Have you looked up your home’s “Zestimate” on Zillow? Did you like the value you saw, or thought it was below rock bottom? You aren’t alone. Many home owners utilize this resource to identify their home’s value, but have questions about its accuracy.
What is a “Zestimate”?
According to Zillow, this is an estimate of home’s value, compiled from public and user submitted data, calculated through a complex computer algorithm. Simple enough, right?
Simply put, Zillow uses reported information and public data from nearby home sales (excluding foreclosures) and adjusts your home’s value based on reported lot size, total square feet, number of bedrooms/bathroom and tax assessment. Zillow then provides two valuations: a Zestimate (i.e: $250,000) and a Value Range which includes the high and low ranges of the estimate (i.e $230,000-$280,000). This range doesn’t account for: seller concessions from sales, the condition of the house, or desirability of the neighborhood.
While a “Zestimate” can be a helpful tool for home owners, since it’s a computer algorithm utilizing the accuracy of public/submitted data, there are variable factors homeowners should still consider:
1. Accuracy of nearby sales, home amenities and upgrades
2. Market Demand
3. Professional Experience
Since the majority of Zestimate’s valuation is taken from public data from past sales and public information, the valuation is only as good as the information provided. There is always room for human error in reporting, whether in discrepancies in sales prices, home size or physical attributes. If an error is discovered, Zillow encourages the owner to edit and update their home’s information to improve the accuracy of the value. That can improve the value, or have the reverse effect if edits/updates are also incorrect. These changes may not be reflected automatically, but adjust over time. The Washington Post reported that Zestimate values are more accurate in neighborhoods with higher turnover, because more public data is available. That isn’t exactly a strong selling point for a neighborhood, but that re-emphasizes that more information is better. Despite the amount of information available, home values are refreshed by Zillow three times a week.
The “Zestimate” also does not account for interior upgrades and major renovations, unless vales are reported to local tax assessor (and on tax assessment). Regardless, upgrade values are subjective based on quality of materials and/or labor. For example, a renovated kitchen can mean: granite tiles thrown onto old 70’s cabinets with new kitchen pulls (estimated $3K), or completely renovated kitchen with custom cabinets, tile back-splash, high end granite slab and matching stainless appliances (estimated $20K+). Valuation also depends on how a homeowner reports their upgrades, whether they under or over inflate the value of their renovations.
Another aspect that the “Zestimate” is unable to account for is market demand or neighborhood amenities. Market value depends primarily on supply and demand. Lack of inventory could inflate home prices as buyers compete for homes, and more prestigious neighborhoods could demand higher prices than a neighborhood directly across the street. On the flip side, high inventory could also result in slightly lower prices with more discerning buyers.
Determining the best value for selling your home requires a detailed analysis and professional expertise. Its critical for a realtor who knows your area and understand market demand, to see your home, its condition and upgrades and give you an accurate value based all these factors. While a Zestimate can be a helpful basis, even Zillow recommends consulting an expert for a more precise value.
Contact The Wethman Group today, for a detailed valuation of your home!
Photo credit: http://customremodelingnashville.com/kitchen-upgrades/