Dear Homeowner, Your Home Value Can't Be Determined Online
Wednesday Jun 20th, 2018Share
The internet has drastically changed many industries and the real estate industry is no different. Home buyer’s and seller’s are able to get information in the comfort of their homes, however, much of it is inaccurate.
Anyone who has bought a home, sold a home, or just looked at homes, has heard of third party websites such as Zillow and Trulia. Third party real estate websites are not local to every real estate market.
These third party real estate websites provide estimates of home values for virtually every home in the United States. How is it possible that a third party website that is headquartered in Washington or California can provide an accurate home value for a home located in Atlanta, GA? It’s not! These third party websites, such as Zillow and Trulia, use computer generated home values based on calculations and formulas.
Zillow does provide a handful of helpful tools for buyers and sellers. So what is not to like about Zillow? It can be summed up in one word “Zestimates.” A “Zestimate,” is Zillow’s estimated market value for a home. They provide these “Zestimates” for millions of homes nationwide. Are Zillow's’ home value estimates accurate? The answer is NO.
The most common statement a real estate professional will hear from a homeowner is, “Zillow said my home is worth $300,000 and you’re saying that the market value is only $250,000?” Or a home buyer, “This house is way overpriced, Zillow’s said the home is worth $225,000 and it’s listed for $300,000?”
This misinformation can cause a ton of confusion amongst home buyers and sellers. Let’s take a look at how Zillow determines its home values.
How Zillow Values Homes
According to Zillow “The Zestimate® home valuation is Zillow's estimated market value, computed using a proprietary formula. It is not an appraisal. It is a starting point in determining a home's value. The Zestimate is calculated from public and user-submitted data, taking into account special features, location, and market conditions.”
According to Zillow their estimate has a median error rate of 4.6%.
Any real estate professional can tell you 4.6% can mean thousands of dollars. For instance 4.6% of $250,000 is $11,500. Which means a home estimated by Zillow at $250,000 might actually be worth $238,500 or $261,500.
It is easy for a buyer, a seller, or a real estate professional to say that “Zestimates” are wrong, so we’ve decided to look at 19 homes that closed the week of June 10-16. The homes that were analyzed ranged in location, price point, styles, and square footage.
3897 Commander Dr,Atlanta, GA 30341 Zestimate was $352,823. Sale price was $370,000 . $17,177 Low
1138 Delaware Ave SE,Atlanta, GA 30316 Zestimate was $371,605. Sale price was $375,000 . $3,395 Low
481 Pasley Ave SE,Atlanta, GA 30316 Zestimate was $349,003. Sale price was $350,000 . $977 Low
2119 Garrison Way NW,Atlanta, GA 30318 Zestimate was $359,770. Sale price was $340,000 . $19,770 High
5 Jefferson Hill Pl NE,Atlanta, GA 30342 Zestimate was $325,472. Sale price was $315,900 . $9,572 High
259 Mathewson Pl SW,Atlanta, GA 30314 Zestimate was $276,735. Sale price was $294,000 . $17,625 Low
2620 Muskeg Ct SW,Atlanta, GA 30331 - Zestimate was $277,160. Sale price was $280,000 . $2,840 Low
6492 Waterford St SW,Atlanta, GA 30331 Zestimate was $260,279. Sale price was $272,000 . $11,721 Low
4743 Longcourt Dr SE,Atlanta, GA 30339 Zestimate was $271,334. Sale price was $271,000 . $334 High
2553 Crestdale Cir SE,Atlanta, GA 30316 Zestimate was $259,581. Sale price was $249,000 . $10,581 High
749 Braemar Ave SW,Atlanta, GA 30311 Zestimate was $244,687. Sale price was $240,500 . $4,187 High
2309 Northlake Ct NE,Atlanta, GA 30345 Zestimate was $227,067. Sale price was $232,500 . $5,433 Low
1937 Vicki Ln SE,Atlanta, GA 30316 Zestimate was $219,573. Sale price was $220,000 . $427 Low
2847 Summit Pkwy SW,Atlanta, GA 30331 Zestimate was $216,328. Sale price was $215,000 . $1,328 High
2671 Rockcliff Rd SE,Atlanta, GA 30316 Zestimate was $221,266. Sale price was $212,000 . $9,266 High
906 Astor Ave SW,Atlanta, GA 30310 Zestimate was $59,387. Sale price was $189,900 . $130,513 Low
5796 Grande River Rd,Atlanta, GA 30349 Zestimate was $148,440. Sale price was $160,000 . $11,560 Low
260 Harris Manor Dr SW,Atlanta, GA 30311 Zestimate was $147,753. Sale price was $150,000 . $2,247 Low
53% (10 homes) of the the homes in this price comparison sold for more than the Zestimate and 32% (6 homes) sold for less. Only 15% (3 homes) sold close to the Zestimate. However, basically 100% of the Zestimates were inaccurate.
A real estate professional who prices even 50% of the homes they list correctly, will not be in the business very long. A great real estate agent should have a 95%+ list price to sale price ratio.
As a homeowner, if Zillow’s “Zestimate” said your home is worth $250,000, and you decided to sale without the assistance of a real estate professional based on that estimate or you hire a real estate professional but insist on ignoring your agent’s comparative market analysis, lists your home for $250,000, it sells, but you find out that comparable properties are selling for $320,000+, how would that make you feel?
Other Reasons Not To Rely on Zillow?
It is crystal clear that the Zillow “Zestimates” are not accurate. Other than the inaccurate “Zestimates,” there are other reasons you should not rely on Zillow? Below are just a couple reasons on why Zillow shouldn’t be the trusted for localized real estate information!
Outdated Data –
It is not uncommon that a buyer comes across a “listing” on Zillow and asks their real estate agent about it only to find out it was sold and closed months ago! This can be extremely frustrating to a buyer.
Selling “Leads –
Third-party websites, like Zillow, generate profit from selling ad space. Buyers inquiring about a property are steered to an agent whose only qualification may be that they were willing to pay to be featured on these third-party websites. This is a disservice to a seller, as in most cases, they would prefer to have the agent they hired (listing agent) - who actually knows about their home answering the questions. Additionally, an agent who is receiving these “leads” will often try and sell their own listings first.
So, Where Should Homeowners and Home Buyer Go For Information?
Local, Local, Local! Zillow is not a local expert in the real estate industry in any community nationwide. They are, however, a very good marketing company. They are able to show up in the top three when searching anything regarding real estate. “Houses for sale Hopkinton, MA,” “Luxury Homes for sale Las Vegas, NV,” “Real Estate for sale Coral Springs, FL.” Go ahead try it!
Anyone looking for quality real estate information, needs to be speaking with the local real estate experts, not relying on information from third-party websites which do not have local knowledge, expertise, or experience!
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