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The problem with all AVMs, Zestimate included, is that they do not have enough information, or they apply the information incorrectly which screws up the valuation.
Sure, anyone can compare 3 houses on the same block, same builder, same size, similar amenities, Zillow gets pretty close on these houses. But throw in a few other factors like busy streets, waterfront views, mountain views, historical neighborhoods, different builder quality, etc. and the automated model falls off quickly. In addition, Zillow weights in "for sale" homes much too high in my opinion. Just because some idiot down the street puts his house on the market for $100K over comps, does not raise the comp for the neighborhood. And don't forget seller concessions of recent sales, they affect value. There is no substitute for local knowledge.
If you want to learn how to properly value homes sit down with some appraisers and see how they value a home and how they adjust for differences in quality, location, amenities, sq footage, etc. You will become a better agent.
Previous posters have mentioned one of Zillow's major flaws: it doesn't account for any non-conforming assets or detriments to a property. My 100-year-old farmhouse in North Carolina was surrounded by subdivisions filled with neo-traditionals that started at 250K. No way was my little 3/2 1500 square footer worth that much, but Zillow always "zestimated" it at 225K, despite its age, size, and backyard next to a railroad track. Ridiculous. And useless.
Get some real numbers from comps/recent sales and go from there in setting your own home price or making an offer.
The problem with all AVMs, Zestimate included, is that they do not have enough information, or they apply the information incorrectly which screws up the valuation.
Sure, anyone can compare 3 houses on the same block, same builder, same size, similar amenities, Zillow gets pretty close on these houses. But throw in a few other factors like busy streets, waterfront views, mountain views, historical neighborhoods, different builder quality, etc. and the automated model falls off quickly. In addition, Zillow weights in "for sale" homes much too high in my opinion. Just because some idiot down the street puts his house on the market for $100K over comps, does not raise the comp for the neighborhood. And don't forget seller concessions of recent sales, they affect value. There is no substitute for local knowledge.
If you want to learn how to properly value homes sit down with some appraisers and see how they value a home and how they adjust for differences in quality, location, amenities, sq footage, etc. You will become a better agent.
"Don't forget seller concessions..."---I was afraid of this.
After 2 1/2 years on the market (us and our neighbor--an older retired woman) she ended up selling in desperation for $100,000 less than originally asked. So are we majorly screwed now in our valuation?
This is in a unique area with no real comps.
And how much does property tax assessment figure into value? Where I lived in the past, we did not pay it much attention but the market was way better.
appraisals are subjective and appraisers are like a box of chocolates. your house is only worth what someone is willing to pay for it.
I see appraisals every day from all over the country. Tax estimates, Zillow, Eppraisal and usually Chase Home Evaluator were all checked prior to having the appraisal ordered. you never know what value you're going to get.
generally I've found the more rural the area and the fewer comparable sales- the less likely you'll get an accurate value estimate on a site like Zillow. if you live in a condo or subdivision, and 5 similar homes have just sold, the value is probably much more reliable.
I like to look at the comps when I run Zillow. not the for sales- but the recently sold. compare your home to home of similar age, style, sq footage, lot size and bed/bath count, town, ect. those are the homes an appraiser is going to compare your home to.
If a realtor tells you your house is worth $x, ask them to justify with recent comps.
As far as I know (and I'm sure i'll be corrected if I'm wrong) the sales comparison approach is always used for mortgages since the housing market fluctuates. cost approach is used for things like hazard insurance- and to make sure the market isn't completely our of whack when getting a mortgage.
Zillow works well if the house is situated in a large, relatively homogenous neighborhood. If houses nearby are a significantly different price point, numbers will be skewed. Zillow is usually a good "ballpark" figure for the otherwise uninformed homeowner. In my area of $150-400,000 homes, Zestimates are generally off between $10,000-50,000. I always come prepared to explain why Zillow may or may not be accurate, and why my numbers are significantly more reliable--even if they happen to agree with the Zestimate.
I love the Estimate when I can use it to my clients' advantage.
I'm curious how you use a Zestimate to your client's advantage?
Zillow had my house wildly undervalued for a long time. It's (now 2 year old) new construction by a tract builder with dozens of comps within a few blocks, yet they were valuing it at less than half of what I had paid, and that's in a very hot market where the market value has gone up over 20% since I closed 2 years ago, based on recent sales. They've now adjusted the value (and wiped out those 18-20 months worth of erroneous valuations).
But back when they had it at less than half the true market value, do you think I would have accepted some crazy lowball offer because an agent said "but the Zestimate says...."
And conversely, do you think a buyer's agent would do a CMA and then advise their client to pay more than a house was worth because the Zestimate is high?
I'm curious how you use a Zestimate to your client's advantage?
Zillow had my house wildly undervalued for a long time. It's (now 2 year old) new construction by a tract builder with dozens of comps within a few blocks, yet they were valuing it at less than half of what I had paid, and that's in a very hot market where the market value has gone up over 20% since I closed 2 years ago, based on recent sales. They've now adjusted the value (and wiped out those 18-20 months worth of erroneous valuations).
But back when they had it at less than half the true market value, do you think I would have accepted some crazy lowball offer because an agent said "but the Zestimate says...."
And conversely, do you think a buyer's agent would do a CMA and then advise their client to pay more than a house was worth because the Zestimate is high?
Reading the comments here there still seems to be a reasonable amount of people who give the number at least a little credibility. If you have a buyer and seller who both put some credence in the Zestimate then the party who that Zestimate favors may be able to use it to her advantage.
Obviously if off by 50% no one is paying it any attention but if it's reasonably close and on our side of true value and we can use that as part of our argument for our number then by all means we will use it. As a buyer, it may as simple as saying that we disagree with your (seller) opinion of value and we'll pay no more than the Zestimate. It's a variation of the higher authority negotiating strategy.
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