by Dan Spaulding
Now that the housing market is slowing starting to pick back up, individuals and couples are starting to look into buying and selling their homes. The Internet has proven to be a very resourceful tool to both buyers and sellers, particularly sites like Zillow, an online home and real estate marketplace that offer their estimates or “Zestimates”. However, consumers are advised to not put all their eggs in one basket, so to speak, because Zillow estimates can’t be 100% trusted. You may wonder how is this possible and why aren’t they more accurate?
What are Zillow Estimates?
Zillow estimates (referred to as Zestimate®) are estimated home valuations based on Zillow’s estimated market values. Unlike an appraisal, which actually tells what the home is worth, a Zestimate is an estimated figure based on information entered into a computer program. Certain factors, such as(1) market conditions, (2) home size and (3) home location, all contribute to determining this estimated figure. Potential home buyers or sellers can look at the Zestimates to get a general idea of what a home is worth. However, because they are based on only certain factors and are only estimates, their accuracy is in question, and the Zestimates can’t be 100% trusted. Zillow has Zestimates (both sale and rent Zestimates) on more than 110 million homes.
Why Zillow Estimates Can’t Be 100% Trusted
It doesn’t take a lot of imagination to realize why Zillow estimates are not 100% accurate. When you want to get an accurate appraisal of your home, you call an appraiser, and the first thing he or she will do is come and take a look at your home. This very important first step is NOT part of the process used by Zillow. They have no idea what your home actually looks like, what its condition is, how it compares to other homes in the neighborhood. Whereas appraisers measure the cooled and heated gross living area (GLA), the programmers at Zillow don’t have that option because they’re not physically at your house. The Zillow estimates are based on facts that the user enters into the program, similar to a graph or data base. It lacks the “personal touch” required for an accurate appraisal.
How Important are the GLAs When Determining Value?
The GLA or gross living area is extremely important when determining the value of your home. The GLA is the area inside a home that can be considered livable space. Generally, the area below grade or only partially above grade, as well as the garage area, is not considered gross living area. Even area that’s above grade may not be considered GLA if it’s an unfinished area. When Zillow determines a house’s GLA, they’re getting their figures based on information that may be old or inaccurate. Much of their information is obtained through county records, which are often inaccurate and in need of updating.
A home may have additions added to it or unfinished rooms from the past may now be finished – both factors that can cause inaccuracies if the county records do not indicate these changes. Another factor used to determine a house’s value is the price per square foot that other homes are selling for in the neighborhood. Zillow is often inaccurate with these figures as well. Therefore, you take two extremely important sets of number and multiply them by each other and the result is inaccurate Zestimates. Another factor used in determining the valuation is their proximity within a school district – information which Zillow may not accurately possess.
How Can I Work Around the Inaccurate Zestimates?
Because of Zillow’s inaccurate Zestimates, they provide a wide range of numbers when they give a value range for the homes they have listed. The unfortunate thing about this is that the ranges may go several thousands of dollars either way, making it difficult for home buyers and/or sellers to accurately know what kind of dollars they’re really dealing with. When potential home buyers apply for a mortgage to buy a home, the lender will always contact an appraiser to get an up-to-date appraisal. The purpose of this is so they know how much financing they can provide based on the home’s value.
Banks will not use Zillow estimates because they’re not providing an accurate figure. When using Zillow Zestimates, make sure you allow for these variances.
If you’re considering buying or selling a home, here are some things I can help you with to get a more accurate valuation.
• CALL ME FOR A COMPARATIVE MARKET ANALYSIS (CMA) | I can prepare a CMA that provides you a fairly close estimate of the value of a house based on similar homes in the market. My experience in this housing market helps to provide you with accurate information gained through comparison.
• CALL ME TO SCHEDULE AN APPRAISAL | While an appraiser may cost you a few hundred dollars, it’s money well spent because you’ll know the true value of the house in question. Appraisers base their figures on the size of the home, age of the home, condition of the home, location of home and on what other similar homes in the area are worth and are going for on the housing market. I can help by connecting you with a trusted Mortgage Advisor who can assist you with scheduling an appointment with a trusted reputable appraisal company.
• CALL ME TO SEE THE HOUSE | Few people buy things sight unseen, and this is especially true when it comes to buying a house. If you’re planning to buy a home, the first thing you’re going to want is to see it for yourself. After seeing a house, it’s much easier for you to do your own comparison shopping.