Property Assessment, Zestimates® and The Value of Your Home

The house across the street from my house is up for sale. I’m reminded of that every time I leave my driveway and I am curious to see how long it will take to sell and at what price. I’m curious not because I’m going to sell my house any time soon, but just because, well, I’m curious. It’s a rare homeowner who doesn’t regularly wonder what their home is worth.

This time of year, homeowners receive their third quarter property tax bills which contain the “actual” assessed value of their homes. Homeowners are billed during the first six months of the municipal fiscal year (July 1st through December 31st) based on the previous fiscal year’s assessed value. So how accurate is that new value?

The “actual” assessed value received in January 2018 is based on the home’s value on January 1st 2017, using sales that have occurred during the year 2016. That assessed value will remain in the public domain for the next 12 months. Meaning that the assessed value of a home in Massachusetts in December of 2018, is based on sales occurring between 24 and 36 months in the past, almost guaranteeing that the “actual” assessed value is not the correct market value.

Submitting the assessed value of a home is a required field in the multiple listing service so there is no getting away from that number even if it varies significantly from the current list price. Individual assessed values enter the public domain as a public record published by every town as required by law.

Good luck getting a local assessor to change that value; it does happen, but rarely. Local assessors are required by state law to assess property at its “full and fair” value. If you have ever talked to an assessor about the process they use, you will come away believing that they have done just that. Of course, time-frame is everything. What assessors are actually trying to do is establish a value for your home relative to your neighbor’s home and every other home in town. Most towns revalue properties every year, though they are only required to do so every three years. Year three values must be reviewed and certified by the state.

There is a dilemma in the residential real estate business that agents often are confronted with: The highest value ever published is the correct value of a property. This is almost never accurate. In an active, appreciating market, this value may be low; more often third-party providers of estimates like Zillow, or Redfin using proprietary algorithms, compete to provide value estimates that regularly vary from each other by tens of thousands of dollars.

These third-party providers admit that their estimates are not capable of directly taking into consideration the aesthetics of a home or its precise location and the accuracy of their estimates are off by 4 or 5 percent at best, which is not insignificant.

The estimates given for my house varies by $119,000 from one of these sites to another. So, you know where this is going. Why rely on an algorithm or some form of artificial intelligence when you can have real time intellect and the practical experience of a Resident Expertsm?

To Buy or to Rent, That is the Question…

By: Victor Normand

There are many considerations when trying to decide whether to buy or rent a home and there is no right answer that will suit everyone.  This blog will deal only with the economics of the decision using a realistic set of assumptions and current market conditions.  It’s a good place to start and allows for other life circumstances to inform the final decision.  Just under 65% of Americans are homeowners and a majority of those who do not own homes would like to some day, according to the National Association of Home Builders. It’s still a big part of the American Dream.

In order to conduct the analysis, a standard model was used to compare both the short term and long term costs and benefits of both owning and renting.  The specific numbers used to populate the model come from  recent sales and rentals as published in the local multiple listing service (MLS PIN). A time period of five years was chosen as the length of occupany for both the renter and the buyer. The metrics used for both the sold and rented units were:

We found 23 sales and 25 rentals that met these criteria.  The median sale price was $185,000 and the median rent was $1,550. The simple average was $177,661 and $1,541 respectively  The median was used because there are as many sales below that number as above, so extremes do not effect the selected values.

For the rental units, we assumed rental insurance of $240 per year and annual rent increases of 4% which seems to be the market for two bedroom units.

For the sold units, we assumed 5% downpayment, a 30 year mortgage interest rate of 5.0 (FHA),closing costs of $6,000, property taxes of $2,123 annually, condominium fee of $393 per month, mortgage insurance at .5% of the mortage amount, and condominium unit owners insurance of $240 annually.  Property taxes and condominium fees were also increased by 4% annually to be consistent with rent increases.

Based on these criteria, the total monthly cost to buy was $1,607 and the monthly cost to rent was $1,570.  Over a five year period of ownership, the cash paid out for the buyer would be $97,879 vs. $101,944 for the renter. So, if you are paying more than $1550 per month and you can find a nice condominium for anything less than $185,000, buying is your best economic option.

There are two real sweetners for the buy option.  Assuming a combined state and federal tax rate of 20%, a five year tax benefit of $10,752 would be realized by the homeowner.  Additionally, the homeowner would have paid down the mortgage loan by $14,361 and can expect the property to have appreciated in value by $40,081 over that time period.

As they say in investing, past performance is not necessarily an indicator of future returns.   The same holds true for real estate investing, including the purchase of a primary residence.  But unlike stocks and bonds, it’s easier to ride out the slow or down years simply because you need to have someplace to live.

So, if you’re secure in your job, have managed to save for a down payment and have a good credit score,(680 or above) a closer look at some available real estate may make sense at this time.  And as always, while formulas and rules of thumb are a good place to start, get a professional like a Resident Expertsm  to work closely with you on this journey.

Pricing Property Using Square Footage of Living Area

By Victor Normand
Published: November 2013


Square Footage

Pricing an individual property using only an average square footage price of recent sales is never advised.  A price per square foot of living area alone often neglects to take into consideration many things like location of the property, how square footage is actually calculated and distributed, or the condition of the home.  However, everyone uses square footage pricing; buyers, sellers, real estate agents, appraisers, and local assessors to approximate the value of property.

At the end of the day, it is the marketplace that determines what the sale price of a home is, so looking at recent comparable sales information is advised.  The most efficient way to transfer the actual sale price of a property to a current one on the market is to begin with the sale price per square foot and adjust from there.  Those adjustments need to include:

  • Location – the same neighborhood in the same town
  • Age  – new, nearly new, mid-century, pre-war, antique
  • Style – colonial, cape, ranch, contemporary
  • Condition – depreciation or replacement attributes

The chart below shows the average sale price per square foot in the past year for many of the communities in our area.  The current list price for single family homes on the market is also shown along with the ratio of current list price to actual sale price for the previous year.  While this information has limited utility in pricing an individual home, it does provide some indication of where the price should be.

blog chart
These aggregated numbers are useful in other ways.  They provide information useful in relating towns to one another in terms of overall home value.  For the towns listed above, properties in Concord list for higher prices than those in the other communities.   Also, the relationship between listing prices and home sales for the previous year help to provide a picture of where home sellers and their real estate agents think the market is headed.  For the most part, sellers expect the market to continue to be strong and they are pricing homes accordingly.

Sometimes the numbers are difficult to interpret.  Although the pricing in Harvard and Concord seem similarly aggressive at 133% of last year’s sale prices, interpretation of this ratio might be different.  In one instance, the town of Concord with its greater proximity to the Boston Market, which is very strong, and the low absorption rate of three months (half of what is generally considered a balance market) seems to reflect a strong forward looking market, whereas higher expected prices in Harvard may have more to do with an extended period of depressed prices and a market trying to regain its place relative to other nearby communities.

So, if you are going to use square footage as one factor in pricing a home, start with accurate measurements.  Although there is no “right” way to determine correct square footage, here are some guidelines as established by ANSI (the American National Standards Institute):

  • Measurements are taken from the outside of the building and include the thickness of interior walls, closets and hallways
  • Below grade spaces like basements, even when finished should not be counted as living area, though an adjustment should be made for that finished space
  • Any rooms or accessory spaces not directly accessible from the main house cannot be counted
  • Enclosed porches can only be counted if they are heated using the main heating source or other permanent systems
  • Finished attic space can only be counted where the ceiling height is at least seven feet

Finally, after you have taken a stab at pricing your home or a home you would like to buy, try taking advantage of a Resident Expertsmto put a finer point on your work.

The Effect of Inflation and Personal Income on Long Term Home Price Appreciation

By: Victor Normand
Published: October 2013

The past year has been a good year for home sales and appreciating values.  In general, the Acton area has experienced home sale prices about 10% above last year’s level.  This makes home owners feel good and a bit wealthier and home buyers anxious, with both sides wondering where prices are headed.  Are we in a period of prolonged rising home prices?  Or are we in a bubble that could burst suddenly and send prices crashing back to earth?

Predicting the future of home prices is like predicting anything, nobody knows for sure what tomorrow will bring, but we do have history and past experience to point us in the right direction.  Local markets can vary wildly from one another and sometimes move in the opposite direction of the larger market over the short run. However, time tends to smooth out the rough spots.  Fundamentally, home prices must mirror inflation and changes in personal income. If home prices increased greater than the rate of inflation and per capita income, eventually, no one would be able to afford to buy houses.

As the chart shows, over the past twenty years (and I am sure for longer than that), home prices have indeed matched the general rate of inflation in the U.S.  If anything, they have lagged somewhat which makes sense given the prolonged period of depressed housing markets in many parts of the country.  So, in general, look for home prices to continue to play catch up.

blog chart
The other factor fueling home price increases is personal income.  If personal incomes increases faster than the rate of inflation, home prices can be expected to rise above the rate of inflation.  That helps to explain why the twenty year home price experience in Acton has outpaced the average for the rest of the country for both inflation and the general Home Price Index.

Over the past 20 years, per capita income in Massachusetts has increased at a greater rate than the country as a whole and the per capita income in Acton has consistently been higher than the statewide average. .  So, it is not surprising that states and communities showing patterns of greater income growth would also have higher home price appreciation.

Per Capita Income*



Rate of Increase










 Where are we headed?  Once the local housing market reaches equilibrium where the current supply shortage is corrected, expect price appreciation to continue, but at a slower pace.  Given the past history as well as the prospects for continued growth in incomes in the area, an extended period of steady 4% home price appreciation should not be unexpected.

As we said, predicting the future is not a perfect science.  So, the best advice is to keep in touch with a Resident Expertsm for the latest in market trends.

Great Information from Service Professionals for Home Sellers

shutterstock_141754537 [Converted]By: Victor Normand
Published: September 2013

You may have heard a lot about the shortage of homes for sale in many communities, including many of the towns in our area.  While it is a fact that the number of homes being listed is down and the competition for well-marketed homes has become more intense, the outlook is that more homes are likely to come to market this fall and certainly next spring.

A big reason why more homes will come to market is that higher selling prices are occurring.  And higher sale prices mean many potential home sellers now have sufficient equity in their properties to make selling a realistic economic consideration.

Selling a home is a complex undertaking that gets more complex as you become familiar with the required steps   At Acton Real Estate we have tried to make the experience  more manageable by breaking things down to ten basic elements (contact us for a copy of  “The Home Selling Process”  which details how we go about selling homes).   The most important steps are pricing, staging, marketing, negotiating, and closing, among others.  Another key step is vendor coordination, which relies heavily on the agent’s knowledge and experience with actual property service providers.

In order to bring some clarity and efficiency to the process, we’ve gathered our trusted Vendor Partners together at an event called,  “The Agents Roadshow for Home Sellers”.  This tradeshow will be held at The Holiday Inn in Boxborough on Wednesday, September 25 from 5:30 to 8:00pm.   Here you will be able to meet with the pros and have all your questions answered.

You may recognize some of the vendors who will be at the event.  We have worked with all of them; they are among the best around because they always get the job done well. We can help answer your questions about:

  • Credit and current interest rates
  • What kinds of upgrades buyers expect
  • Which rooms could use remodeling
  • Increasing curb appeal with landscaping
  • Choosing the right paint palette to unify your home
  • Straight talk about environmental issues (mold, radon, etc.)

Whether you have questions about these issues or others, you will find advice from these folks helpful for all these topics.

So, if you are thinking about selling your home now or sometime soon, this is the “one-stop shopping” forum that will help you put all the pieces together. There will be no formal program or presentations, just you and your neighbors in the company of these service professionals.   Of course, the Resident Experts sm will be there as well to talk about the current market, and how to take the next steps along the way to a successful home selling experience.

First Time Home Buyers – A Call to Action

By Victor Normand
Published: July 2013

The 25 to 34 year old demographic typically makes up the largest percentage of first time home buyers, but they are largely absent from the scene nationally and in our market.  Beset with student loans, challenging job circumstances and a conservative lending environment, these future homeowners are holed up at home with their parents or in rental units waiting for things to change.

The economy is improving, but not fast enough to deal with the unemployed or underemployed who might like to own their own homes.  And lenders are cautious in making loans to those who might have good jobs with good incomes and good potential for advancement, but they have education debt (which they are managing) and only a little cash for a down payment.

That’s not to say that programs aren’t out there to help.  The Governor recently announced a new initiative called the “Home Ownership Compact” to help first time buyers.  Six banks in the State of Massachusetts have signed on to this initiative, which should be rolling out very soon.. However, the major players behind almost all of the mortgages made in the country — Fannie Mae, Freddie Mac, and the FHA — are effectively on the sidelines when it comes to first time home buyers as we have described them.

Expect that to change at some point, now that interest rates have begun to rise and the refinance market has come to a near halt. The big banks seem to have more influence on the aforementioned government-backed entities than your average consumer, and soon they will look for new markets to replace their lost refinance business. For those first time buyers who have good jobs, less than perfect credit (as in paying down student loans), and little cash, some creative borrowing may be in order.

In the past we have suggested that borrowing from parents may be a good option.  Most 401(k) employer sponsored programs allow participants to borrow from their own accounts; often with very low interest which accrues to the participant.  Even IRA’s funded by a potential first time home buyer allows contributors to take penalty free distributions for the purchase of a home.  Given the low rate of return on these accounts, an interest bearing loan to a first time home borrower can be a good investment.   Get the facts to see if it’s a good option for you.

Recently, we have shown that the purchase of a condominium can be a good investment.  In fact, in our market, most condominiums priced under $175,000 are being purchased by investors, usually with cash.  Unlike recent single family home sales, which have been showing increasing price appreciation, condominium sale prices continue to decline, while rents on these units have been increasing.  On the basis of an income approach to value alone, sale prices for condominiums will eventually rise.
Every real estate deal is unique with different criteria involved depending on the condo complex.  Ratios of Owners vs. Renters come in to play along with knowing what specific type of financing might be available. Trust a “Resident Expertsm,” to apply their knowledge and expertise to insure a smooth transaction. You’ll move quickly through the potential pitfalls and learn something about the real estate market. It’s what we know that makes the difference.

A Condo May Present Income and Growth Opportunities

By: Victor Normand
Published: March 2013

About this time each year we like to see what is happening with the condominium market.  To begin with, we found that the overall number of condominiums sold and the number rented has remained relatively constant for the past several years.  In Acton, during the” post-bubble” period,(after Sept. 2008) about 25 to 35 condominiums priced at or below $175,000 have been sold each year, and t between 55 and 70 rented.

For the purpose of this article, we will be using a maximum sale price of $175,000.  This price is consistent with local affordable housing guidelines making this sale price within reach of family incomes at 80% of the median,  or about $80,000 per year in Acton.

As we have done in the past, we looked at both the home ownership and the investor perspective for our analysis.  The assumptions made for the study include:

  • The statistical period runs from March 1, 2012 to March 1, 2013.
  • All condominiums sold during that period under $175,000 were included and the average sale price used in the analysis.
  • The average rent for all condominiums rented during that same period was used.
  • Similarly, the association fees and property taxes were averaged for all condominiums used in the study.
  • The average mortgage interest rate for the past 12 months of 3.59% was used.
  • Rent levels, condo fees, and sale price are typically set to reflect the treatment of utility costs; consequently, no cost line item is included for utilities.

First Time Buyer/Investor Condominium  in Acton

                                                    First Time Buyer

     Investor (Cash Buyer)

Sale Price

 $116,559  $116,559

Down Payment @ 20%


Loan Amount




Term of Loan (years)


Loan Rate


Monthly Payment



 $205  $205

Condo Fee

 $331  $331

Monthly Costs

 $959  $536

Average Rent

 $1,143  $1,143

 Net Monthly Cash

 $184  $607

Annual Return on Cash

9.5% 6.2%

Given the challenges of financing a condominium purchase requiring government insured mortgages, we have abandoned that method and instead  are relying on conventional financing with 20% down for the home ownership analysis.

If a buyer is able to find a condo to purchase that meets or beats the metrics used in our hypothetical model, the economic returns are significant.  A home buyer who has been able to save up for the down payment can enjoy significantly lower monthly  housing costs and a greater effective return on the cash used for the down payment than any bank now pays on deposited funds.

The investor, who transfers available funds from any insured investment to the purchase of a condominium, will similarly see a very good return on their money.  Even greater returns might be realized depending on how an investor is able to fund the purchase.  A line of credit against other financial assets or a home equity loan usually comes with even lower interest rates than are used here.

Finally, all this good investment strategy comes at a time when condominium values are still depressed.  An improving housing market, the beginnings of easier credit and the lack of new inventory, all bode well for higher values in the not so distant future.

Why not start working with a Resident Expert smto find your good deal?