The good, bad and ugly of Zillow's "Zestimates!"

Every homeowner, person shopping for a home, or homeowner with a neighbor has probably scouted Zillow and has also seen a Zestimate of their home.  A Zestimate is just another opinion of value.  And you know what they say about opinions!

Zillow uses proprietary valuation models that identify relationships between home-related data and actual sale prices in geographic areas.  Data sources include physical attributes of homes, tax assessments, actual sale prices, foreclosures and tax sales, and user-submitted information.  Think about the word "data."  What comes to mind?  Perhaps some math problems, or numbers swirling together and bar graphs?  Zillow uses this kind of data, as well as user-submitted information and physical attributes of homes to determine a dollar amount determining a home's value.  

Surprisingly the national median error is only 8.7% and Zillow claims that nearly one third of estimates are within 5% of a home's sale price.  So, by the numbers:

There are 1,000 homes in a geographic market for sale, and the average sale price is $175,000, for example.

Zillow prices 333 of those within 5% of the home's sale price.  And within 5% of that average price those 333 homes could sell for $166,250 to $183,750. 

Almost a $20,000 difference in opinion of price.  That's quite a wide range.  

To competently determine a home's true market value, homeowners, as well as home buyers, need to consider days on market, sold prices and seller contributions, staging advice, and absorption rates.  Many REALTORS® understand how to report this data for their clients to give them a better idea of what their market is actually doing.  This is considered a comparable market analysis, or CMA.  The other determination of value one can receive is an appraisal.  

For a complete analysis of the Jacksonville, NC real estate market conditions, call or email Amanda!  Or check here for a market valuation of your home!  You can use this to compare with the Zestimate to monitor the difference!  Good, bad, or ugly!

Is This Worth My Money?

So, how do you know that what you are offering is even based on a realistic amount? This a very good question and one that every buyer should be asking.   While there is NOTHING or NO ONE that can guarantee that today’s good value will be worth any thing tomorrow, you need to get the best deal you can today based on today’s market conditions.

Here is where to begin…

•   Search for comparable properties (similar sq ft, beds, baths, garage, age) that have sold in the community of the subject property within the last 90 days.  If there are not at least 3, stretch the search to 180 days.

•   Your competent buyer's agent should also give you a comparable market analysis report which should be very similar to your findings, as well as the current deed on the property, plat map, septic permit (if applicable) and tax record.

THE DO NOT’s…

•   DO NOT- base the value on the tax record or a "zillow estimate".  Both are un-reliable sources in a fluctuating market.  Nor do these two tools take into account upgrades, changes in the home or neighborhood or rental properties.

•   DO NOT- base your offer price on what the seller owes or what you think they owe.  However, your buyer's agent should be able to give you an "guestimate" on about how much they owe to help with your negotiations.

•   #1 DO NOT- work with the listing agent or builders agent as they work FOR THE SELLER.  It's in your best interest to choose someone who has your best interests at heart and can completely negotiate on your behalf.  The seller typically pays the buyer's agent's commission, so you're getting the benefit of working with a professional, for free!

A necessary tool in the homebuyer's toolbox is the appraisal.  The lender is going to require an appraisal and it can be completed during the due diligence period and the buyer should be more than willing to pay for it.  The appraiser will determine the value for which the bank will finance, and if the seller refuses to re-negotiate, so that the selling price at least matches the appraisal value, the buyer has the opportunity to back out of the contract, free and clear.

At the end of the day, a home is only worth what a buyer is willing to pay for it.  But, until the last “i” is dotted, purchase with intelligence.  When everyone is well informed and realistic, you will have a smooth transaction with no surprises!

Whether you're curious about buying or selling your home, I would love to help!  I'm never too busy for any of your referrals!