A good number of home sellers put a lot of stock in home value estimates put forth by real estate mega websites like Zillow and Trulia, and understandably so, given the pervasive influence of these sites in the marketplace. But it’s important to know the limits of these types of estimates in order to arm yourself with a more realistic assessment of your home’s value as you move toward selling your home.
Home appraisals and detailed comparative market analyses prepared by competent real estate agents take into account not only a good number of comparable properties when assessing a subject property’s value, but also a great deal of specifics regarding these properties. Zillow’s and Trulia’s estimates are based on complex algorithms that fail to take into account virtually any of these specifics, and frankly, how could they? These sites don’t know anything about the condition of your home, or about any updates or improvements you've made to your home. The “comparable” sale that they might bring up a half mile away from you could be a gleaming showpiece, or it could be the ugliest fixer-upper on the block.
Good real estate agents understand how to assign realistic additions or subtractions in value to various improvements. They also know how local neighborhoods differ from one another and how sometimes, differences between neighborhoods that appear subtle at first glance actually impact local real estate prices in a significant way. This expert knowledge matters a great deal to buyers and sellers who are trying to assess values of local homes.
My wife and I recently sold a home in California. On the day of our closing, the Zillow Zestimate was still over $100,000 less than the actual sale price. Of course, Zillow’s algorithms couldn’t take into account that we bought our home as a major fixer with an outdated 60’s kitchen (complete with red and white checkered vinyl flooring and fern-embossed oatmeal-colored tile counters) and blue carpet from the 80’s. It couldn’t factor in all the improvements we’d made inside and out, including hand-carved hardwood floors throughout, new appliances, granite countertops, new paint and extensive landscaping. On top of that, Zillow couldn’t possibly have come close to “understanding” the fact that our property was the only one in its price range in a very sought after community of a few square miles, surrounded by a large area of homes that were in much less demand.
Click here to read the second post in this two-part blog series.