Zestimates (and other home valuations) in the time of Covid-19

By
Real Estate Agent with John L. Scott Renton
https://activerain.com/droplet/5nj9

With both the short term and long term economy on everyone’s mind, many homeowners are turning to Zillow and other online home valuations for help in understanding what is happening to their largest financial asset, their home. 

 

I use a program called Homebot for my clients.

 

The reason I use this program is that it provides some of the best information as it pertains to financing options.

 

From the Homebot website it reads:

 

By the time the average American reaches 65 years of age, 83% of their retirement will come from their home equity. In addition, homeowners are losing up to 100 billion dollars in wealth every year because they are making poorly timed financial decisions. 

 

The US homeownership market is the largest asses class in the world at $30 trillion but is essentially an “unmanaged” asset. Homebot is a dynamic financial dashboard to empower homeowners to build wealth with their home.

 

Homebot also provides users an automated valuation with the added option of requesting an actual REALTOR® Generated Comparative Market Analysis (CMA) with the click of a button. 

 

If you’d like to sign up for Homebot and tap into the advantages of using a financial dashboard to save thousands of dollars, click here and sign up today.

 

Now that we covered what Homebot is, let’s talk about computer generated or automated home valuations. 

 

Both Homebot and Zillow use computer algorithms to determine value. These algorithms are based on data, usually sold data of nearby properties. The problem with automated valuations during anytime period, but especially in a time of changing markets are numerous and some are listed below:

 

Sold Data Is Always OLD Data

Computer models use sold data. Usually the reports for sold data comes in around the 10th of any given month for the previous months data.

 

Therefore a home that goes under contact in March, will close escrow in April and get reported in May as "sold" prices. 

 

We can all agree that we are in a completely different market today than we were earlier this year before social distancing and global shutdowns of entire industries.

 

Computer Algorithms Assume Perfect Data and Perfect Comps

 

A computer can tell you the value of your home provided the computer has access to perfect data. 

 

Perfect data assumes that at a minimum 3 to 5 perfectly similar properties sold with a recent time frame and that nothing has changed in the market since that time. 

 

Example One: 

If you are selling a studio condo and the only other comparable sales are 1-bedroom condos, the computer can only make an approximation of what an able and willing buyer would expect as a discount for a studio vs. a 1-bedroom and this would also assume that the buyer has the same choices as they did when the comparable sales sold. 

 

Example Two: 

A home that sold on September 8th of 2001, even if it's exactly the same as the comparable property would have been worth significantly less on September 9th of 2001 because the market changed the morning of 9/11. No computer or algorithm in the world can predict with certainty what an able and willing buyer will pay when the markets change in unprecedented ways. 

 

Even the CEO of Zillow's home sold for 40% less than the computer model 

An entertaining read:  https://www.geekwire.com/2016/zillow-ceo-spencer-rascoff-sold-home-40-less-zestimate-1-75-million/

 

From the article: 

 

Stan Humphries, chief analytics officer at Zillow Group, told GeekWire that the slight edge does go to humans over automated valuation models when it comes to pricing a home.

I would argue that 40% is more than a slight edge, but I’m no analytical officer.

Summary

We are in a fast changing and volatile market. Computer estimates are helpful at times, but not when markets are rapidly changing.

 

You will want an expert with their thumb on what’s happening right now this minute in today’s market. Yesterday’s news is completely irrelevant and our advice is to disregard any automatic valuations until the economy stabilizes again. 

 

If you’d like additional help or resources, contact me today or set an online appointment to safely go over your questions. 

 

Click the below link now to schedule a zoom call.

 

 https://calendly.com/janasellshomes/zoom-call?back=1&month=2020-05

 

 

 

Posted by

Jana L. Schmidt

REALTOR

John L. Scott KMS Renton

425-432-9430

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Rainmaker
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John Pusa
Berkshire Hathaway Home Services Crest - Glendale, CA
Your All Time Realtor With Exceptional Service

Jana Schmidt very good report about zestimates and other home valuations in the time of Covid-19.

May 17, 2020 08:27 PM #1
Rainmaker
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Realtyna Inc
Realtyna - Newark, DE
Realtyna- MLS RETS Integration software & services

I agree that models struggle in a changing market. Add the uncertainty about the shape of the recovery, and it becomes very challenging indeed. Thanks for this report Jana Schmidt 

May 18, 2020 02:59 AM #2
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