Chase Bank Home Value Estimator

[John Franczyk]

Has anyone ever used or relied upon the Chase Bank home value estimator on the bank's website (www.chase.com/mortgage/mortgage-resources/home-value-estimator)? I was recently looking at a single family home on the southwest side of Chicago. Realtor and Zillow had it at $135,000 (the listing price), but the Chase Bank calculator put it at $168,000. The bank's calculator also listed other houses in the neighborhood at higher prices than either Zillow or Realtor. Is Chase using higher prices to justify larger mortgages or is it just an anomaly of how they are estimating value in one neighborhood?

[Chris Mason]

Originally posted by @John Franczyk:

Is Chase using higher prices to justify larger mortgages or is it just an anomaly of how they are estimating value in one neighborhood?

 No, but close. They are using higher alleged values to drum up refinances, which require actual appraisals most of the time. Because borrowers pay for appraisals, not lenders, it's not skin off of Chase's back to get a bunch of people excited about refinancing to drop mortgage insurance. 

- Some folks, randomly, it'll turn out that the appraisal comes in high enough to drop mortgage insurance. Great!

- Most folks, if it turns out the appraisal is short and they only have 15% equity, not 20%, will still move forward with the refinance because the 85% LTV PMI will be so much cheaper than the 95% LTV PMI they have from when they purchased it with 5% down.

- Similarly most folks, if it turns out the cash out refinance comes in lower than expected and they can only pull $50k out instead of $65k, will also still move forward with the cash out refinance transaction.

- The majority of the time, overall, the appraisal will come in short. But you the borrower paid for the appraisal, not Chase, so what does Chase care? 

Either way, the goal is to bring refinance business in the door at as low a price point as possible. I don't know if this is specifically the case with Chase, but some banks and credit unions have subsidiary appraisal management companies collecting that appraisal fee, so that would be even better for the bank if that is the case.

The other garbage estimator websites, like Zillow or Redfin, do the same stuff, but are aimed at bringing business in the door for their primary customers -- real estate agents (you, the person reading this, are the product being sold). Maybe in Neighborhood A more business comes in the door by estimating high, and maybe in Neighborhood B more business comes in the door by estimating low. Great, adjust the model accordingly. Or maybe all the customers (Agents) tell the garbage estimator website they will pay more for listings than they will for buyers in this neighborhood, so just estimate everything high & put my picture/phone/email next to that garbage number and giant "Are You The Owner?" question.