If you search for properties online, you’ll notice that most third-party sites (Trulia, Redfin, Zillow, etc.) offer some type of automated home valuation. By using valuations like Zillow’s Zestimate, you can get an idea of what your home is worth. However, they’re not as accurate as you might think.
To clarify, most agents don’t like sites like Zillow because they can be considered a disruptor of the industry, but I’m a fan of them because I like the fact that so much information is transparent. I think this benefits sellers tremendously because, before these sites existed, Realtors held all the information. Many times, this information wouldn’t get to the right people and cause homes to sell for less than what they were worth.
So why the message about their inaccuracy? We put a North Tustin home on the market recently, and we were surprised by how big the difference was between its automated valuation and its real value. It’s located in a neighborhood where homes are selling between $1.2 million and $2 million, but Zillow said it was worth $847,000, while Redfin said it was worth over $1.3 million. That’s a $500,000 gap.
As my business partner Ryan McMillan says, Zillow’s Zestimate is beneficial in that it allows consumers to gauge how much a property is worth, but they don’t take into account the fact that it’s an algorithm. You can’t really know what a home is worth until you take into consideration the state of the market, the home’s condition, and other factors. This is why consulting a real estate professional is the best way to determine your home’s value.
Zillow claims that their Zestimate has a 10% margin of error, meaning it’ll value a $1 million home for anywhere from $900,000 to $1.1 million. This is because, as we already said, it’s an algorithm that can’t account for a lot of important factors.
We consider seven to 10 different factors before pricing a home for the market, and a home’s worth can also be altered based on the strategy the seller uses to get it sold. If you overprice your home, it might sit on the market and cause you to sell for less than what it’s worth. If you underprice it, you might create an auction effect that causes it to sell above its list price.
To summarize, what a home is worth on paper and what a Realtor can sell it for are two very different things, which is why you must hire a Realtor to accurately assess your home’s value.
On a final note, keep in mind that when you list your home on Zillow, you have the ability to alter its criteria and modify its Zestimate based on its condition. Don’t be afraid to take advantage of this and make sure your home’s valuation is as accurate as possible. If you need help with this, please let us know.
If you have any questions about this or any other real estate topic, don’t hesitate to reach out to me. My team and I would love to help you.