Over the past couple of years, homeowners have been able to go online and obtain an estimate of their home’s value in the span of about 30 seconds. Just type in an address and a value is delivered to your computer screen for your viewing pleasure. But how accurate is the value?
Before I dive into the accuracy issue, lets spend a moment on how we got here. Twenty years ago, if a homeowner wanted to find out how much their home was worth, they would have to contact a real estate agent and undergo a root canal just to obtain a five or six digit number. The homeowner would have to arrange the appointment with the agent to see the home; spend an hour or two with the agent walking through the home and answering a myriad of questions; wait three days for the agent to decide to come back; sit through a three hour appointment at a kitchen table and listen to a presentation about the agent’s qualifications and company stature; then get THE NUMBER.
Now I ask you, if you were a homeowner and had two options to obtain the value of your home, would you choose the 30 second method listed in the first paragraph of this post or the five day, painful dental alternative? So when I hear agents rail against these online estimators and roll their eyes about the accuracy of them, I just want to say, “Shut up and deal with it!” They are now a fact of our business. Learn how to present these estimates instead of ignoring them.
Let’s start with listing some of the most popular online estimators out there:
- Zillow – the most popular of them all
- ForSaleByOwner.com – the king of FSBO sites
- Chase – a lender alternative
- Bank of America – another lender alternative
- eppraisal – appraisal site
- Berkshire Hathaway HomeServices – shameless plug for my franchise’s estimator
Want to have some fun? Go to each of these websites and enter your own property address. Go ahead – – I’ll wait.
See where I’m going with this post. If you’re like most homeowners and went through this exercise, the range of values presented is as wide as the Grand Canyon.
Of all the online estimators, Zillow is the one that everyone points to as the leader in the industry. It is also the one that is most vilified by many real estate agents. I hear from agents all the time that bemoan the lack of accuracy of the Zestimate (Zillow’s name for their online estimate). The problem that occurs most of the time is that Zestimates are usually in the upper range of value and it’s difficult to convince a homeowner otherwise. After all, people see what they want to see.
Instead of trying to fight homeowners on this point, show them the facts. The following chart was pulled from Zillow’s website and covers the accuracy of their Zestimates in various geographic regions across the US. Take a look at the two largest cities in Pennsylvania: Philadelphia and Pittsburgh.
If you were a homeowner in Philly and received an online Zestimate, the chances of the figure quoted being within 10% of the final sales price is only 60% of the time. Put another way, approximately 40% of the time it’s not even close to what the property ultimately sells for!
Not let’s take a drive west on the turnpike and take up residence in the Steel City. Your Zestimate is within 10% of the final sales price only 54% of the time. So if you received a Zestimate of $200,000, the chances that your home WILL NOT sell between $220,000 and $180,000 is 46%. That’s a huge margin of error!
Just so I’m clear, these percentages are coming from the source; Zillow. I didn’t make them up out of thin air to prove a point.
If someone obtains an online estimate of their home, it should be the beginning of the conversation, not the end. The figure is based on the available data plus a number of assumptions about comparable sales. And we all know what happens when we assume too much. It makes an A** out of U and ME.
Here are some examples of key attributes that no computerized algorithm can account for but can have a huge impact on value:
- A home is 27 years old and has the original asphalt, fiberglass shingle roof on it – – not good
- The home sits at the end of a quiet cul-de-sac with very little traffic – – great for kids
- The basement frequently leaks during times of heavy rain – – Ugh
- The home is the smallest in the neighborhood – – Yipee
- The house next door has eight vintage cars (all in different states of disrepair) parked in their driveway and on the street in front of your home – – really?!?!
And the list goes on and on – – –
So the next time a homeowner says, “Zillow says my home is worth $239,000,” take a deep breath and pull out your Zestimate Accuracy Table and start a conversation.
All the best!