“Zestimates” - That is the only word I have to use to elicit deep frustration in the minds of most fellow Realtors yet this is a source of property "valuation" that many home buyers naturally look at when shopping on Zillow, a service now fueling AOL's real estate portal as well as Yahoo Real Estate and others. In the business we must understand that with the growth of Zillow over the past few years that they are not going anywhere! What I feel in this link is useful is to point out Zillow's own honest assessment that their Zestimates are only an "estimate" and not an appraisal!
In our market for example, Zillow only has 3-STARS on their Zestimates for the Atlanta area! A median error of 8.4%. In some neighborhoods that is much, much greater.
When attempting to put a value on real estate, what I think is useful is to add a second tool to the mix to compare values. In relocation or even in doing a BPO on distressed properties it seems that most consider "true value" to be where at least two (2) sources are within 5% of each other. So in addition to the Zestimate from Zillow that inevitably comes into play when working with home buyers, I use other sites and the Courthouse Retrieval System to true up any online estimates. I also provide to Buyers and Sellers an RPR or Realtor Property Report, and a CMA using CRS (Courthouse Retrieval System) data based on sold comparables.
What this does, without arguing the point on whether a Zestimate is valid or not, is proof the Zestimate based on multiple pricing sources and methods. For the consumer, certainly anyone can find, including Yahoo Real Estate’s pricing model, ways to cross reference the Zestimate, but my message is to certainly cross reference it and true it up. If you are building a house, doing renovations, or having your car repaired you get multiple estimates! When evaluating a home’s value you should do the same.
Make sure before you walk into making an offer on a property you really like that your offer is going to be well received. I am not talking about “not” negotiating. I am talking about negotiating in a smart well informed way. Also, make sure you understand the failings of all these models. They rely on tax data and previous MLS data that might be in error! I cannot tell you how many times I have spoken with someone who finished out a basement, a bonus room was finished that was never included in the original building permit, or a kitchen was renovated, and those changes did not show up on Zillow much less other data I have at my disposal as a Realtor. This is why when I am working with someone who is looking to buy a home or talking to a prospective seller about what their home is worth, I ask questions. I want to find out as much as I can about the property in ways that add value as compared to the tax records and sales.
Too, at times tax laws may impact a valuation online. I sold a short sale about a year ago for $300,000 that had a previously sold for well over $450,000. In our State the following year after a purchase the tax assessed value should be what the current owner's paid for the home. Accordingly, the current tax assessed value on this property was just under $300,000. Now with this said, homes in the neighborhood a year later, when prices have run up substantially over the past year, are selling in the low to middle $400k’s. We priced it with the market of course, and I even had an experienced (in years) Realtor call me to question why we would price it so much “above tax assessed value!” What is humorous is that before the short sale closing the tax assessed value was $424,000! Again, you must know the history of a property and consider things like this when looking at Zestimates, which too are attempting to glean value from tax assessed values and previous sales that might not adjust quickly enough for neighborhoods and a broader market experience on where sales prices are today!
To sum up, if you are looking to buy a home and want to get an idea of value, go ahead and consider the Zestimate, but ask a Realtor for their opinion as well! It is not going to cost you anything and you might just end up making a better more well informed decision in the end!
For more information about the home buying process please contact me! I would love to be of assistance!
