The housing market is really hot right now. Home values are up considerably, and continue to rise. When the market is on the move, we’re all naturally interested in what homes are going for in our area, where prices may be headed, and what our own home may be worth. But how do we make sense of all the noise? We’re getting information flying at us from every direction - a local agent may leave a flyer at your door showing what they’re listing similar homes for right now; you might listen to a friend talk about what they just got for their home, or see a listing pop up on your own street. Or if you’ve ever been on sites like Zillow or Trulia, you may have emails coming at you every few weeks, telling you what their estimate of your home value is.
Whenever we get a Zillow update on our own property, there’s a natural curiosity to go online and check out what they value it at, and to look at what’s going on in the area around us. Any seasoned agent will tell you, however, that while a Zillow estimate (or Zestimate) is a fun way to start thinking about home values, it is only a small part of the full story!
We recently got a laugh out of a news story regarding the sale of the home of Zillow’s CEO. In a bit of irony for Realtors who caution against leaning too heavily on Zestimates for an expectation of sale price, the CEO’s home sold for $1.05 million, 40% less than the Zestimate of $1.75 million shown on its property page. Now this is only one example, on a high priced home, but it reminded us of the importance of this discussion.
Let’s use the home of a friend who was recently asking about their house’s value as an example. Zillow lists their home’s Zestimate at $354,198. Trulia’s estimate is $377,000 - 6% higher. Then there is an identical floor plan and square footage home (on a smaller lot) in their same community, one street over, currently listed for sale at $415,000! That’s right - a Zestimate can be low just as easily as it could be high. Given the high demand in the market right now, the listing price of the identical home is probably a better barometer for them, but it certainly doesn’t mean that they will get that price!
So what is their home actually worth? The real answer is, only an actual appraisal, or an experienced local Realtor, (and the market) can really determine that. And then does that mean it will sell for that amount, or they should list it at that? No! Again, it’s a Realtor’s job to take into account all factors - like how fast they would want to sell, what the demand is like in the market, the unique qualities their home has, and a myriad of other things - in order to set the correct listing price, and ultimately get the most from the sale.
The faster the market is moving, the more likely these online estimates may lag behind. Also, the more expensive the home, the greater the variance in valuation can be. And overemphasizing a Zestimate can hurt both the buyer and the seller. If a seller tells their agent, they don’t want to pay more for home in an area than Zestimates, they may be missing out on what the market is really doing right now, or they may be willing to pay too much if Zestimates are high! And a seller who hangs their hat on a Zestimate may be hurting their Realtor’s ability to sell their home, if they are not realistic about its true market value.
We think that Zillow has done a great job of bringing an overview of the real estate market right to people’s fingertips, but as with any tool, it’s only as valuable as the way that it’s used. A computer algorithm takes into account some of the data available and calculates a rough value. Ok, that’s pretty neat, and a fun thing to check into. Now let’s use it as way to get the conversation started with our own Realtor. What number did you have in your head? Ask them about the market in your area. After all, they’ve been pricing and selling homes all around you for some time. How accurate do they think the online estimate is? How about the number you had in your head? Maybe they need to talk you back down to reality, or maybe they can get you more! Either way, they’ve got your best interests in mind. That’s your Realtor's job.
If you have questions about your home’s value, online estimates, or are in need of any Real Estate services, just contact us!