Forget about Zillow as a reliable valuation source, at least until they can do a better job of accurately estimating! If you are serious about Real Estate and accurate valuations you must be working with a licensed Realtor/Appraiser â€“ there are just too many variables that go into valuation.
Not convinced about Zilllow? Consider this: Back in January of 2008 I watched an interview with Lloyd Frink (Zillow Pres). Here are some FACTS communicated during the I-view:
Zillow had just finally officially exited out of "beta" mode. Zillow had changed their appraisal algorithms to be more localized in nature. To measure accuracy of their algorithms Zillow looks over the last 3 mos and compares their â€Zesstimateâ€to actual sales price. Here's what they found:
a) Median accuracy (described as the number separating the higher half of a sample from the lower half) was 8.8% of selling price. Note: this is NOT and average accuracy.
b) 25% of Zesstimates were within 5% of selling price, 50% within 10%, and 75% within 20%â€¦...which I suppose means that 25% are within 80%?
For me, this interview cleared up why there was so much â€œplayâ€ in Zillowâ€™s accuracy.
In regard to your question concerning a general value for homes, a Comparative Market Analysis (CMA) gives you the best representation of market price/activity/trend direction - for the specific property details you search on. Just because a property sells right next door to another does not mean that it's a comparative match. DO NOT rely on median and average-based statistics, these measures are meaningless for targeted selling/purchasing as they have no regard for any of the specifics you may be comparing and can be skewed by segments of market activity not matching your individual situation. A buyer/seller should look specifically at the targeted segment of properties that match their search criteria for the information to be meaningful. Generalized stats are easier to come by, but that doesnâ€™t mean they should be used to make one of the most important financial decisions of your life. An individually-performed Comparative Market Analysis is the "gold standard" for approximating market value - period.
My suggestion: Interview a few Realtors, pick one, and then team to develop a purchase strategy based on what sector of the market you are intetested in.
If the area you're looking is in an active selling area, Zillow will be reasonably close to value. But, if you
are looking in an established area with very little turnover in homes, Zillow can be off by $100k-$200k OR more. My understanding is they use property tax records mixed in with some complex formula only they know. The problem with the valuation comes up when as a result of Prop 13 and assessed value only being able to go up 1% a year - that it doesn't reflect the true current market value of the home as the last sale may have been 10 years ago, so will be skewed.
If a client were to ask me what I thought about Zillowestimate of a certain home at a certain price. I'd go in to my side of Metrolist, go into Realist tax site. Realist is a corporate site for corporate multiple listing services. I would do a search going back 3 months (pretty much as far back as appraisers go now unless they can't find recent sales), have the square feet be within 10% and just take a look at the results. I would then look at MLS sold within the last few days as it may have not made it to property tax records yet. After that, I would look at pending sales and see how quick they went pending and how many times the home price had been reduced. If it goes pending in less than a week - it likely had multiple offers and may well sell for more than list. On Realist, there will almost always be a high and a low (maybe a inter-family sale), but I can see if the sales are trending up or down and based on all of the above, I'd have a good idea of what a reasonable selling price would be (that's not a guarantee a seller would take it - just my opinion based on what I see).
Zillow information is a little stale and I find not as accurate as the MLS information.
I hope this helps.
* using a CMA (comparative market analysis),
* realist (tax records),
* knowledge of neighborhoods and current trends for that area,
* and then considering the terms that are commonly used when offers are placed in that area,
for that type of sale (short sale, foreclosure, seller owned),
for that condition of a home.
There's just more depth to coming up with a valuation than pressing one key on a query. Or else there wouldn't be a need for banks to hire reatlors to do BPO's (broker price opinion) on their bank owned homes, or for lenders to pay for an appraiser to give them a valuation.
Jack, you're right on about listing prices being arbitrary and often being used to attract more buyers with a lower price. But consider that the terms are also part of your negotiation, especially when you're competing. The good news??? Lenders are accepting offers UNDER THE OFFER PRICE, when they're afraid the appraisal might come in lower (by the time they get the deal approved by their investors).....crazy market....
Everything was and still is overpriced in real estate la la land. Rewards cometh to those who wait while renting.
Never pay more for a home than what it would rent for per month times 100. A home that could get $900/month in rent should not be bought for over $90,000.