Recently I received a call from a past client of mine who is considering selling her home this spring. Like many homeowners will do, she went online to see if she could figure out how much her home might be worth.
She told me that Zillow values her home at $363,122! She added that one of her neighbors recently sold a home just down the street, which in her words is almost identical to her home, for $385,000!
She went on to say that she is quite confused about the home-pricing process and wondered if we could help her out.
First off, online real estate portals offer only “estimates” of a home’s value. We call these online pricing tools AVM’s or Automated Valuation Models. Websites from Zillow to Realtor.com to any of the numerous real estate sites out there use public data to provide their estimates. Sometimes they are all over the board too. Why? It’s because a “website,” has never seen your home or any other home for which they determine an estimate, so they are rarely correct.
Forbes points out in an post entitled, How Accurate are Zillow Estimates, “Most of these websites don’t give you an estimated price range, they give you a price down to the dollar and that precision gives their estimates a misleading air of accuracy.
Home sellers can get a quick glimpse into the inaccuracy of online home value estimators by comparing the estimates different websites give for the same house. Check out the value estimates for your home on Zillow, Realtor.com, Redfin and Trulia, and you’ll likely be shocked at how much they differ.” Without seeing and knowing the home, updates, improvements, etc…it’s hard to put an accurate value on any property.
Another reason they are frequently wrong is because of inaccuracies in public records. Let’s face it, public records are many times just simply wrong. I remember going to see a potential listing once where public records showed the home I was going to see was a two story house on a basement. In real life, it was a three story home on a slab!
If you are on Zillow, for example, make sure all the details in your home’s profile are accurate. Click “Edit Facts” and make sure that any pertinent details are checked!
Even then however, these online pricing models are only so good. Zillow provides information on the accuracy of the current “Zestimate.” In this they show that if you live in Phoenix, AZ the Zestimate is within 3% of what’s considered accurate. If you live in Dallas however, the margin of error is almost 8%! This is another reason why it’s best to get help and multiple estimates of value on your home from several locations prior to listing your home on the market for sale. You need more than one opinion of value though.
When a bank wants to price a home owned in their inventory or a corporate relocation company wants to price a home that’s part of an employee relocation they normally get two different real estate agents to provide a price opinion. For these price estimates to be considered reliable, these figures should fall within 3-4% or so of one another. If they don’t, they’ll call a third agent to do a broker pricing opinion to find where fair value is related to how this third estimate of value lands in relation to the other two values.
It’s all about market value
One thing my client was “right on the money” about is that she understands that the price she sets for the home should reflect its current market value.
The only way to know what that is by figuring out what home buyers have paid for similar homes to hers in the recent past.
This means we need to look at sales prices of similar homes, preferably within the past 3-6 months. Please remember that there is more that goes into determining if a home is comparable to yours than meets the eye. As an agent, I’d look at the same criteria that professional appraisers might do.
- The age of the home: Sold homes that are within three years of the age of your home.
- The size of the home: Yes, we look at the sold homes’ square footage, but the number of bedrooms and bathrooms also plays a role in determining market value. Also, where that finished square footage is in the home matters! What I mean by this is that above grade (or main floor and up) square footage is more valuable than below grade or basement finished space in a home.
- The home’s location: As an agent, doing a comparable market analysis I would try to find sold homes in close proximity to your property, but will consider a wider range, if necessary. Some neighborhoods are easy in this and may have half a dozen sales in the past 3 months! Others may not see homes that turn over that often. In that sense, you’d have to go outside the neighborhood to find enough good comparable sales. Finally, the location within your particular neighborhood may also impact its market value.
- Upgrades, amenities, and condition: We’d compare your home to the sold homes with an eye toward any upgrades performed to see how the condition of the homes compare. It turned out for my client in comparing the house down the street that sold just recently for $385k, that over the past year those owners had really made that home like new again. It had new countertops, appliances, HVAC, roof, and the previous owner had added a sunroom! There were reasons why it would sell for more than my client’s home, which was 17 years old and for all intents and purposes it was the same house she bought 10 years ago, but a decade older.
Finally, we’ll do some number crunching to determine if your home is worth more or less than other sold homes.
When the buyer is using financing to fund the purchase of a home sale, remember that no lender is going to approve a loan for more than a property is worth. So what will the appraiser say? He or she, after all, has the final say in how much your home is worth in today’s market.
This is why we are so thorough in our determination of the appropriate price for your home. An inaccurate evaluation on your agent’s part can lead to a failed real estate transaction, just when you thought it was a done deal.
The appraiser will visit your home to perform an inspection. He or she may or may not take photos while in the home.
The inspection process can take “anywhere from 20 minutes to 3 hours depending on the size and details of the property,” according to Rachel Guthrie at GoHomeside.com.
If you hire an experienced listing agent, the suggested list price should match or come very close to the appraised value of the home. This is why it is so important to make sure you are working with agents who have experience. That’s pretty easy to find today. Look at their profiles on Zillow. Look at how many sales they’ve had as a listing or seller’s agent and where.
I’d love to help! If you are in Georgia and looking at selling in the near future, please reach out to me. I love real estate, and it would be my pleasure to see your home and help you make sure you are getting top dollar for your home while making sure your home is priced right!