An old adage in real estate sales 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 look to industry leader Zillow for information. But the questions is, “Should I Trust Zillow to Determine My House Value in New Orleans?”
Don’t trust Zillow for valuing your home. Here’s why.
Should I Trust Zillow to Determine My House Value in New Orleans
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 consider this. 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 pricing difference is huge.
Zillow estimates discourage buyers to think a home is out of their price range, while giving sellers an unrealistic idea of a selling price point. When it comes to properly pricing a home, this unrealistic idea is the starting point of many disagreements between homeowners and selling agents.
Simply put: homeowners see the price estimate on Zillow and think that it’s the starting point for their home.
How Does Zillow Create Estimates
Zillow calls its proprietary estimating tool a “Zestimate.” Even with all the factors placed into the formula, the margin of error is high because Zillow isn’t actually looking at your home.
The proprietary formula looks at the market pricing in the area. It factors in the size of the house, the lot, and the features of the home, including the number of bedrooms, bathrooms, pools, and highlighted features. With this, even Zillow says that this is a starting point for a true valuation of your home, and should not be considered an appraisal or true value.
This is because the information used in the formula is dependent on public records and user input, such as realtor sales. But there is no way for Zillow to know if your home is the run-down eyesore, or the completely renovated home that everyone envies.
Zillow also can’t discern community pockets. These are common in larger cities, where higher-end communities can be blocks away from a mid or lower-end one. These “pockets” can skew (or be skewed by) larger metropolitan data that Zillow factors in that aren’t related.
The More Accurate Model
Pricing a home requires a complete understanding of the home itself, the location, and current market trends in that area. Many realtors look at Zillow pricing with some disdain because it makes pricing and managing client expectations more difficult.
A realtor prices your home by looking at sales in the related area, creating a radius based on your pocket, rather than an entire zip code. Next, they will compare your home based on size, features, and upgrades to homes that were recently sold, thus appraised, in the previous 3 to 6 months. This range depends on how hot the real estate market is in the area.
They will compare this information to existing homes on the market, and see how your home compares to the other homes buyers see on the market. If your well-kept home is being sold next to a fully remodeled home, it may not be possible to get the same price per square foot as the other.
Realtors also consider whether it’s a buyer’s or seller’s market, and use corresponding tactics to create a frenzy around your house, even in New Orleans.