Zillow is far and away the most popular website/app for consumers who are not only shopping for homes, but for potential home sellers as well, due in large part to Zillow's Zestimate - a computer generated home valuation. As a real estate professional, I'm very familiar with the local market, I have extensive knowledge based on years of experience and touring thousands of homes in nearly every neighborhood in my market. I have a pretty good intuitive idea of a home's value as soon as I walk in the door, however, I always rely on cold, hard data when it comes to pricing a home. Appraisers work in the same way. The key factor in finding a home's value is sold data.
When real estate agents and appraisers are valuing a home, we look for similar homes that have sold recently. That is always the starting point. We also consider market conditions and market trends. When finding comps (comparable properties), we look at it several different ways - square footage, number of bedrooms, number of bathrooms, garage spaces, location, school districts, floorplan, amenities, condition, finishes, overall appeal, age of roof, HVAC, construction material, etc.
Zillow uses similar data points to come up with its Zestimate. According to the website: "We use proprietary automated valuation models that apply advanced algorithms to analyze our data to identify relationships within a specific geographic area, between this home-related data and actual sales prices." There's one big problem though. Missouri is a "real estate sales data nondisclosure state" - in other words, Zillow has no idea the price at which homes actually sold for in Missouri.
Ok, so what about states that are not nondisclosure states? How about Washington, where Zillow's CEO Jeff Raskin sold his home in February of this year? Well...Raskin's home sold for $1.05 million. And the Zestimate for his home? $1.75 million. Ouch. That's 40% LESS than the Zestimate.
Honestly, this is not an attack on Zillow. They readily admit that their Zestimate is NOT an appraisal nor is it a CMA (comparative market analysis). Here's how Zillow says consumers should handle the Zestimate: "We encourage buyers, sellers, and homeowners to supplement Zillow's information by doing other research such as: Getting a comparative market analysis (CMA) from a real estate agent. Getting an appraisal from a professional appraiser. Visiting the house (whenever possible)."
So, the problem is that in our tech savvy, instant gratification world, we want the info right away, and we expect that the tech company providing the info has taken the time to ensure that info is correct and that we, as the consumers, are protected. However, we're in such a rush, we take no time at all to read the disclaimers and caveats.
As real estate professionals, usually, if the value of a seller's house (based upon our expertise and analysis of the data) is greater than the Zestimate, it's not much of a problem. However, if the reality is that their property is less valuable than the Zestimate, that becomes a massive hurdle for us to surmount. Sellers often tend to overvalue their house due to emotional attachment, and when the world's most used real estate website seems to corroborate their inflated value, that can be a costly scenario. The momentum and excitement of a hot new listing is immediately undercut by a price that savvy buyers know is too high. By the time sellers agree to course correct to a lower price, the buyer pool has moved on to the latest listing, and the homeowner may have to sell for less than what they could've gotten, had they priced the home correctly from the beginning.
So, please, don't take my word for it - take Zillow's: "[The Zestimate] 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."
If you would like an accurate analysis of your property's value, all you have to do is click here, fill out a little bit of information, and we'll be in touch with you very shortly to prepare a CMA for your property!
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