Here in Teton County Idaho, closing the transaction is a bit more complex due to the proration of utilities at closing. A couple of things need to be taken into consideration. Those items typically include property taxes, electricity, liquid propane or oil, water and sewer bills, local improvement district assessment, and so on.
Most of the above items will be addressed in any real estate transaction in most every state. Here and Idaho, taxes are assessed in arrears. I have written a few different articles on how property taxes work, I’m happy to provide that link. If anyone has pre paid their taxes, they will get a credit at closing. Otherwise the seller might have a deduction on their closing statement and the buyer would be responsible for the entire tax bill when it comes due in this scenario.
Things I would like to focus on would be electricity, liquid fuel, and Municipal Water and Sewer bills.
When it comes to electricity in Teton County Idaho, the provider is Fall River Electric. Fall River Electric is actually a co-op with over 13,000 members in three states and eight counties. The coop owns and manages several hydro-electric stations in the region. The Coop operates on a non-profit basis with a primary goal to deliver safe and reliable electricity to it’s owners. Revenue that exceeds the cost of delivering this service – the members of The Coop is allocated back to the owners in the form of capital. This capital is distributed approximately every 20 years. Over time this Capital accumulates. So what happens if you sell your property prior to receiving your funds we’re at the co-op only distributes every two decades? The answer is that you are still entitled to these accumulated funds, but you can’t receive payment until distributions are made. With that being said, if you’ve owned the property here and Teton County for any significant amount of time, it’s a good idea to make sure you continue to keep your address updated with your account at Fall River Electric. In the short-term, you will be working with prorating electricity charges through the date of closing. Fall River is extremely efficient when it comes to keeping track of members accounts. It is a good idea for a new buyer to set up an account prior to taking possession, and providing the exact date of closing. If the seller also provides the exact date of closing, Fall River Electric Kim Bill accordingly. For this reason, we usually don’t see any prorations on a closing statement when working with your real estate agent and Title Company. It’s also important to remember that Fall River tides the bill to the property and not the owner. Even if the owner leaves an unpaid balance, it will run with the property in the new owner will be responsible to make that payment. Most of the title companies are very good about making sure balances are current prior to closing.
Liquid propane and fuel oil or diesel fuel is a different story. Idaho’s contract provides for a section that describes who is ultimately responsible to receive, or pay for any fuel left in a tank upon closing. Since we don’t have natural gas piped and metered in the area, and very few Community Propane systems with meters, this comes up frequently. If the contract states that the buyer is responsible to reimburse the seller at closing for fuel remaining in the tank, a representative from the title company who acts as a third-party will usually get a reading on the tank or a percentage level and to multiply that by the size of the tank and at the current rate. In this circumstance, you will see a proration or a credit or a debit on the closing statement. Build is less common, fuel oil is something that comes up periodically. If the buyer is not responsible to reimburse the seller at closing they are entitled to any remaining fuel in the tank. In this scenario, it’s easy peasy. If the buyer is required to reimburse the seller for the fuel remaining in the tank, it gets a little complicated without a gauge present to provide information as to how much fuel is left in the tank. The basic process for testing how much fuel remains in a fuel oil tank is basically a dipstick similar to you are car oil. Oftentimes The seller might top off the tank so that they can calculate based on a full tank. Alternatively, the buyer can top off the tank and deduct that amount from the total tank volume. There a few other moving factors with all of this, usually comma and more specifically with liquid propane, the tanks are never filled to 100%.
Water and Sewer is also a bit peculiar when it comes to the way things operate in Teton County Idaho. In most cases, the cities do not want to try to prorate to the day any bills as it complicates their Billing System. In most cases the buyer and the seller are able to come to an amicable agreement as to who will pay for it, or how they will split the difference. If a tenant resides in the property it can further complicate things as the city’s generally require owners to keep the city water and sewer Billings in their name since the owner is tied to the property and the Tenant is not. This allows the city to have better control with regards to who is using the service comma and who the owner is. If a tenant moves out of the property, they would rather be able to communicate with the owner as opposed to keeping track of the different residents or tenants in each property.
Alright, this has been coming for a while. The good old Zestimate.
For those of you that are not entangled in the real estate community, and specifically Zillow, (an online platform for real estate agents to connect with the public, and for the public to search for available real estate) a Zestimate is basically in algorithm or program created by Zillow to automatically value properties based on other recent sales. Zillow describes the Zestimate as a proprietary formula to estimate market value.
Before diving into this, understand that I am not a fan of the Zestimate. Read on for my biased opinion on the program, and its “proprietary formula”…
I’m going to break this down into a few sections. How it works, the difference between a Zestimate, a CMA, and an Appraisal, why it doesn’t work (biased opinion) and in what circumstances you should use it.
How it works
To some extent, I’m speculating here. However, I do have a fair amount of experience with these programs, algorithms, and a general sense of how the digital world functions. That being said, here is how I think it works…
Zillow’s primary function is to utilize incoming information feeds from Multiple Listing Services (programs where Real Estate Agents pool listings) to provide a one-stop-shop for customers, (primarily buyers) to view all listings for sale in one location. Zillow doesn’t really make any money doing this. Zillow’s moneymaker is real estate agents. Real estate agents pay for advertisements to promote themselves on Zillow, hoping to connect with potential buyers. Zillow is also able to obtain information on sales as well, where multiple listing services and/or states allow it. There is so much data from all of these multiple listing services that Zillow has been able to create an algorithm for individual markets to automatically value properties based on their basic features. These basic features can include square footage, landscaping, acreage, bedrooms, bathrooms, recent remodels, the list goes on. For the most part, the real estate industry’s information data feed, referred to as a RETS feed, provides the same information Nationwide. Some areas might have a standardized feed to include amenities like pools, proximity to a golf course, and even information on local schools. Most multiple listing services provide the information on the nearest school, and I believe Zillow can pick up on this information to include it as part of the overall valuation. So, recent sale data comes in, and the subject property is adjusted based on its size, location, amenities, etc.
The difference between a Zestimate and an Appraisal
You will receive all sorts of disclaimers from Zillow stating that is Zestimate is not an appraisal. That is because it is not. You will receive the same disclaimer from a real estate agent when they provide a broker’s price opinion or market analysis. However, while market analyses and appraisals are similar in the way that they are prepared, I do not believe the Zestimate is. A sales appraisal is prepared by choosing similar properties and adjusting those “comparables” to obtain the value for the subject property. This method is how brokers and appraisers alike are trained in the industry.
As opposed to the above method, my assumption is that the Zestimate simply adjusts the subject property’s value based on its square footage or amenities. While this might seem similar, it does not produce the same result.
Why it doesn’t work
To be clear, I’m not saying that it is wildly inaccurate. Truthfully, I guess that means that an argument can be made that it does work, but I digress.
The biggest problems with the Zestimate, in my opinion, is lacking data and niche markets.
Lacking data – if you recall from above, Zillow relies on data entries from local multiple listing services to arrive at a value based on other sales and the amenities included with those sales. However, not all multiple listing services provide sales information publicly. In some cases, it is a non-disclosure situation. Idaho, for instance, is a non-disclosure state. In these circumstances, Zillow must rely on data entries from real estate professionals. Based on my own personal experience, I can tell you that not all, if not very few real estate professionals actually take the time to enter all of the correct data for a recent sale. In Zillow’s defense, they did have the initial list price data, features, and listing amenities.
Niche markets – this is arguably a bigger problem for Zillow, particularly in the Teton region. In my opinion, this valuation method works best when similar data is available across the board. For instance, tract housing.. These types of developments feature very similar homes, at very similar prices with quite a bit of data available. However, in our unique market, we often times find developments with home selling at nearly twice the $$ per square foot than an adjacent home. This can’t be good for an algorithm operating primarily on price per square foot.
Should you use it? Sure. Just remember that this is a rough guideline. Personally, I would imagine the Zestimate to be much more accurate in urban markets such as Idaho Falls such as opposed to Teton Valley for reasons above, but it can be used as a guideline. I would not advise that you make a decision to sell the farm based on your findings online…