The best feedback you can get regarding the value of your property is an offer. There are many different options for estimating the value of your property. From formal appraisals, broker price opinions, online value estimates, sellers now have more ways to estimate the value of their property than ever before. It is important to remember that all of the above-mentioned valuation methods are estimates of value and don’t guarantee you will sell your property for that amount. At the end of the day your house is worth what a willing and able buyer is going to pay for it.
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 Chicago?”
No.
Don’t trust Zillow for valuing your home. Here’s why.
Should I Trust Zillow to Determine My House Value in Chicago
Zillow’s Margin for Error
Zillow has been reported to average anywhere from 18 to 20 percent higher or lower in home estimates. Just a few years ago the CEO of Zillow sold his home in Seattle for 40% lower than what the Zillow estimate stated the property was worth. If the CEO of the company is selling his property for 40% less than what the Zillow estimates says the property is worth then he must believe that the Zestimate valuation is not accurate. So, if the CEO of Zillow is taking the Zestimate with a grain of salt then why wouldn’t any other homeowner do exactly that?
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.
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.
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 expectation more difficult.
A realtor will take a look at sales in the pertinent area, creating a radius based on your pocket rather than an entire zip code. He will then compare your home based on size, features, and upgrades to those homes that were recently sold, thus appraised, in the previous 3 to 6 months. This range is contingent on how hot the real estate market is in the area.
He will then compare this information to existing homes on the market, looking at how your home compares to what else buyers are seeing on the market. After all, if yours is a well-kept home being sold next to a completely remodeled home, you might not be able to get the same price per square foot at the other.
Additionally, realtors 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 Chicago.