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The following was adapted for Northern Virginia based on a blog that ran on May 23, 2016 by Tallahassee Realtor Joe Manausa. He is a daily blogger with content that focuses on real estate analytics.
If you sold your home for 40 percent less than the Zillow Zestimate (an online home valuation tool), would you say that you gave it away?
Well, the CEO of Zillow just did this very thing, yet he sold it for as much as he could get in today’s current housing market.
So how could this property valuation tool be so inaccurate?
Property Valuation on the Internet
There have been home valuation tools on the internet for many years now, and the one that is most actively advertised is the “Zillow Zestimate Tool.” Unlike many of my contemporaries who say this technology will never replace real estate agents, I am more comfortable saying that they have a long way to go before they do so.
For our readers who have tried checking home values with this tool, I suspect many were intrigued by the sway in values that it still maintains, Unfortunately, it just does not have enough local data in it to properly value the homes.
The reason (for now) that internet based property valuation tools are not reliable is that they do not “know” what local real estate experts know. Currently, they try to establish an average price per square foot for nearby home sales, but that is just not going to work. Unless a home is highly similar to all those around it, including the amenities and lot type and its frontage, there are too many variables that just do not show up in national databases. Yet.
A recent article in Inman reported the following information on a recent home sale: “On February 29, Rascoff sold a Seattle home for $1.05 million, 40 percent less than the Zestimate of $1.75 million shown on its property page a day later.”
This home seller is not just “anybody,” rather Rascoff is the CEO of Zillow, and his property was over-valued by the Zillow Zestimate by 40 percent. While this is probably no big deal to a super wealthy CEO of a publicly traded company, imagine a 40 percent over-valuation impact on a typical home seller.
How to Get Your Home’s Value
If you want to know what your home is worth today, recognize that there is a process that you can use and you don’t need to spend any money.
Real estate values are relative, they rise and they fall based upon the supply and demand for similar properties. You can use this understanding to determine a range of possible values for your home. Start with the big picture (how are values doing across the entire real estate market) and work your way down to homes very similar to yours. A great place to look is at a recent neighborhood report.
When you look at the “bigger picture” reports, focus less on the absolutes (meaning exact current prices and current values) and focus more on the trend of values and prices. If the trend has been rising, then it is likely your home’s value has been rising. If the trend has been falling, then it is likely that your home’s value has been falling too.
Condition is an important facet of value, as are the features and amenities of your home. A good parallel is the automotive industry. Do all 4-door cars sell for the same amount of money? Does the brand and features of a car impact its value? (In other words, does a used Lexus sell for the same money as a used Toyota?).
If you understand the larger market and you understand your neighborhood trends, then you only need to see what is for sale as well as a few sales in your neighborhood to get a decent feel for the range of value of your home.
Internet Home Valuation Tool
You can use this home valuation tool to get a feel for the current market around your home. But just like the Zillow tool does not have all the answers, so too is the tool below inadequate for giving you actionable information when it comes time to sell your home.
Get a More Accurate Price Estimate
Due to MLS rules, this tool depends on active listings to give you an idea on what your home might be worth. Agents have access to sold listings data, market statistics and additional information that can contribute to a much more accurate estimate—access to this information is as easy as signing up!
Professional’s Opinion of Value
You really must get a professional’s view of your home, from somebody that will not lie in order to “get you listed,” but will instead tell you what you need to know.
We stand-by, ready any time you would like a no-strings-attached, on-site consultation to calculate your home’s true value, simply LET US KNOW when you would like to schedule an appointment.