What Carlsbad Homeowners Should Know About Using Zillow
As a Carlsbad home owner you no doubt like to know what the value of your home is, even if you are not planning on selling, at least not for some time. Heck, as a Carlsbad Realtor I like to know, too.
Lots of home owners I know and have talked to use Zillow, and to a lesser extent Redfin, for their online valuations that provide an estimated value with a quick click.
Indeed, I’ve had plenty of sellers, and buyers, say “I know you guys…meaning us Real Estate agents…don’t like Zillow, but Zillow says…”
I won’t tell you not to use Zillow, but there are some things to be aware of before you check it out, see your home is worth far more than you even thought possible, and decide “let’s sell!”
For starters, I suspect you know Zillow provides online estimates of value for homes called Zestimates. They are not the only ones, now, either.
What home owners don’t realize is that Zestimates are often incorrect – they may be low, or they may be high, for a given property, and sometimes that difference can be tens of thousands of dollars. Unfortunately, sometimes homeowners who are going to sell want to price their homes based on Zestimates, and other online valuations, which are incorrect, and that’s a big mistake. Why?
Online estimates use algorithms that do not take into account factors that Realtors and appraisers know influence a home’s true market value, such as location, views, amenities and condition.
Plus there are things Zillow might include in their valuations that do not enhance the accuracy – a recent refinance on your home, for example, or single story comparables when your home is a 2-story – as well as data submitted by the public or Zillow users which may be incorrect.
It’s one thing to be mislead into thinking your home is worth more than it is, or possibly less. But the problem as a seller with using an estimate that is high to determine your list price is that overpricing a home can keep buyers away. And if, by some remote chance, a buyer actually offers what you want there could be a problem with the appraisal coming in low.
On the flip side a low price based on Zillow, while it might encourage an auction effect and multiple offers, could possibly result in you leaving money on the table since the home could sell for less than it’s worth, depending on the kind of market you’re in. In our competitive market here with multiple offers that's less likely to happen.
A related issue is that we know buyers commonly consult Zillow, and some like to make offers based on what Zillow says, which may be very low compared to the true market value, rather than based on comparable sales, even if their agent counsels them otherwise. As a seller that low doesn’t do you much good if you want to sell, does it? Oh, you might counter, but if that buyer sticks to their guns, and love for Zillow, no deal.
I look up my own house from time to time, and of course as a Carlsbad Realtor I know what it’s reasonably worth based on nearby comparable sales. Recent Zestimates have it 5% – 7% above what I would consider generous market value, and Redfin’s estimate was 10% too high when I checked just the other day.
Bottom-line, I would never make a buying or selling decision based on Zillow, or any other online valuation. And that’s NOT just because I’m a Realtor!
All that being said, there is nothing wrong with looking these estimates up, as long as you are not unduly influenced by them or take them as gospel.
A prudent seller will not make listing decisions based on these online estimations but will list their home based on market data from a knowledgeable Realtor who knows the local market conditions, recent comparable sales, the competition for the home, and pricing, and not just what Zillow says about the value!!
To be fair, Zillow acknowledges there are margins of error in their Zestimates and states this, along with statistics, on their website, although that commentary is not readily seen.
They also point out that Zestimates should be viewed as “a starting point in determining a home’s value, and not an official appraisal.” Very true, if you actually listen to that advice.
But the fact remains…online valuations can be way off, by a lot, and you won’t know by how much unless you get expert advice.
As a home owner, and more importantly as a seller, relying on Zillow or other online home valuations, or making key decisions based on this information, is not in your best interest financially.