Podcast 396: What to Know About Zillow Fair Market Values

In this week’s episode, Podcast Host, Property Manager & Business Owner, Andrew Schultz, goes over basic landlord responsibilities including property maintenance.

The NY rent assistance program could come to an end here soon. We’ll go over everything you need to know about the upcoming changes.

Are the fair market values for rent on Zillow reliable? Find out our thoughts in this latest episode.

Andrew Schultz: (00:00)
Hey everybody. Welcome back to another episode of the Rent Prep for Landlords podcast. This is episode number 396, and I’m your host, Andrew Schultz. On today’s episode, we’re gonna be talking about the end of the New York State Emergency Rental Assistance Program, basic landlording responsibilities, and Zillow’s fair market values on rentals. We’ll get to all that right after this.

Voice Over: (00:25)
Welcome to the Rent Prep for Landlord’s podcast. Now, your host, Andrew Schultz.

Andrew Schultz: (00:31)
Have you joined the free Rent Prep for Landlord’s Facebook group? We’ve just reached 13,000 members and of course, that means we’re on the hunt for 14,000. So if you have a question or a situation that you’ve never encountered before or you just need to bounce an idea off a big group of housing providers, this is the place. If you haven’t checked it out yet, do it today over at facebook.com/groups/rentprep. Don’t forget to mention the podcast when answering the questions so we know how you found us. We’re gonna start things off this week. The news, we haven’t done it in the news segment in a while, and it’s about time that we bring you guys up to speed on what’s happening here in New York State with regards to the Emergency Rental Assistance Program, we’re gonna take a look at a news article, then we’re actually gonna cover some information that’s been released on the website.

Andrew Schultz: (01:15)
And finally, we’re gonna have a conversation about what this means, not just for landlords here in the state of New York, but the overarching picture of what does this mean for landlords in general. So we’re gonna go ahead and start this off with our article. This comes to us via Gothamist and the title of the article is New York Rent Assistance Program could close on January 15th. This one was written by Chan Lam and it was published back in December. Uh, as I’m recording this, it is January 13th. Uh, but I wanted to wait to record this segment until we had an update. So here we go.

Andrew Schultz: (01:51)
New York’s Pandemic Spurred Rental Relief Program could close to future applicants starting as early as next month under an agreement reach Wednesday between the state and lawyers who sued to keep the program open. The agreement lifts a temporary injunction that kept the Emergency Rental Assistance Program open through 2022. Even though funding had dwindled, allowing rents to STA off eviction proceedings while awaiting decisions on their cases. Ellen Davidson, an attorney with the Legal Aid Society, which had sued to keep the roughly $2 billion program open, said that the group agreed with the State Office of Temporary and Disability Assistance that there isn’t enough money left to help struggling New Yorkers who apply for rent relief after January 15th, 2023. We looked at their numbers and saw how much federal money is remaining, and it became clear that the only way to fully fund everyone who has currently applied and will apply in the next month is for them to close the portal so that they can focus on the people who’ve already applied.

Andrew Schultz: (02:44)
Davidson said that means that New Yorkers who have fallen behind on rent since the pandemic began lost income and are in low to moderate income. Households should submit their applications to the O T D A before January 15th under the program known as eap, certain tenants can apply for funds to help pay rents. The payments which come from state and federal funds go directly to landlords. Tenants can’t be evicted while their applications are pending. Spokespeople for the O T D A did not immediately respond to a request for comment on Wednesday. Around the nation’s similar rent relief programs are also shuttering as they run out of funding. As part of the agreement signed by the State Supreme Court Justice Lynn Coulter, the state said it would reopen the application to process future tenants in the event that new state or federal money becomes available. And again, that comes to us via the gothe.

Andrew Schultz: (03:34)
And now I want to jump over to the New York State EAP programs website. Again, I’m recording this on January 13th, and this update was posted to their website on January 11th. New York State EAP applications will not be accepted after January 20th, 2023 at 9:00 PM Eastern Standard Individuals will not be able to submit new applications or complete applications that have been started but not submitted after January 20th at 9:00 PM. Application submitted before the application portal closes on January 20th will continue to be processed in the order received consistent with state law and program rules. O T D A is currently reviewing and processing eligible EAP applications submitted through October 31st, 2022. Additional applications are expected to be reviewed and processed in the future as funds become available. This notification will be updated if additional funding is available to pay eligible applications submitted after October 31st, 2022. After the portal closes to new applicants, tenants and landlords may continue to upload required documentation for pending submitted applications. Important note applications from subsidized housing tenants whose rent is limited to a certain percentage of income are not currently able to be paid. State law requires these applications to be paid after all other applicants have been reviewed and paid.

Andrew Schultz: (05:02)
And it goes on a little bit to discuss some of the requirements still inside the program as well as a little bit of information on where other assistance might be available. But essentially the article mentions that more and more of these programs are being shut down. And what I wanted to jump into here was, does the end of the Covid area assistances and restrictions signal a return to normal? And I think my answer to this is maybe, but it’s definitely going to be a new normal if you aren’t sick of hearing that phrase already. It’s worth keeping in mind that in many states, legislation is being considered that alters the relationships between landlords and tenants all over the country. Here in New York State, we saw a major update back in 2019 when HST p a, the Housing Stability, and Tenant Protection Act was put into place here in the state.

Andrew Schultz: (05:52)
That was the most sweeping change in landlord-tenant legislation to happen here in the state of New York In decades. New York State was not the first and won’t be the last state to make those types of changes. Many states are already starting to consider things such as rent control, source of income laws limiting the criteria that we’re able to use when screening for tenants, eliminating credit checks, background checks, eviction searches, things of that nature. And we’re currently living in a time where new legislation is being written at breakneck pace and oftentimes the people writing this legislation aren’t writing it from a place of industry insight, but rather writing it from a place of what is gonna get me the most attention come election time? I don’t think that this is something that will stop in the short term. I think that there are gonna be a lot of changes coming our way in pretty much every state, even the landlord-friendly states at this point.

Andrew Schultz: (06:42)
And I think that the best thing that you can do as a property owner is to stay informed of what’s going on at a local, state, and national level. We typically don’t talk a lot about industry groups on the podcast, but if you’re looking for some resources, I would start with NPA, the National Association of Residential Property Managers of which I’m a member, followed by an aa, the National Apartment Association. Follow that up by searching out groups at the state or the local level that help landlords stand formed of what’s going on around them. Hop on Facebook, look for local groups there. And I mean, obviously, I’d be remiss if I didn’t plug the Rent Prep for Landlord’s Facebook group. There are obviously people from all over the country in that group and we try to make sure that the posts updating everybody on legislative changes get approved as quickly as possible so that everyone can see that information. But beyond being in groups online, you need to make your stance known to your representatives so that they understand what’s actually important to their constituency. At the end of the day, we’re the ones writing their paychecks. Don’t be afraid to speak up and speak out to a politician, especially at the local level. The tenants aren’t afraid. There are a lot of tenant advocacy groups out there and there are a lot more tenants than there are landlords. So being vocal about your needs as an investor is critical to everyone’s continued success.

Voice Over: (08:00)
Water cooler wisdom, expert advice from Real Estate Pros.

Andrew Schultz: (08:08)
All right, let’s move on to something a little bit lighter than the last topic. How about pilot lights? This one is a water cooler wisdom. This one was brought to us via the Rent Prep for Landlord’s Facebook group, and it’s pretty straightforward, um, but it’s got an interesting twist to it. So let’s jump in here. Do you landlords relight a pilot light? I have a tenant who turned off for gas service for the last six months, had the gas company come back and turn it on for winter, and is loudly yelling at me via text because I won’t send someone to come and light the pilot light. The gas company dropped the ball by not lighting it on the day that they reconnected her service. I’m of the opinion that relighting a pilot light is a bit like changing a light bulb, plunging a toilet, something like that, which should be considered basic home maintenance.

Andrew Schultz: (08:51)
How do you feel about it? I’m wondering if I need to reassess my opinion. And again, that one came to us via the rent prep for landlord’s Facebook group. So right off the bat, I have a couple of concerns with what’s going on here. The way our leases are written, if a tenant’s responsible for any utility, whether it’s gas, electric, water, whatever it happens to be, they’re responsible for that utility for the entire duration of their tenancy. So essentially what I’m saying here is that the gas service needs to be on all the time, at least here in Western New York, it’s much more common for both furnaces and hot water tanks to be run off of natural gas or even propane out in some of the more rural areas than it is for those items to be run off of an electric service. So if someone’s living in a home that doesn’t have gas service, chances are pretty good that they also don’t have hot water or heat in that house.

Andrew Schultz: (09:40)
If you live in a cold weather climate like New York, this obviously presents a lot of problems during the winter months. We’re in the middle of the winter months right now, and we just made it through a colossal blizzard here in Buffalo. If you had a house that lost electric service for an extended period of time during that storm, meaning you also have no heat in it, you could pretty much guarantee that it was gonna be frozen solid in many instances. It wasn’t a matter of if there was damage, but rather how much damage. At one point there were over 120,000 homes in this region with no power, many of them for multiple days. So this was a very, very real concern. Even if you’re living in a warm weather climate or a cold weather climate during the warm weather months, you still need to have gas service established in order for your hot water tank to work.

Andrew Schultz: (10:25)
And again, this obviously will vary by what region you live in, but these are the two most pressing concerns that I would have if this is a situation that I was going through. The solution in a situation like this is very, very simple. You issue a notice to cure following whatever requirements there are in your state. Your notice to cure needs to include what the tenant needs to do, which in this case has obviously reestablished the gas service and it needs to give them a timeframe in which to do it. The typically the timeframe is gonna depend on the state that your property is in. You’ll have to do a little bit of research on that to find out what’s going on in your state personally during the notice-to-cure period. I would move to reestablish that utility company myself just to prevent additional property damages.

Andrew Schultz: (11:07)
Yes, you might be paying for utility bill that you rightfully shouldn’t be paying for, but it’s a lot cheaper than the potential property damages that could occur from a lack of heat or uh, having frozen pipes. Your lease should also include language that allows you to back-build this usage to the tenant and require them to pay it as part of their next monthly rent payment. Now we’re a little bit off-topic with regards to pilot lights here, but we’ll get there. Stick with me. You mentioned in the question that the gas service had recently been reestablished by the gas company, but they did not relight that pilot. I find that to be incredibly suspect in and of itself, and I’ll explain why at least here in Western New York, the gas utility is required to check the lines and make sure that there are no leaks in them, as well as ensuring that any gas appliance is connected and working properly as part of their turn on work order.

Andrew Schultz: (11:55)
So if there are leaks on the line or one of the appliances not working properly, typically speaking, they’re gonna lock that gas meter in the off position, tell you to fix it, and call ’em back when they’re ready or when you’re ready for them to retest the lines. Back in July 2021, there was a gas leak in a residential property here that caused a massive explosion just south of Buffalo. In the city of LaJuana. There was an explosion as a result of a gas leak into a property that went undetected and eventually sparked off. Unfortunately, the explosion killed a 92-year-old woman who was living in the property and it completely leveled her home. Now, obviously, I can’t include pictures in a podcast, but when I say leveled, all you could see was the basement. This house was gone. In addition, the explosion was so violent that it picked up a car and threw it through the front of a home, a neighboring home like I think it might have even been across the street.

Andrew Schultz: (12:48)
So in total, the damage in addition to the fatality, there were seven homes that were damaged as a result of that blast. Ultimately, it was determined that the source of the explosion was a gas leak, but they were never able to determine the source due to all the damage. And ever since then, both of the local gas companies here have been ultra cautious when it comes to turning on gas service at any property. They’re making sure every device is working and they’re making sure that there are no leaks on these lines prior to turning that service on because they don’t wanna be the center of attention because of something like this. So they’re going above and beyond to cover themselves and honestly cover the public at large really whenever it comes to the potential for a gas leak. So now that we spent a few minutes talking about everything, that wasn’t the actual question, let’s get back to it.

Andrew Schultz: (13:33)
Would I go over and light that hot water tank? In most instances, I’m gonna go over and do a hot water tank or a furnace pilot one time with the tenant present. That way I can show them how to light a pilot in the future in case it ever goes out again. It’s gonna go out again. It almost always happens at some point that a pilot light goes out. Being able to light a pilot on a hot water tank is pretty much a universal skill, and it never hurts to show someone how to do it so that they know how to help themselves out in the future. There are also a ton of informative YouTube videos out there that you could probably sort through and find one that would help your tenant understand the process. There are also instructions on the front of every hot water tank on how to go about relighting the pilot after it’s gone out.

Andrew Schultz: (14:16)
I don’t know, as though I would say relighting a pilot is as simple as changing a light bulb, but I wouldn’t say that it’s terribly complicated either. I typically don’t want tenants doing any work beyond changing light bulbs or furnace filters in our property. We don’t want people who are uninsured working on properties. That said, I wouldn’t consider a pilot light to really be working on a property. If a tenant has ever lit a gas stove burner or honestly even just lit a candle, they probably have the skillset needed to light a pilot. Also, depending on the age of the tank, they may not even need to take a match or a lighter to the tank. Most newer tanks are all sealed and have a spark igniter, very similar to a barbecue grill. If you could light a barbecue grill, you can light a pilot. So again, I would probably show the tenant one time so that they had that skill for the future. Then I would move on. I think your bigger battle here is the fact that your tenant’s not establishing gas service for the entirety of the year. They’re only establishing that utility for a portion of the year. I would be addressing that concern likely with a non-renewal notice as soon as possible.

Voice Over: (15:22)
Forum quorum, where we scour the internet for ridiculous posts from landlords and tenants.

Andrew Schultz: (15:31)
Less than not least this week we have our forum quorum segment. This one is dealing with Zillow’s fair market values. When it comes to rent, it comes to us via the Rent Prep for Landlords Facebook group. Let’s go ahead and jump in here. I have a single-family home in Los Angeles. Fair market value is 6,500 per month. According to Zillow. I currently have an a plus tenant paying, uh, February 21, move-in rate of $4,300 a month. In February 22, I tried a 1 percent increase but settled with no increase with a full one-year commitment. I’m now thinking 5,000 for the 2023 renewal with month-to-month terms. Month-to-month is what the tenant wants. Any suggestions? LA County does allow for more than 10% increase with a 90-day notice. So keeping your property at fair market rent is critical to your continued and ongoing success.

Andrew Schultz: (16:24)
As a property owner, and I know that I’ve mentioned that more than one time here, but letting your property fall below fair market rent potentially put you behind in a lot of different ways. Property expenses pretty much universally go up every single year. It’s not often I see a year go by where maintenance prices decrease, labor prices go down, insurance prices go down, taxes, stay level, et cetera, et cetera. You do mention that your county allows for a 10% increase with a 90-day notice, which is awesome. This tells me that you’ve already done some research and you understand what the laws are in your area when it comes to rental increases. Now, obviously, every state’s a little bit different when it comes to the rules regarding this. So it is a pretty good idea for you to know what the rules are in your specific area.

Andrew Schultz: (17:08)
There may even be laws at the local level that you need to know about beyond what applies at the federal and state levels. So for instance, in Erie County, we had a lawful source of income law for probably about a year or so before that law was passed at the state level. What I’m looking to zoom in on in this article is Zillow specifically. I wanna spend some time talking about Zillow’s fair market rate. And you need to understand that when it comes to any of these estimates or Zillow fair market values, they need to be taken with a great big grain of salt. Algorithms are just that algorithmic. They’re not spending time looking at the actual units to see if your unit is at the same level of finishes, another unit, or if you have amenities that the other units can’t provide or things of that nature.

Andrew Schultz: (17:52)
More often than not, it’s looking at things like square footage, number of bedrooms, number of bathrooms, number of parking spaces, and how close it’s to the other units that it’s trying to compare against. There are certainly some other factors that are mixed in along the way, but essentially the algorithm is looking to compare your property to other properties nearby that meet the same generic standards. We may get to the point with all of the AI technology that’s emerging, where some of these algorithms get a lot better at determining what fair market value is or can compare a stone countertop to a for mica countertop or something of that nature. But right now, the best bet is to always do your own research and compare units yourself when you’re trying to figure out what the market value for your property should be. The way that we do this is by compiling data from a few different sources and then comparing it to our unit, the subject unit.

Andrew Schultz: (18:45)
And you can feel free to grab rental data from sources like Zillow, Trulia, hot Pads, et cetera. We get a lot of data from Facebook as well. Marketplace seems to be pretty useful. I would be cautious about using data from Craigslist as a lot of the places listed on Craigslist nowadays seem to be scams. But essentially, you wanna look at other properties that are in the same area as yours and make determinations based on comparing that property with your property to determine fair market value. Yes, all of those things that the algorithm looks at should factor into your decision as well. But you also need to look at other factors such as level of finish amenities and things of that nature. Tenants are willing to pay more for places that have granite countertops, but there is a top dollar for every unit. The goal should be to be as close to that top dollar as possible without going over.

Andrew Schultz: (19:33)
It’s kinda like the price is right. Algorithms also don’t necessarily know how to recognize bad data and exclude it. Garbage in, garbage out is the phrase that’s commonly used in technology, and essentially what that means is that if the data going in is garbage, then all of the analysis is also going to be garbage. So handpicking your comp based on your local market knowledge and your knowledge of your subject property is always going work out in your best interests. So you’ve had a few bad experiences recently with your property manager and you’re wondering just how to go about approaching them. In our latest post, we’ll go over how to address your property manager and if need be, how to file an official complaint. Check that out today over at rentprep.com/blog. That pretty much wraps up this week’s episode of the Rent Prep for Landlord’s podcast.

Andrew Schultz: (20:22)
Thank you all so much for listening. We truly do appreciate it, and our goal with the podcast is to help as many people as possible make educated decisions when it comes to real estate. You’re able to help us reach that goal by sharing this episode or any of our other episodes with someone that you know that might be able to benefit from it. If you’re looking to get in contact with me, I can be reached over at whatsdrewupto.com. From there, you’ll find links to everything going on on with me over at Own Buffalo, as well as other projects that we’re working on. Grab a free copy of our deal analysis tool today over at whatsdrewupto.com. There’s no obligation and it comes with a companion video showing you how to use it. If you’re looking for top-tier tenant screening services, head on over to rentprep.com. There are multiple products to choose from, including tenant-paid options, and if you’re over 50 doors, ask them about their enterprise-level programs and pricing. I’ve been an enterprise user at Rent Prep for years now, and it’s definitely changed the way that we screen our tenants. Check that out today over at rentprep.com. Again, thank you all so much for listening. We’ll be back in two weeks with an all new episode you won’t wanna miss. Until then, I’m Andrew Schultz with ownbuffalo.com or rentprep.com, and we’ll talk to you soon.

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