The Truth About Zestimates
Do you know how much your home is worth?
Homeowners and buyers often answer this question by turning to a system known as a Zestimate, produced by Zillow.com. Zillow’s intention is to create an accurate value estimate for the over 100 million homes indexed by the site. Although it won’t give you a number that’s right on the money, it can provide a price range to start with during your real estate negotiation. This is helpful to buyers and sellers; this way sellers know, roughly, how much they could list their house and buyers know how much the house they are buying is actually worth.
Wait, What’s a Zestimate?
A Zestimate is Zillow’s attempt to use algorithms and publicly available data points that influence housing prices to estimate a home’s value at any given time. While this is a good idea, it’s important for buyers and sellers to realize that there’s a bit more to predicting prices than just the cold, hard facts.
Often, real estate becomes a very personal and emotional buy. Two houses that have the same floor plan, but a slightly different back yard can have different effects on different people.. That’s really what matters. Ultimately, a home is only worth what the market will bear and what a buyer will give.
The Perception Versus the Reality of Zestimates
Zestimates became popular because outside of an appraisal or comparative market analysis generated by an experienced Realtor, it can be really hard to judge whether your home is gaining or losing value. After all, no one wants to bet on a losing horse.
Unfortunately, the Zestimate has been responsible for a great deal of confusion since Zillow started using the original algorithm in 2006. Even though the algorithm has been upgraded several times since its inception, it’s not perfect. Unfortunately, people deeply enveloped in the stressful process that is buying a house sometimes become ultra focused on the numbers that Zestimates provide, treating them more as an absolute than a flexible guide. Zestimates should be a starting point in finding the true value of a home.
Because most people don’t really know what goes into valuing a home, this issue of trusting a valuation that’s not quite on the dot isn’t new. Even before Zillow, many homeowners believed that their home was worth so many dollars due to tax assessments that were often based on outdated information, collected during the initial construction of their home and updated based on average inflation. These misconceptions on valuing a home have set too high expectations for sellers.
Why Have a Zestimate, Then?
Zestimates aren’t the most accurate way to assess the value of a home because they aren’t able to pick up on the harder to quantify items that go into determining the value of a home. They can’t tell a freshly remodeled 1960’s ranch home from one that’s still got the original shag carpet, for example. They aren’t accurate appraisals. For many homes, though, a Zestimate will get you in the ballpark.
Zestimates work best in areas of high turnover, in neighborhoods with fairly similar homes. Because a Zestimate relies on public data like tax assessments and homeowner corrections of the basics, including the number of bathrooms and bedrooms, it can make a fine starting point for the potential home buyer or seller.
Since you don’t buy and sell real estate constantly, having an overview of the neighborhood’s stats is helpful when you do–but you have to allow for wiggle room. Just because a listed house on Maple Drive has a Zestimate of $203,000 and it’s almost identical to your house next door, it doesn’t mean you won’t get more (or less) when you go to sell. You have to look at the entirety of a home in order to determine an accurate valuation.
Taking Your Zestimate to the Next Level
Zestimates are just a starting point in your quest to buy or sell a home. If you’ve reached that point where you’re ready to buy or sell a home and want a highly accurate price point to start from, contact your Realtor for a comparative market analysis. Once you have a contract in hand, a professional appraiser will take it from there and give you an exact dollar figure based on hundreds of factors that are a bit too nebulous for the technology we currently have available to reliably assess.