You see a home on Zillow or the like (we’ll call them portals from here on out) and inquire about its availability with us or another agent… and it’s not for sale. You’re looking to sell your home and you LOVE the Zestimate, yet the number is completely wrong when you talk to a Realtor.
Why?
Let’s start with the availability of homes. The dirty secret about online real estate is that it’s built upon you being a ‘lead’. There is a war being fought between portals like Zillow, Trulia, and local real estate brokerages for your name, number and email address. Mr. Buyer and Mrs. Seller, you are caught in the middle of an online war that has led to the mess that is the online real estate world, it is inaccurate and untrustworthy without a person in your corner. For this reason, portals don’t care about their data being accurate; they are more of an advertising website than anything, there’s no incentive for them to make sure that a home that sold six months ago is changed from active to sold on their website; their main concern is getting your contact information.
Now that you know that portals are really just information gathering, let’s move on to estimates of home value. First of all, Zillow itself calls it a “Zestimate,” as in estimate. Zillow has a helpful chart which can be accessed here showing their accuracy in various markets. Until recently, in the Denver area the Zestimates were off by 9.8% on average (it’s currently 1.55% in the Denver area for active listings and 5.17% for off-market homes). That means on a $700,000 home the Zestimate could say it’s worth either $660,000 or $7400,000. That’s an $80,000 swing in price. Click this link to hear that Even the CEO of Zillow says they aren’t meant to be used as fact. but instead, he says it’s a starting point for a pricing discussion. Currently in the Denver area the Zestimates for off-market homes are correct within 5% of the sales price only 48.67% of the time. So on that $700,000 property 48.67% of the time it sells for between $660K – $740K. 76.12% of the time it sells for between $630K – $770K. 98% of the time it sells for between $560K – $840K. That is a huge swing! As Realtors, our job is to give you a more realistic sales price so you aren’t guessing in a $280K price spread range.
So why aren’t they accurate and what are these Zestimates based on?
- In the Front Range, most of their data comes from public information derived from the county, city and state. The problem with this data is that it can be out of date and inaccurate. Anyone who has lived in Colorado for any length of time knows that the county data can miss basement finishing, remodels, additional buildings etc..
- The portals then apply an algorithm – a computer program – to these disparate incorrect pieces of data to derive an estimate of value.
How can an accurate price be determined for a home when the data it is based on is out of date and incorrect? It can’t.
So how should the value of a home be determined if you want it to be accurate?
- Sold home data – hard dollars spent – in a recent time period on homes that compare to each other is the most important way to determine the current market value of your home. Appraisers often only use comps that have sold within the last three months that have a similar number of bedrooms, baths, square footage and features and are located within a 1 mile radius of the subject property. This is the reason that the beautiful new construction 3 bedroom single family home that sold a year ago on your street doesn’t help the value of your 80 year old 2 bedroom bungalow. Only real estate professionals and appraisers have access to the best and most solid sold data.
- The condition of your home is a factor. All things being equal, an updated home will be of more value than an identical home in bedroom, bath and square footage no matter how much you love your “charming!” 50 year old kitchen.
- Whether a neighborhood is appreciating or depreciating in value will affect the price of your home.
- Often a seller’s perceived value of their home and the actual market price are very different numbers. You might be willing to overlook that your home has no AC and that the third bedroom is the size of a storage closet because you think the home has a ton of character which makes it worth the same as a home with Central AC and three large bedrooms, but these issues affect the price whether a seller wants to admit it or not. This is why determining the fair market value of a home is a mixture of art and MLS data. Our job as a REALTOR is to help you determine what the actual market price of your home is based on the accurate information we have at our disposal, not the perceived price based on AI and emotion..
So, in lieu of talking to us or any other Realtor, where can you go for accurate information?
- As a buyer, check out REColorado.com. This site is the most up to date and will have Coming Soon listings that the big portals don’t have access to.
- Sellers have it a bit tougher. You’ll need to find every home in your general area and neighborhood that matches your home’s bedroom, bath, square footage, parking, etc which has sold in the last three to six months, the time frame appraisers like to use. Then you need to go inside of them (or find recent photos of the interior) to make sure they match your home in terms of quality, condition and finishes to determine a somewhat accurate value or you can pay for an appraisal.
- We are always happy to generate a free CMA (a MLS report of sold homes in your neighborhood with our take on where your home fits in value).
One tip we do recommend for sellers is to claim your home on Zillow so you can make the data as accurate as possible. Here’s the link to: Edit Your Home Facts on Zillow
The bottom line for these and other websites is this: They are nothing but advertising sites meant to monetize your clicks. Next time you log-on to a portal such as Zillow or Trulia, look for an ad for a bank, a mortgage company, or any of the myriad of advertising partners these companies have. Every time you look up a home as a buyer, or try to ascertain the value of a home as a seller, you are a number to help collect advertising dollars.
Want accuracy? Want to know the market value of your home? Tired of wasting your time online? Give us a shout.