Just remember that a CMA is not the same thing as an appraisal. When a realtor prepares a CMA, he is looking at market value for listing price purposes. Whereas an appraisal looks for how much a lender should loan on the property based on a sales approach or cost approach. Here's a good explanation http://homeguides.sfgate.com/should-real-estate-appraisal-ma
As for eappraisals vs Zestimates --- they can be worlds apart as you have seen. Best that you engage a realtor to help
If you've been studying the market, you'd notice that the "sold" price is usually at least 20% less than listing price or estimate, whichever is lower. I've been studying the market for months and so far have only seen two listings which appeared to be priced at "real market value". Please remember we've had a housing bubble (as if anyone could forget) and there's still a very large amount of homes which haven't yet had a fair market price adjustment. Most owners are underwater if they've bought within the last ten years. So notice when the property was sold to it's current owner, and in addition, notice how much it sold for prior to THAT sale. Getting buyers to focus only on recent sales, is a scam tactic which fueled the flip frenzy. Why does it matter that you paid as much as your neighbor if you both grossly overpaid?
The system is set up to make it easy for the buyer to pay more than the property is worth. If you are asking these kinds of questions, then you are simply not prepared yet to enter the shark's pool. No offense but you have not studied the market enough to be able to answer these kinds of questions by yourself, and relying on a realtor who has a vested interested in a larger commission, is a mistake waiting to happen. I cannot stress this enough -- their entire purpose for breathing is to get you as the buyer to pay as much as possible, and make you feel good about getting screwed. Of course they are going to claim that ethical realtors exist, they certainly don't want you verifying anything they tell you. People who trust realtors are the worst sort of naive, especially if you foolishly believe they are your "friend". They would screw their own mother for a half percentage point.
Correctly stated your question should read, "If you never want to buy a home, never offer more than the Zestimate/Eappraisal."
I consistantly compare these values with the real values. Zillow own words (small print) stated in the new transparence format- 'accruacy can be no more than 10% and can be off an infinate amount.'
A recent study in Indian Bluffs showed these online values to be incorrect by a crimianal amount A real example: a $502,000 home (that is what the home sold for) Guessed at $200,000! (the value when home was listed and the day it sold)
If that is the accuracy or reliablity of the numbers from which you wish to make a decison...there are a plethora of random number generators from with to choose. I recommend creating your own.
((Eappraisal + Zestimate + Tax assesed value)/3) * avr ratio = YOUR OWN CUSTOM SWAG!
Or you may want to benefit from a consultant who assists in the selling and buying of real estate dozens of times a year. Most of these consultants have experience working with INVESTORS!
Be aware, the financing bank has their own FIAT evaluation you must deal with.
What makes my blood boil is the systemic deception these sites, who publish these numbers, practice that has you asking, "ARe these properties overvalued?" YOu should be asking, "Why haven't these folks been put in jail for their practice of public deception?"
As Mack stated, these sites are good for entertainment, but when it's your money on the table, you just may want something more reliable than entertainment value.
Best of success to you,
Annette Lawrence, Broker/Associate
Remax Realtec Group
Palm Harbor, FL
The biggest factor appears to be neighborhoods since these programs use radius searches. They can be reasonably accurate in areas with very large homogeneous communities, but most of our communities don't fit that parameter ... so high end neighborhoods that adjoin less expensive ones will be negatively impacted as will any infill home or small subdivision ... or as often happens in communities like Danville, Lafayette and Orinda homeowners go in and build significant additions and remodels... Zillow can't factor those circumstances in very effectively. As a reverse example I own a rental property in Antioch in a very distressed neighborhood. Zillow just sent me an updated Zestimate on the unit for $89,000... but the highest sale in the complex is $65,000. the key is that their price is based on surrounding neighborhoods with fewer challenges.
Additionally, because all the info Zestimates use is historical, in a rapidly changing market with few sales due to low inventory a differential of 20 to 30% is quite possible.
To evaluate whether these properties would make "profitable" rentals you will need the expertise of a Realtor to factor in cash flow, appreciation, maintenance, etc ... none of the websites can do that very accurately
All the best,
Also, when determining if the home is a good rental, make sure that you can see what average rents are going for in the area. if you have any further questions regarding determining a value of a certain home or estimated rents, I would be glad to help.