Sex, rugs, and rock n’ roll: 13 new (and strange) rules for surviving the real estate market

Now that the two companies are to become one, Zillow is an even more formidable force in the real estate industry, as well as a vital source for data on the housing market. On January 27th, the firm’s CEO, Spencer Rascoff, and Chief Economist, Stan Humphries, will publish The New Rules of Real Estate, a compendium of knowledge gleaned from the 3.2 terabytes of data processed by Zillow computers each day. The volume is loaded with secrets the average homebuyer or seller can benefit from, but here are the 13 we found most useful, or just plain entertaining.

1 Buy a house close to Starbucks

While it's true that homes close to a Starbucks cost more than the national average, it's also true that they appreciate faster than the average home. Rascoff and Humphries hypothesize that this might be the result of the great work of Starbucks' 20-person location analytics team, which pores over data on traffic patterns and business density to pick the best places for their stores. If Starbucks' comes to a neighborhood, it's got a good chance of being the next up-and-coming spot.

2 Don't buy the worst house in the best neighborhood

The old saying goes, "real estate is about location, location, location." And if neighborhoods are what drive real estate prices, then following the oft-repeated advice of buying the worst house in the best neighborhood makes sense. After all, you can always fix up a house, but you can't move your house to a new neighborhood.

In fact, the folks at Zillow found that "the more affluent a neighborhood is . . . the worse that homes in its bottom 10 percent tend to perform." They hypothesize that this is because people who look for houses in expensive neighborhoods tend not to be cheap, and will overlook your house when they are shopping for a new home.

3 It's not impossible to find an affordable house in a good school district

School quality can vary widely from neighborhood to neighborhood, a dynamic that is reinforced by the fact that schools are largely funded by local property taxes.

That's why home values can vary so much between neighborhoods that are otherwise very similar. But by doing a bit of homework, you can find good schools at a great value. Rascoff and Humphries give the examples of Dublin, Ohio and Greer, South Carolina as towns where you can buy affordable housing in great school districts.

4 Foreclosed homes don't offer good value

Following the housing bust, the media was awash with stories of homes that could be had at rock-bottom prices. But looking at the data, Zillow found that there were good reasons why these homes were inexpensive. First of all, foreclosed homes tend to be smaller than other homes nearby, and banks often require purchasers to buy without a home inspection.

5 When selling your home, don't describe it as "unique"

Analysis of online real estate listings show that the language used to describe a home for sale is incredibly important. Homes that are described thoroughly and honestly sell for higher prices than comparable homes that aren't, and Zillow was actually able to zero in on a few words that usually drive demand way down.

If you are selling, stay away from "unique." Homes that are described as such, "can sell for as much as 30 to 50 percent less than expected," Rascoff and Humphries write.

6 If you want to increase your homes value, remodel your bathroom

Investing in your home through maintenance or remodeling almost always increases its value, but some projects pay off a lot more than others. For instance, "a $3,000 mid-range bathroom model ... replacing the toilet and light fixtures, adding a double sink, and adding some wallpaper--would result in a $1.71 increase in home value for every $1.00 you spent on the renovation," Rascoff and Humphries write.

In comparison, a pricier bathroom remodeling will likely return less in home value than you spend, while basement renovations tend to do the least in terms of increasing a homes resale value.

7 When listing your home, "The Price is Right"

Many people tend to shoot for the moon when selling a home. After all, if selling a home is a negotiation process, why not start high and come down from there, right? But the reality is that homes listed for close to their market value actually end up selling for 4% higher than homes that are initially overpriced.

That's because pricing a home at its fair value will attract more demand, and sometimes even start a bidding war.

8 The best time to list your home? Late March

Most homebuyers begin contacting agents in May and June, so it's good to get your home listed in late March on average. That's enough time to make realtors aware of your listing, but not too much time that the home appears to have been langusihing by the time peak buying season begins.

However, this rule is a national average, and in colder locales like Boston, the best time to list is in early April, while places farther South call for listings a bit earlier. On average, homes listed in late March sell faster and for 2% more than comparable homes that are listed at other times.

9 Homebuyers can be really superstitious

It's no secret that people can be really superstitious, but it might be surprising to hear that this can affect the real estate market in a big way. One example? Homes with the number 666 (the number of the beast, according to the Book of Revelations) somewhere in the listing sell for 3.2% less than expected.

10 Cool street names will cost you

If you want to live on Penny Lane or Thunder Road, it's going to cost you. Houses on streets with these names sell for 53% and 46% higher than the median home, respectively.

11 Manhattan isn't being overrun by emerging-market emigrants

Many think that foreign buyers of Manhattan real estate are mostly Russian and Chinese nouveau-riche looking for a place to stash their exorbitant wealth. But Zillow's data show that "Canadians and Brits are actually the foreigners flocking in greatest numbers to New York City."

12 Homeowners don't see as much action as renters

Using Zillow data in conjunction with the General Social Survey, Rascoff and Humphries found that there are significant differences between the behavior of renters and owners. One fun fact: "In every age group, the percentage of renters engaging in sexual activity at least once a week is greater or equal to the percentage of owners knocking boots."

13 Homeownership isn't always the best way to climb out of the lower class

Homeownership has a storied history in this country, and promoting it is a bipartisan cause. But as the real estate bubble showed us, owning a home can just as easily be a financial burden as it can help build wealth.

This is especially true for lower-class people, who typically cannot afford significant down payments and tend to live in neighborhoods where home values are most volatile. Homeownership should be the result of increased wealth rather than the thing that propels a person up the socioeconomic ladder.