Can you trust the home value offered by Zillow? Keep reading to find out just how reliable Zillow’s home value estimates are, and how you can get the most accurate value for your home.
After almost 20 years in the business of Real Estate, I would say home value is one of the most interesting subjects to talk about. The value of a home determines what price a buyer and seller agree upon in a transaction. Before we get to Zillow, there are some misconceptions about determining the value of a property that we’ll discuss first.
#1 Misconception is Sellers determine the value of houses.
It is very tempting as an owner of a property to think this way: I bought my house for “$X”, over the years, and then I put “$X” into the bathrooms, the roof, new windows, new kitchen counters, and resurfaced the driveway. So, my house is worth what I bought it for, PLUS all that money I invested in the property over the years on improvements, right? Well, sorry to say, it doesn’t work that way. This is tempting as a homeowner or seller because we want to “get back” everything we invested in the house over our time of ownership. Unfortunately, that way of thinking has no relation to the way Real Estate is actually valued.
Here's the cold truth: buyers don’t care what you paid for the house or how much you spent on the light hanging over your dining room table (for example).
Here’s the shift in mindset to consider: think only from a buyer’s perspective and you’ll understand what your house is actually worth.
Value in Real Estate is determined by what willing buyers will pay willing sellers for a property.
“Ok”, you might say, “But I want to know how to determine my asking price for my home, how do I do that without thinking about all this money that I’ve put into my property?”
Well, to do this, we think from a Buyer’s perspective. When a buyer is looking at homes, most people want to know they are getting a good deal. You would if you were the buyer looking at your home, wouldn’t you?
So buyers want to know they are getting a reasonable deal; they want to know whether the house they are looking at is a good “value” for the price. How do they determine this? They know by comparing the house and its price against other similar homes in the area that have sold.
We do the same thing when we shop for a car. We look at the price and features and we will often compare those to the price and features of the same model at a different dealership to see which car is the best value.
So, with your house, a buyer (usually via their agent or online) compares your house’s features: square footage, year built, layout, lot size, condition, against the features of a similar or the same-style house in the area. This way, they can determine whether they would be overpaying for your house based on the neighborhood.
Zillow's Estimates Miss Important Factors In A Home's Value
Now to Zillow for a moment. Zillow can do this feature and price comparison…but only to a point. You see, there are some important things that Zillows algorithms cannot do and cannot compare. An algorithm cannot compare the relative quality of the condition of the inside of a home, the functionality of the layout, or the location. These are among the most important factors when buyers determine what to pay for a property - and Zillow cannot even consider this. Zillow only looks at the numbers and uses math to come up with its “Zestimate”.
FUN FACT: in 2016, Zillow CEO Spencer Rascoff famously sold his personal residence for $1.05 Million which was 40% LESS than Zillow’s own value estimate for the property.
So far, humans are far better at determining the market value of Real Estate due to the complex nature of how buyers compare properties to one another.
So how do you ensure you get the most accurate valuation on your home so you can determine your asking price if you are preparing to sell? Hire a Realtor or Broker or hire an Appraiser.
A Broker/Realtor will do an analysis of your house (usually called a Comparative Market Analysis), inside and out, and compare its features to neighboring houses that are similar and have sold recently. Many Brokers will do this complimentary although a few will charge a nominal fee for the time and expertise involved in preparing this report for you.
An appraiser will do the same kind of analysis and report but this will be more detailed and comprehensive. Appraisers are certified and licensed to prepare appraisals for lenders and homeowners. A typical appraisal will cost the homeowner between $300 to $500.
Comparative Market Analysis: More Accurate than Zillow
Neither a Comparative Market Analysis (“CMA”) nor an Appraisal is a guarantee of the value of a home but is an educated, professional opinion based on the surrounding market data that can give you a very good idea of how buyers would view your home’s value in comparison to others. From this information, you and your Realtor can establish a realistic asking price with some expectations about how the market may respond to your home.
If you are wondering about the market value of your home or have any Real Estate-related questions, contact me and we can have a quick phone consult.
Have a question about your home buying or selling options or the Real Estate market in general? You can schedule a Zoom Meeting with Grimm Realty Group to discuss your housing needs, lifestyles, & future goals!
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The content on this page provides general consumer information. It is not legal advice or regulatory guidance. Grimm & Associates may update this information periodically.
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