An old saying in real estate is “your home is worth what someone is willing to buy it for.” 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 homes buyers and sellers look to the popular website Zillow for information. You can see properties for sale, for rent, but probably most interesting is Zillow will provide an estimate of a home’s value…..But the questions is, “Should I Trust Zillow to Determine My House Value in Oklahoma City?”
The answer is…..NO.
Don’t trust Zillow for valuing your home. It might be tempting to see a bigger number than you expected or upsetting to see a lower value. Here’s why you shouldn’t rely on Zillow’s estimate of your home (called the Zestimate)….
Should I Trust Zillow to Determine My House Value in Oklahoma City
Zillow’s Margin for Error
Zillow has been reported to average anywhere from 18 to 20 percent higher or lower in their home estimates. There are even reports of home values on Zillow rising in market areas where prices are clearly falling.
Let’s think about this for a second…..For a $200,000 home, a 20 percent error 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 gigantic difference in pricing.
Zillow estimates are just that…estimates. These or other inaccurate estimates could discourage potential, qualified buyers who might think a home is well out of their price range while giving sellers an unrealistic idea of their home’s value. In the end, this is the starting point of many disagreements homeowners are having with selling agents regarding properly pricing a home.
How Does Zillow Even 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. They don’t go inside your house. They don’t even factor in how it looks from the outside whether you have rotting siding and broken windows or a brand new roof and fresh paint.
The proprietary formula uses second-hand data on what homes have sold for 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. That sounds legit but calculating the value of a home is not that easy. Since every home, real estate market, and location is different and constantly changing, you can’t just apply a formula to get an accurate value.
Even Zillow will admit this is only a starting point for a true valuation of your home and should not be considered an appraisal or true value. The main reason for this is Zillow doesn’t have all the information. They don’t know if your house had new flooring. They don’t know if that new flooring was hardwood floors or cheap carpet.
Additionally, Zillow doesn’t factor in community pockets. These are very common area where you can have a 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. In other words, lower value homes can get sucked into the valuation of higher valued homes and vice-versa.
The More Accurate Model
Any professional real estate agent 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. To get a true value estimate, you have to actually see the home and know the area.
An agent will take a look at comparable sales in the nearby area, creating a radius based on your location rather than an entire zip code. The homes they compare with yours will be similar in size, shape, quality, and year built to ensure the valuation is accurate. They only look at homes sold within the last 90-180 days if possible to get an accurate reading of the CURRENT market conditions. With a few of these comparable sales meticulously picked by the agent, you can make some minor adjustments and average them out to see what your home is really worth.
Agents will also compare your home to existing homes up for sale on the market to see how yours compares. After all, any home that is currently up for sale is your competition. If other homes are more updated or in nicer condition, those will sell for more and faster than yours meaning you’ll have to drop your price or invest money into improvements to compete.
Additionally, agents 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 Oklahoma City.