Zestimate
Zillow is a giant in the Real Estate industry. Recently I have had several people comment on their home value variations on Zillow using their “Zestimate” pricing. There are several factors to consider when trying to determine what your home may sell for. Anyone can price their home at any price they would like to. Obviously if it is priced too high it will not sell, and may not even have anyone look at it. If it is priced too low, it will sell quickly the owner may leave revenue on the table. Establishing a fair sales price is an art more than a science. There are several factors that go into determining where a home should be priced. One important factor is the location of the house. Not only the neighborhood, but the location in the neighborhood are both important. For example a house may be in the nicest area in the city, and be located on a busy street with a lot of traffic noise. True the house is in a nice area, but the traffic noise will detract from the saleability of the home. Other obvious factors are condition, and upgrades.
Appraisal
Even more importantly than what it will sell for is what it will appraise for. Let’s say a house is listed above market value and receives an offer at the high price. The next step in the home purchase process is the appraisal ordered by the lender. Lenders will not allow a home to be financed for more than it is worth. This means that the buyer will have to come up with extra money to put down, or renegotiate the price of the home. Most times the price of the home is negotiated down to the appraisal price or very close to the appraisal price. In my opinion that means that it is really difficult to sell a home for more than it is worth.
Data
Another problem with the Zillow Zestimate is the data they use to determine a homes value. In Utah buyers do not have to disclose what they paid for a house, and sellers do not have to disclose what they sold a house for. That means that Zillow may not have accurate info when determining what homes have sold for. They may be forced to assume that a home sold for what it was listed for. This creates a situation where homes appear to be worth more than they are really worth. In our area, homes are currently selling for about 97% of list price. That means that if Zillow is using listed price as sold price, they could be Zestimating homes at 3% over what they actually sold for. This is not Zillow’s fault, as many agents do not take the time to notify Zillow of what they sold a listing for. I am a supporter of Zillow and have their link on my website.
This is my opinion, and not intended to speak negatively of Zillow in anyway.
This blog post was shared by Kevin Richey.
View Kevin’s website HERE.