But Zillow Says The House Is Worth...[insert random number here]
By Sally Grenier, Broker / Owner
One of the biggest changes to the real estate industry over the last decade is our access to the Internet and all the wonderful resources and data it has to offer. Twenty years ago, when consumers wanted to buy or sell a home, they typically contacted a Realtor, looked for “For Sale” signs, went to Open Houses, or looked at print ads in newspapers & real estate magazines. Today, most consumers start online and are typically looking at the “Big 3” real estate websites: Zillow, Realtor.com and Redfin.
Consumers now have easy access to so much information on these sites, and are educating themselves in many aspects of the real estate industry. They’re able to see listings in their area, price adjustments and trends, tax info, and can find answers to questions they may have about the home buying or selling process.
However, these sites also offer estimates of value (called a “Zestimate” on Zillow) which have been proven to be wildly inconsistent and extremely inaccurate. These “automated valuation models” — AVM for short — can be low or high by tens of thousands of dollars, or more. They pull data from various sources such as county assessor's records, and MLS data, then use very sophisticated algorithms to come up with a value.
In the end, it is only an automated system that cannot think for itself. It doesn’t necessarily take into account the most recent sold comps in the neighborhood. For all we know, it could be averaging comps from an entire zip code, which can drastically skew numbers one way or the other. It also doesn’t take into account the many “intangible” features (or detractors) of a home such as updates (or lack thereof), location, views, neighborhood, HOA amenities, proximity to open space, shopping, etc.
What’s interesting is that Zillow knows and admits their info isn’t necessarily accurate — and they say as much on their Web site (although you have to dig to find it).
According to Zillow, “The Zestimate is not an appraisal and you won’t be able to use it in place of an appraisal, though you can certainly share it with real estate professionals. It is a computer-generated estimate of the worth of a house today, given the available data. Zillow does not offer the Zestimate as the basis of any specific real estate related financial transaction. Our data sources may be incomplete or incorrect; also, we have not physically inspected a specific home. Remember, the Zestimate is a starting point and does not consider all the market intricacies that can determine the actual price a house will sell for.”
Redfin has a similar disclaimer: "...the Redfin Estimate is just a starting point—it is not an appraisal or a substitute for the expert pricing advice of your real estate agent."
While consumers like to rely on these numbers when making decisions about buying or selling, these "Zestimates" actually create unrealistic expectations of the consumer, thus making an agent's job more difficult.
Whether I’m acting as a Buyer’s Agent or a Listing Agent, pricing a home correctly is one of the most critical aspects of my job. When you are trying to buy or sell, you cannot afford to be off by tens of thousands of dollars in your pricing or your bidding.
As a Seller, if you list a home that’s priced too high, it will take much longer to sell. If you list a home for too low, you could lose a lot of money. As a Buyer, if you make an offer that's too low, you’ll likely get beat out by other buyers. If your offer is way too low, you stand the chance of offending the sellers who may not take any future offers seriously. Therefore, determining a home's "Fair Market Value" is absolutely crucial when buying or selling a home.
So, what is “Fair Market Value”? It’s what a ready, willing and able buyer is willing to pay for a home in today's market. Basically, it is what other similar properties have been selling for in that neighborhood in recent months.
I will find the best “apples to apples” comps –- properties that have similar SF, bedrooms, bathrooms, condition, etc. I also look at what properties are currently on the market and are either under contract, or still active. I also look to see if there have been any properties that were listed and never sold (expired & withdrawn listings).
Lesson to Buyers and Sellers:
PLEASE ignore those estimates of value or “Zestimates” you see on Zillow, Realtor.com, Redfin, or any other website you find. Only a detailed market analysis will give you a very clear picture of “Fair Market Value”. This can only be done by a live human being with access to the TWO MLSs (your REALTOR).
To receive a FREE market analysis on your home, or if you're thinking of buying, please do not hesitate to contact me!
Sally Grenier
Broker Owner
Metro Brokers / Grenier Real Estate
303.475.4508 CELL
sally@sallygrenier.com
www.sallygrenier.com