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The Crossland Team
Sylvia Crossland, Broker Steve Crossland, MPM (512) 301-5811 |
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Does MLXChange MLS Software Calculate Price Per Square Foot Properly?
April 30, 2008
I have have been critical of our new Austin MLS System called MLXChange since it was first placed into production in Austin in November 2007. It produces what I believe to be incorrect data. I was contacted yesterday by a product manager from MLXChange because they saw my last blog article showcasing some of the bad data. In that article, I mentioned that the price per square foot is not calculated correctly by the system.
The product manager was very nice and I enjoyed our conversation. She wanted to explain to me how the average price per square foot numbers are calculated and that, in fact, the numbers are calculated correctly. She is right on a certain level. That is, if one understands and follows the formula being used by MLXChange, it can be argued that their number is a mathematically correct.
But I maintain that the method being used by MLXChange to calculate average price per square foot is not the correct formula. I’m not smart enough to articulate it in a scientific or mathematical argument, but my intuition and instinct tells me I’m right. I’ll do my best to explain below and I hope a smart reader can chime in and offer a mathematical or statistical point of view and explanation of why two different methods, each of which seems correct independently on face value, produce different results.
So let’s look at an example that illustrates the MLXChange formula versus the method I believe most of us would use, and the method I believe makes the most sense. I’ve created a small sample set of data, shown in the chart below.
|
Square Feet
|
Sold Price
|
Sold $ per SQFT
|
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| House 1 |
1200
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$150,000
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$125.00
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| House 2 |
1300
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$110,000
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$84.62
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| House 3 |
1400
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$95,000
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$67.86
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| House 4 |
1500
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$120,000
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$80.00
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| House 5 |
1600
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$85,000
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$53.13
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| MLXChange Avg |
1400
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$112,000
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$82.12
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| My Average |
1400
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$112,000
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$80.00
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What is the average sold price per square foot of the 5 homes shown above?
MLXChange computes the Average Price per Square Foot by adding together all of the individual price per square foot numbers (the five psf numbers in the far right column) and dividing by the number of sales (five). This produces a result of $82.12 per square foot as the average price per square foot of the sold homes in our sample set.
I compute the average price per square foot by taking the average sqft size of all homes (1400) and dividing it into the average sold price of all homes ($112,000). My result is $80 per square foot. That’s what you would see on a stats chart that I manually produce and post regularly on this blog.
The two methods, in this particular example, produce results that are 2.65% different. 2.65% is not an insignificant amount when pricing a home. It’s a bigger gap than the List/Sold price difference on most sold homes in Austin. It’s a $5,300 difference on a 2500 sqft home at our example psf rates. Would you like to sell your home for $5,300 too little? Would you like to pay $5,300 too much, based on your Realtor’s CMA, produced by MLXChange?
Let’s dig deeper into why I think the MLXChange method is flawed.
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Responding to Unsolicited Offers to Buy Your Home
April 27, 2008
I received a call recently from an Austin homeowner looking for a place to rent. After further questioning I learned of her situation. The neighbors have offered to buy her home, and she is willing to consider selling it. The neighbors have outgrown their smaller home and would love to move up to her larger home while remaining on the same street. The homeowner is now exploring rental options in case she were to sell.
“Have they indicated a price they’re willing to pay?”, I asked? No.
“Have they provided a pre-approval letter indicating their financial ability to buy?”, I asked. No.
“Well”, I said, “you’re out looking for a place to rent but you haven’t first established that your prospective buyers are legitimately interested. How do you know you’re not wasting your time? Do you really want to spend time looking for a home to rent before knowing that your neighbors aren’t just daydreaming about your house, and that they might turn out to be flakes?”
“No”, she said. “I guess not. What should I do?”
When you, as a home owner, are approached about selling your home, and your home is not on the market for sale, there are a couple of up front requirements you should request before you spend even 3 seconds thinking about it. Assuming you are open to the possibility of selling and you wouldn’t simply say “no thanks” immediately, you would tell the prospective buyer the following:
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Austin Property Tax Appraisal Map 2008
April 24, 2008
The Austin Statesman published this map today of the property value increases around Austin, broken down by School District area, for 2008. There is a link to the full story below.
This is a good time to once again draw the distinction between the Appraised Value of a home for property tax purposes, as set by the County in which the home is located, versus Market Value of a home, which is determined of course by supply and demand.
The County does in fact attempt to value your home at market value, but they do not have the resources to perform an individual market analysis for each property. Instead, they paint with a broad brush across neighborhoods and areas.
The majority of appraised values around Austin are below market value, but there are plenty that are above. Also, just because the Appraised Value of a home increased 12% from last year, that doesn’t mean the Market Value of your home (what you could actually sell it for compared to last year) increased by that amount. The appraised value was probably low to start with, so the amount of the appraised value increase may or may not have any correlation with true market value.
Yesterday a home owner contacted me asking for a CMA on his home. The County appraised value is over $200K. The CMA I ran showed the market value, as of Jan 1st of this year, at about $180K. That owner will need to file a protest, gather data, and attend a protest hearing to have the price lowered. Otherwise, he’ll be paying too much in property taxes to Travis County. So don’t assume your value is low. It may be located in one of the neighborhoods or price ranges where the broad brush of the county over-estimates the value.
Huttoparke Problems Continue, Values Suffer
April 22, 2008
It is with great fascination that I first saw last year Huttoparke home owners made sure that everyone knew how poorly their homes were built. They may have had no choice but to bring public attention to the problems they were having. The homeowners felt that Lennar was unresponsive to their complaints about poor construction quality. Lennar Homes did have some major problems with sheetrock cracking, foundation movement, and crumbling driveways as Huttoparke is built upon the clay farmland soil prevalent east of IH35 in Austin, and these homes were apparently not built with sufficient consideration given to the implications of expansive soil.
Today, yet another Huttoparke story in the Austin Statesman brings attention to the construction quality problems of the neighborhood, and reminds me why I don’t sell homes in these types of subdivisions in the first place. Never have, never will. We refer buyers who want those homes to other Realtors, mainly because I don’t want to sell poor product.
If you’ve followed my blog or read our investment page, you know that Sylvia and I believe, for most buyers, especially those seeking stability and appreciation, a home in an established neighborhood is a safer real estate purchase than venturing out to buy a new starter home on the edge of sprawl.
The reason is that you never know for sure what you’re getting into when you buy in these fast growing new starter home subdivisions. In this case, in Huttoparke, you would be living/owning a home in a neighborhood where the home owners have resorted to picketing the builder, putting signs in their yard to let everyone know how poorly built the homes are, plastering their vehicles with anti-builder messages, setting up websites to warn other buyers not to buy there, and in general driving their property values into the ground.
Let’s see what property values have done in Huttoparke the past few years:
Austin Sales Market Update – 2008Q1 Stats Breakdown by MLS Area
April 21, 2008
Below is a chart breaking down Austin MLS Sales of single family homes by MLS area for Jan-Mar 2008. Not all MLS areas are included due to low or no sales activity in some.
Of the 42 areas covered 36 saw a decrease in the number of homes sold and 6 saw an increase in the number of sales. 32 of the 42 areas saw an increase in Average sales price, 35 saw an increase in median sales price, 30 saw an increase in average sold price per square foot. Only 15 of the 42 areas saw a decrease in average days on market and only 7 saw a decrease in median days on market.
In summary, sales are slow in Austin but overall prices are holding steady or rising. Chart of 2007/2008 sales stats by MLS area is below.
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Austin MLXChange MLS Software Still Falls Short
April 20, 2008
I just finished running my stats for my Austin Rental Market update. This month I only had to report three listings to the Austin Board of Realtors which had bogus and incorrect data. Check the screen shot above to see the sort of thing Austin Realtors deal with on a regular basis.
Hopefully if you have an agent running a Market Analysis for you, he or she is keenly aware that the data from MLXChange cannot be trusted. It needs to be double checked before you rely on it. How would you like to go into an important math test with a calculator that spits out bad answers? Well, imagine trying to be an effective Realtor with an MLS System that spits out bad data.
As agents, we really have to pay attention to the MLS data from MLXChange. I always have a calculator at my side when crunching numbers because the MarketLinx MLXChange MLS system for Austin cranks out unreliable results. I could make 10 screenshots like the one above with other examples of miscaluculated data, the most frustrating of which is incorrect price per square foot calculations.
Those price per sqaure foot amounts you see above?… they are incorrect. I should have circled those in red also for the screen shot. Divide the average square foot Sold/Leased price by the average square foot amount from the colums to the left and the number is way off. They’ve had 6 months to fix this and it still produces incorrect values.
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Austin Rental Market Update – March 2008 and YTD
April 20, 2008
Homes in Austin are renting for 8% more than last year, on average. Average rent price for homes across the Austin Metro area was $1401 per month for March 2008 compared to $1295/mo the year before. The Median leased price remained about the same at $1200. Homes are renting fast this March. The average days on market was down to 37 days from 42 last year. The Median days on market was 26 compared to 28 days last year, which means half of the rental homes in Austin that leased through the Austin MLS rented in 26 days or less, and half took more than 26 days to rent.
The average rental price per sqaure foot is up almost 6% to $0.73 compared to $0.69 last year. The average size rental home in Austin was 1915 sqft and the median size was 1794 square feet.
The number of homes rented was down about 10%. More renters are renewing leases as fewer can qualify for home purchases than in the past several years. This is good for landlords. Note that our average rental rate of $1401/mo for March 2008 is still lower that the average of $1497/mo that renters paid in the year 2000 and the $1524/mo renters paid in 2001 before Austin rents tumbled for four years and bottomed out at $1235/mo in 2005. So we’re still trying to climb back to where we were 6 or 7 years ago.
Below is the data chart for March Rentals in Austin. Further below is a year to date chart, breakdown by city, and a historical graph of rental rates in Austin from 1999 through the end of March 2008. As usual, comments and questions are welcome.
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Feb 2008 |
Mar 2008 |
Mar 2007 |
Yr % Change
|
|
| # Leased | 563 | 594 | 659 | -9.86% |
| Avg List Price | $1,370 | $1,412 | $1,305 | 8.20% |
| Median List Price | $1,200 | $1,250 | $1,200 | 4.17% |
| Avg Leased Price | $1,362 | $1,401 | $1,295 | 8.19% |
| Med Leased Price | $1,200 | $1,200 | $1,195 | 0.42% |
| Avg Size SQFT | 1901 | 1915 | 1874 | 2.19% |
| Median SQFT | 1755 | 1794 | 1769 | 1.41% |
| Avg $ per SQFT | $0.72 | $0.73 | $0.69 | 5.87% |
| Avg Days on Mkt | 39 | 37 | 42 | -11.90% |
| Median Days on Mkt | 27 | 26 | 28 | -7.14% |
Below is the Year to Date Comparison chart.
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Austin Eviction Aftermath and the Cost of Rental Property Turnover
April 19, 2008
Last Tuesday my tenants did not show up at Eviction Court, so I was awarded possession of the property. Afterwards, I immediately drove to the property to find it trashed, as expected. I own this particular property. The tenants had lived there since 2001 and had been good tenants until about a year ago when they started having payment problems. I worked with them as best I could. They would fall a month behind. Catch up. Fall behind again. Catch up. And it became a cycle that I normally won’t allow.
But after I discovered they had their deadbeat adult son living there, and he mouthed off and cussed at Sylvia when she knocked on the door last month to see if they were still living there (after we again received no rent and no communication), I decided to call it quits and I initiated the eviction process. I knew in doing so I would be incurring now a fairly expensive makeready and turnover expense.
This brings me to a point I always try to make with prospective investors thinking about buying their first rental property. If you can’t afford to take the occasional big financial hit that can happen to any landlord at any time, don’t buy rental property. As I walked through my home, strewn with abandoned belongings, including a wrecked motorcycle left in the garage, I concluded quickly by rough estimate that I was looking at a very costly turnover, probably up to $12,000 depending on what I ended up doing on the rehab. This house will need the full treatment.
How did I arrive at $12,000 of the top of my head? I’ll itemize it below:
$2300 = Lost rent prior to the eviction.
Almost two months lost rent because I was slower than I normally would be due to my long-term history with the elderly tenants and hoping they would come around. A managed property would have been dealt with much sooner, so I broke one of my own rules and it cost me almost an entire additional month of lost rent by being slow.
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New Crossland Real Estate Website and Blog – All Wordpress Now
April 18, 2008
After spending the past few months redesigning and completely redoing our Crossland Team website and blog, it’s finally done – well, close enough. It’s live and you’re seeing it now. I’m still ironing out some things, but that will always be true with any website, forever. A website is never really done. Whew! It was a lot of time and effort.
The problem I had with the old website was that it had been cobbled together using the Joomla CMS, OpenRealty for our Listings, Wordpress for the blog, and then we sent users off-site for the Austin Realtor Listings search because I never could get that part to function correctly inside a framed Joomla page.
Having what was really three separate sites trying to work together and appear as one made it a nightmare if I wanted to do something as simple as add another menu item. To do so, I would have to make changes to the coding of three different back-end templates, otherwise the site would lose the consistent navigation and look it had. I can’t believe I let myself get talked into a setup like that to begin with. It was a real mess.
The new website, for which this is my first blog article, runs 100% on Wordpress except for the Our Listings manager, which is an old customized version of OpenRealty that my programmer Ben at Seedling.com integrated into wordpress for me.
The advantages of having a Wordpress based real estate website are numerous, as I will explain in further detail below.
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Property Tax Appraisals Rising in Austin Area
April 17, 2008
Home owners will be receiving their property appraisal notices from your County Tax Assessor this month or in May. Most will see value increases due to the continued strong job growth and low unemployment in Austin and surrounding areas. Job growth and employment drives the real estate market more than any other factor. There was an article in today’s Austin Statesman about it, which I will provide a link to below.
But first, there seems to be a lot of confusion about how property taxes in Texas are calculated. This discussion comes up with almost every buyer we help, especially those relocating from outside Austin. Often, buyers make the mistake of using the “Estimated Property Tax” field that shows up on MLS listings to help rate a property. Often I’ll hear, “this property has a much lower tax amount than that other property – our payment would be $120/mo. less”, to which I respond, “ignore that number you see on the listing, it means nothing. Ignore it completely. Don’t even look at it. It’s not valid data”. Nice, huh? That our MLS Maestros clutter our MLS printouts with completely useless and bogus data.
Why would our Austin MLS listings show a field called “Est Taxes” that can’t be trusted? Without going into a sidebar tirade about incompetence, failed leadership, computer programming, and other issues, let’s just say it’s “garbage in, garbage out”.
The estimated tax amount shown on the MLS Listing is based on the current tax rate multiplied against the appraised value set by the County, not market value. It’s not uncommon to see a $280,000 home with a $220,000 appraised value. So, a buyer purchasing a $280,000 home with an appraised value of $220,000, would see on the MLS Listing an estimated tax amount that is $1350/yr below what they will actually pay if the appraised value catches up to market value the following year.
How should a buyer determine the property tax amount to use in estimating monthly house payments?
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