An old adage in real estate sales is “your home is worth what someone is willing to pay.” There are many different factors, some that make sense and others that don’t when it comes to valuating a home.
In today’s internet savvy world, many look to industry leader Zillow for information. But the questions is, “Should I Trust Zillow to Determine My House Value in Salt Lake City?”
No.
Don’t trust Zillow for valuing your home. Here’s why.
Should I Trust Zillow to Determine My House Value in Salt Lake City
Zillow’s Margin for Error
Zillow has been reported to average anywhere from 18 to 20 percent higher or lower in home estimates. There are even reports of home values on Zillow climbing in declining market areas.
Let’s think about this for a second. For a $300,000 home, a 20 percent deviation is $60,000. For high-end markets like Miami or Los Angeles, a $2 million home could see unrealistic estimations varying from $280,000 to $400,000 or more. That’s a lot of mula when it comes to pricing the home right.
Did you know that Zillow estimates will discourage potential buyers who might think a home is out of their price range and at the same time give sellers an unrealistic idea of what their home is worth. With this false information, many disagreements between homeowners and selling agents as to regards to the correct pricing on the home.
Here is what really happens: homeowners see the price that Zillow suggests and they think that is the starting point for their home.
How Does Zillow Create Estimates
Zillow calls their property estimating tool a “Zestimate.” Even with all the factors they have for pricing for the formula, there is still several errors because Zillow isn’t actually looking at your home.
The proprietary formula looks at the market pricing in the area. It will factor in the size of the house, the lot and all features of the home including the number of bedrooms, bathrooms, pools and highlighted features. However, even Zillow will say this is a starting point for a true valuation of your home and should not be considered an appraisal or true value.
The main reason is because the information Zillow uses is the information from accessing public records and information Realtor’s use when they input their sales. However, Zillow cannot discern if your home is the distressed eyesore in the neighborhood or the completely redone from top to bottom with several upgrades that every buyer would want.
Additionally, Zillow doesn’t discern community pockets. These are very common in larger cities where you can have higher end community just blocks from a mid or lower-end one. These “smaller areas” are different when it comes to comparing information from a large metro area. When Zillow factors this in it gives inaccurate information to the public.
The More Accurate Model
Any professional real estate agent will tell you that pricing a home to sell requires an understanding of the home as a whole, the neighborhood and what is happening in the market and trends for that area. In fact, most realtors hate the way Zillow comes up with their pricing because it gives home owners the wrong impression when it comes to what is happening in the market. This often leads to pricing and managing realistic client expectation more difficult.
A realtor takes into the fact of current market sales for that area, creating a 4 block radius from your house rather than the entire city. They will then compare your home based on its features like size, and upgrades to those houses that just sold, thus appraised, in the previous 3 to 6 months. This range is always based off of how hot the real estate market is a given area.
He will then compare this information to existing homes on the market, looking at how your home compares to what else buyers are seeing on the market. After all, if yours is a well-kept home being sold next to a completely remodeled home, you might not be able to get the same price per square foot at the other.
Additionally, realtors will consider whether it is a buyer’s or seller’s market. If you want a lot of action or create a frenzy with buyers for your property in a seller’s market, you can under-price the home and let the bidding wars begin. This tactic works in many markets including Salt Lake City.