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 Fort Myers?”
No.
Don’t trust Zillow for valuing your home. Here’s why.
Should I Trust Zillow to Determine My House Value in Fort Myers
Zillow’s Margin for Error
Zillow’s home estimates, known for their significant deviation—ranging from 18 to 20 percent higher or lower—can lead to considerable financial discrepancies. This variability is especially concerning in declining market areas where one would expect prices to stabilize or decrease. For example, for a home valued at $200,000, a 20 percent deviation translates to a $40,000 swing either up or down. In more expensive markets such as Los Angeles or Miami, where homes often price around $1 million, this deviation can mean a difference of $180,000 to $200,000 or more, substantially impacting buyer and seller expectations.
These fluctuating Zillow estimates have real-world implications. Potential buyers might be deterred by inflated prices, mistakenly believing a home is beyond their financial reach. Conversely, sellers could develop unrealistic expectations about their property’s market value, leading to frustration and potential conflict with real estate agents who are tasked with setting a more accurate, market-driven price. This misalignment can complicate negotiations and prolong the selling process, as homeowners might insist on listing prices based on Zestimates rather than market realities.
Inaccurate Zestimates can also impact financing. Lenders rely on property valuations to determine loan amounts and interest rates. Significant deviations can lead to discrepancies in loan approvals and terms. If a lender bases a mortgage on an inflated Zestimate, the borrower might end up with a larger loan than the property is worth, increasing the risk of default. Conversely, undervaluations can result in lower loan amounts, limiting the buyer’s purchasing power and potentially excluding them from homes they could afford.
To navigate these challenges, it’s crucial for buyers and sellers to use Zillow’s estimates as a starting point rather than a definitive value. Engaging with professional real estate agents and appraisers can provide a more accurate picture of a property’s worth, incorporating local market conditions and the unique features of a home. By combining automated estimates with professional advice, individuals can make more informed decisions, ensuring that transactions reflect true market values and reducing the likelihood of financial discrepancies and conflicts.
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 Fort Myers.