Your house is only worth what someone else is willing to pay for it. This suggests that there are many different factors, some arbitrary that go into the valuing of a home.
In today’s internet-savvy world, many people automatically turn to the internet to answer all their questions. As house prices continue to rise, many people want to know the value of their home, and so they turn to websites like Zillow and Redfin to determine their home value. However, can you really trust these companies that use artificially generated estimations to value your home accurately?
No.
Don’t trust Zillow for valuing your home. Here’s why.
Can I Trust Zillow’s Estimate of My House Value in Bakersfield?
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 $200,000 home, a 20 percent deviation is $40,000. For higher-priced markets like Los Angeles or Miami, a $1 million home could see unrealistic estimations varying from $180,000 to $200,000 or more. That’s a huge difference in pricing.
Can you imagine selling your home and losing out on $200,000 because you didn’t realize your home’s true worth? Or on the other end of the spectrum, you list your house for a hundred grand more than you should because you weren’t aware that the price just wasn’t realistic for your market?
Zillow estimates could discourage potential buyers who might think a home is well out of their price range while giving sellers an unrealistic idea of a selling price point. In the end, this is the starting point of many disagreements homeowners are having with selling agents regarding properly pricing a home.
Simply put: homeowners see the price on Zillow and think that is the starting point for their home. In reality, it isn’t. These are artificial guesses that can sometimes be in the ball park, but they are rarely accurate. Typically in Bakersfield, we have been seeing a difference of about 10% between an estimate from Zillow and the final sale price. Don’t trust these companies, trust a local Bakersfield real estate professional that knows the market.
How Does Zillow Create Estimates
Zillow calls its proprietary estimating tool a “Zestimate.” Even with all the pricing factors placed into the formula, there is still a high margin of error 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 reason is the information Zillow uses is reliant on accessing public records and user input such as realtor sales. However, Zillow cannot discern if your home is the dilapidated eyesore in the community or the completely redone and upgraded home everyone is envious of.
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 “pockets” can skew or be skewed by larger metro data that Zillow factors in that aren’t pertinent.
Take Taft, CA for instance. Taft can have beautiful properties just one or two blocks away from completely rundown and abandoned-looking properties. Obviously, they are not worth the same amount, but a computer doesn’t know that. It just sees that one house sold for a certain price, and so the other should as well. If you take a house in Seven Oaks versus a house in Rosedale, those are very different neighborhoods. If you are trying to sell in Seven Oaks, but the computer is pulling comps at $300,000, you might not realize that your Seven Oaks house is probably worth three times as much because of the neighborhood that it’s in. This requires a local touch of someone that knows exactly what the market is doing and where.
The More Accurate Model
Any professional realtor will tell you that pricing a home to sell requires a full understanding of the home itself, the location, and current market trends in that area. In fact, most realtors look at Zillow pricing with a bit of disdain because it does make pricing and managing realistic client expectations more difficult. AFter someone has seen that their house is worth $350,000, good luck trying to convince them that it is only worth $250,000. They will only learn over time when nobody bites on their property after it has been listed for months.
A good realtor or investor will look at the houses that sold in the closely surrounding area as opposed to an entire zip code which can skew the numbers all over the place. Then they will take into account the condition of the property compared to the other properties that have recently sold.
Then, if they are good at what they do, they will use their knowledge and experience to provide an accurate estimation of what the market will do in the very near future, and what the best decision is for your home. If you have a nice but older property next to brand new homes, yours will probably not sell for quite as much.
Additionally, realtors and investors will consider whether it is a buyer’s or seller’s market. If you want to create a frenzy with a lot of eyes on your property in a seller’s market, you can underprice the home and let the bidding begin. This tactic works in many markets including Bakersfield.