving up the amount of money buyers need to come up with for a downpayment.

Even so, many first-time buyers are managing to save enough on their own. Some 76 percent used their savings to fund their downpayment last year, according to the National Association of Realtors.

Here are some tips to consider when working toward that downpayment on a home:

Start soon
Begin saving now. Renters may want to calculate what their extra monthly costs would be as a homeowner and then set aside that amount, minus rent and utilities. This accomplishes two goals: Saving money for a downpayment and getting you accustomed to the financial constraints of living with the costs of homeownership.

Another strategy that may help: open a separate savings account just for your downpayment. That will help lessen the temptation of using the funds for something else.

You'll also have to set aside money for closing costs, which can run into the hundreds or thousands of dollars.

Weigh loan options
The type of home loan you get may determine how much of a downpayment you need. For many years, buyers sought to put down 20 percent of the purchase price. That would lower their monthly mortgage payment and allow them to avoid having to pay for private mortgage insurance, or PMI. But as home prices have risen, that trend has waned. Loans that require as little as 3 percent up front have become more common. As a result, the median U.S. downpayment has declined to 10 percent the past four years, according to the NAR.

"The housing market is not a matter of 20 percent downpayment or bust," said Greg McBride, chief financial analyst at Bankrate.com. "You can get into a house with a low downpayment, but you're going to have to come up with the money for closing costs."

Lenders offer loans backed by government mortgage companies Fannie Mae and Freddie Mac that require only a 3 percent downpayment. Borrowers can ask to have their PMI waived once the equity in their home reaches 20 percent.

Borrowers with less-than-sterling credit may have a better shot qualifying for loans backed by the Federal Housing Administration. The FHA's program requires 3.5 percent down, but borrowers have to refinance once their equity grows above 20 percent in order to get out of paying PMI. Until then, PMI is tax-deductible.

Buyers may not need to save for a downpayment at all if they are U.S. military veterans, service members or residents of certain rural areas. The Department of Veterans Affairs and the U.S. Department of Agriculture have zero-downpayment loan programs for qualified borrowers.

Explore other options
Saving for a downpayment sometimes takes more than cutting back on dining out or travel. A quarter of first-time homebuyers in 2016 used gift money from relatives or friends to round out their downpayment, according to the NAR. And more than 10 percent tapped their retirement savings without the usual hefty penalties for an early withdrawal. Of course, before withdrawing money from your 401(k) or IRA accounts consider that a big withdrawal will mean your retirement savings won't grow as swiftly.

Borrowers with low or moderate income, and teachers, firefighters or other public service job holders, may also qualify for downpayment assistance through thousands of federal, state or local programs aimed at helping homebuyers.

There are more than 2,100 funded programs, many of which help cover the downpayment and closing costs through loans that can sometimes be forgiven over time, or paid back only once the buyer sells the home, according to Downpayment Resource, a tracker of homebuyer assistance programs.

Consider using home equity
A newer approach to coming up with a downpayment involves letting investors put up some of the money in exchange for a slice of the potential value in the home.

San Francisco-based Unison now has a program available in 12 states and the District of Columbia that offers to match up to half of a 20 percent downpayment on a home. The match isn't a loan, in that the buyer doesn't have to make payments, but still benefits from the lower cost of making a 20 percent downpayment.

There are several payback scenarios, but essentially the company collects a 35 percent share of the gain, if any, in the sale of the home. Should the home decline in value, the company also shares in the loss, potentially receiving less money back on its original investment.

If the homeowner hasn't sold the home after 30 years, a property appraisal is used to determine how much Unison gets paid. The homeowner also has the option to buy out Unison any time after their third year in the home. Unison also doesn't share in the equity that the homebuyer builds as they pay down their mortgage or from investments, like a kitchen remodel.

"There's a very clear trade off here in that you are surrendering future equity," said McBride, noting that home equity is increasingly becoming Americans' principal way to fund their retirement. "So, look yourself in the mirror and make sure that you're not potentially shortchanging your future financial security just to get into a slightly more expensive home now."

The possibility of losing a big slice of her home's future value didn't put off Courtney DeAnda from using Unison to double the $52,000 downpayment on a home this month.

She and her husband, James, who have three kids, recently entered escrow on a five-bedroom, three-bath house in Vacaville, California, for $468,000. The couple expects to save $417 a month on their mortgage payment by using the Unison program.

"It's a price to pay to help us get into a home that we really love," said DeAnda, 28. "We really don't see much of a negative with using it."

May 22, 2017

Trending: Open communities with gated sections

ST. JOHNS COUNTY – May 19, 2017 – One of St. Johns County's newest master-planned communities is launching a gated neighborhood within the community, and it's a trend that real estate insiders expect to continue.

Shearwater, a development located off County Road 210 that's approved for 2,600 homes, just announced the opening of the Woodlands, a gated section of the community that will have more than 130 homes when built out.

The rest of the Shearwater neighborhoods that are currently open are not tucked behind private gates.

Andy Smith, regional development manager of Shearwater developer Freehold Communities, said the separation of that small part of the community was simply a way to meet customer demands.

"The reason for us doing this gated section was to present another variety in our lineup," Smith said. "One of the things we realized was there's a buyer that wants to be behind the gate and still wants to be in a master-planned community with the high-level resort amenities.

"When we designed this phase back here, the land plan laid out such that it could be its own little exclusive oasis."

Some of the development's biggest and most expensive homes will be located in the Woodlands. D.S. Ware Homes and Drees Homes are building houses that start in the $400,000s and will be as large as 4,000 square feet.

Smith pointed out that a lot of buyers want the added privacy and security of a gated community. At the same time, he thinks the proximity to Shearwater's amenities center provides the right balance of being part of the community but with more security.

At some gated communities, Smith said, people can feel isolated. But the Woodlands is a short bike ride from the pool and clubhouse where many social events take place in Shearwater. And by adding the Woodlands to the offerings, Shearwater has become that much more marketable.

"We really just let the buyer tell us what they want," Smith said. "It's a very healthy mix of people wanting to be in gated neighborhood and not wanting to be in a gated neighborhood."

Ann King, broker/owner of Berkshire Hathaway HomeServices Florida Network Realty office in North Florida, said it's very important for developers to offer the option of gated neighborhoods. She said some clients simply will not consider developments without that component.

"Some people say they have to have a gated community and other people don't want anything to do with a gated community, so it is definitely a strong preference," King said. "I think even within a community when there's a separate section that is gated, that is appealing to people."

Seeing Shearwater and other developments add gated neighborhoods is good for the county, King said. "If we didn't have that option, I think we would lose a lot of sales," she said. "We need that diversity."

Gated neighborhoods are not a priority for every buyer, but some in the real estate industry say it's still very important to many buyers.

ICI Homes North Florida division president Don Wilford said gated communities are still a big part of his company's business. In St. Johns County, ICI is selling homes in a gated portion of Julington Creek called Magnolia Preserve and also in gated portions of Nocatee.

Wilford said another example of ICI's commitment to serving those who desire gated communities is Tamaya in Jacksonville, which is an entirely gated community that will eventually have about 1,000 homes.

"I look for them to stay around forever," he said. "It's an amenity people want."

Wilford, who lives in a gated neighborhood himself, said the added safety of such a community is a huge draw. Not all homebuyers want to deal with the added costs associated with having a gate but Wilford said it is important to a lot of people.

"In my opinion, that would be the No. 1 request," Wilford said. "People feel secure. I live in one. I feel secure."

May 18, 2017

Poll: 49% of renters want to buy within five years

NEW YORK – May 17, 2017 – Forty-nine percent of Americans who don't currently own their home say they expect to purchase one within the next five years – and 10 percent plan to buy within the next year, according to a recent survey by Gallup of more than 1,500 adults. And one in five (20 percent) non-homeowners plan to buy within 10 years.

However, one in four Americans (28 percent) say they have no plans to buy a home, according to the Gallup poll.

The percentage of non-homeowners looking to buy has risen over the past year. Gallup's survey from a year earlier (April 2016) found that 38 percent of non-homeowners did not intend to buy in the foreseeable future, and 41 percent said they would buy within five years.

The most willing buyers tend to be millennials and Generation Xer's. Fifty-two percent of respondents age 18 to 34 say they plan to buy within five years; that number is 58 percent for those age 35 to 54. Only 30 percent of non-homeowners over the age of 55 say they plan to buy within that time period.

The persistent constraints on housing supply, however, pose a big problem for those looking to buy as home shoppers face a limited selection of homes for sale. And as more owners stay put, inventories are being constrained even more.

With current homeowners, 64 percent of U.S. adults surveyed by Gallup say they don't think they'll sell their home in the foreseeable future; 20 percent say they expect to sell within the next five years; 13 percent plan to sell within 10 years; and just 4 percent say they plan to sell next year.

"If real estate demand continues to outpace real estate supply, home prices will continue to rise and could rise beyond what most Americans can afford," says Jeffrey M. Jones, who reported the Gallup poll findings. "To the extent that happens, many would-be homeowners may not be able to achieve their goal of owning a home."

Source: "Gallup Poll Shows High Hopes for Homeownership," Mortgage News Daily (May 9, 2017)

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May 17, 2017

Housing starts down – but not single-family construction

WASHINGTON (AP) – May 16, 2017 – Construction of new homes fell for a second straight month in April, pushing activity to the lowest point in five months.

Housing starts fell 2.6 percent in April to a seasonally adjusted annual rate of 1.17 million units, the Commerce Department reported Tuesday. That followed a 6.6 percent decline in March and left home building at its lowest point since last November. The weakness was led by a big drop in construction of apartments, a volatile sector.

Nevertheless, housing construction has been one of the bright spots for the economy. Analysts expect that the number of Americans seeking homes will rebound in the coming months, driven by strong employment gains and low unemployment.

In April, construction of single-family homes edged up a slight 0.4 percent to an annual rate of 835,000 units. Construction of multi-family units dropped a sharp 9.2 percent to a rate of 337,000 units.

The weakness was led by a 37.3 percent plunge in activity in the Northeast and a 9.1 percent drop in the South. Those gains offset a 41.1 percent rise in the Midwest and a 5.4 percent increase in the West.

While the overall economy grew at a lackluster 0.7 percent rate in the first quarter, the housing sector stood out with a solid 13.7 percent growth rate. Economists are looking for housing to continue to support overall growth for the rest of the year.

The National Associated of Home Builders/Wells Fargo builder index rose to 70 this month, up two points from an April reading of 68. Readings above 50 indicate builders view sales conditions as good. The index has been above 60 since September and the reading hit 71 in March, the highest level since June 2005 during the height of the last housing boom.

Even with construction running ahead of last year's pace, the supply of new and existing homes across much of the country remains tight.

May 15, 2017

More new households opt to buy rather than rent

NEW YORK – May 12, 2017 – The number of new-owner households was double the number of new-renter households in the first quarter of this year, as the share of first-time buyers creeps back toward its historical average, and mortgages for first-timers rise.

In a shift, new households are overwhelmingly choosing to buy rather than rent.

Some 854,000 new-owner households were formed during the first three months of the year – more than double the 365,000 new-renter households formed during the period, according to Census Bureau data. It was the first time in a decade there were more new buyers than renters, according to an analysis by home-tracker Trulia.

Home builders are beginning to shift their focus away from luxury homes and toward homes at lower price points to cater to this burgeoning millennial clientele. In the first quarter of this year, 31 percent of the speculative homes built by major builders were smaller than 2,250 square feet, indicating they were in the starter-home range, according to housing-research firm Zelman & Associates. That's up from 27 percent a year ago and 24 percent in the first quarter of 2015.

The return of first-time buyers is allaying fears that millennials might eschew homeownership permanently. But it also provides an infusion of new demand while housing supply is tight and home price growth is significantly outstripping wage gains.

Source: Wall Street Journal (05/12/17) Kusisto, Laura; Kirkham, Chris

May 15, 2017

Illinois owner sues Zillow over home value estimates

SEATTLE – May 12, 2017 – It was bound to happen: A homeowner has filed suit against online realty giant Zillow, claiming the company's controversial "Zestimate" tool repeatedly undervalued her home, creating a "tremendous road block" to its sale.

The suit, which may be the first of its kind, was filed in Cook County Circuit Court by a Glenview, Ill., real estate lawyer, Barbara Andersen.

The suit alleges that despite Zillow's denial that Zestimates constitute "appraisals," the fact that they offer market value estimates and "are promoted as a tool for potential buyers to use in assessing (the) market value of a given property," meets the definition of an appraisal under state law.

Not only should Zillow be licensed to perform appraisals before offering such estimates, the suit argues, but it should obtain "the consent of the homeowner" before posting them online for everyone to see.

In an interview, Andersen told me she is considering bringing the issue to the Illinois state attorney general because it affects all owners in the state. She has also been approached about turning the matter into a class action, which could touch millions of owners across the country.

In the suit, Andersen said she has been trying to sell her town house, which overlooks a golf course and is in a prime location, for $626,000 – roughly what she paid for it in 2009. Homes directly across the street, but with greater square footage, sell for $100,000 more, according to her court filing.

But Zillow's automated valuation system has apparently used sales of newly constructed houses from a different and less costly part of town as comparables in valuing her town house, she says. The most recent Zestimate is for $562,000.

Andersen is seeking an injunction against Zillow and wants the company to either remove her Zestimate or amend it. For the time being, she is not seeking monetary damages, she told me.

Emily Heffter, a spokeswoman for Zillow, dismissed Andersen's litigation as "without merit." A publicly traded real estate marketing company based in Seattle, Zillow has been offering Zestimates since 2006. Currently, it provides them for upward of 110 million houses – whether for sale or not.

Type in almost any home's street address and you'll likely get a property description and a Zestimate. The value estimates are based on public records and other data using "a proprietary formula," according to Zillow.

The Zestimate feature is the cornerstone of Zillow's business model since it pulls in millions of home shoppers, allowing the company to sell advertising space to realty agents. Zillow makes big money with the help of its Zestimates: In the first quarter of this year, it reported $245.8 million in revenues – a 32 percent jump over the year before – including $175 million in payments from "premier" agents, who pay for advertising.

But there's a flip side to Zestimates. Homeowners, realty agents and appraisers have been critical for years about the valuation tool, citing estimates that too often are far off the mark – sometimes 20 percent or 30 percent too low or too high – and misleading to consumers.

Zillow itself acknowledges errors. Nationwide, according to Heffter, it has a median error rate of 5 percent. Zestimates are within 5 percent of the sale price 53.9 percent of the time, within 10 percent 75.6 percent of the time and within 20 percent 89.7 percent of the time, Zillow claims.

A Zestimate "is not an appraisal," the company says on its website, but instead is "Zillow's estimated market value" using its proprietary formula. Another way of looking at the Zestimate error rate: Roughly one-quarter of the time, the value estimate is off by 10 percent or more of the selling price, and wrong by 20 percent or more 10 percent of the time.

Though the 5 percent median error rate sounds modest, when computed against median sales prices, the errors can translate into tens of thousands of dollars – hundreds of thousands in high cost areas. Also in some counties, error rates zoom beyond the 5 percent median – 33.9 percent, for example, in Ogle County, Ill., and 10 percent to 20 percent in a handful of counties in Ohio, Maryland, Florida, Oklahoma and Illinois.

Some appraisers are cheering Andersen's suit and welcomed the idea of state by state legal challenges.

"They've been playing appraiser without being licensed for years and doing a bad job," said Pat Turner, an appraiser in Richmond. "It's about time they got called on it."

Copyright © 2017, Richmond Times-Dispatch, Richmond, VA, Kenneth R. Harney. Kenneth R. Harney heads his own consulting firm in Chevy Chase, Md.