Zillow Zestimates Were Off by $120,000 in Bungalow Heaven
In late spring 2017 a quaint three bedroom two bath Airplane Bungalow goes up for sale on North Chester Ave. With over 1,400 square feet and a lot nearing 9,000 square feet, it is the exact search criteria of many homebuyers. It had been tastefully renovated to include marble counters, French doors off the master and a modern pool. Zillow.com’s “Zestimates” lists the value at $1,123,779 a significant amount of money, but not a crazy number for Bungalow Heaven. After what I could only imagine, much debate, the owners and their Realtor list the house for $1,095,000. By under valuing it, you will draw more traffic is the theory. Forty-six days later the sale closes at a final price of $1,075,000 Twenty thousand dollars under list price and almost $50,000 under Zillow said it was worth.
What went wrong? Why did such an amazing property go for less than list. Generally, it is pricing strategy that does this. The overpriced Zestimate can inflate the value in the mind of the owner. The Realtor does their best to talk them into reality. In the end they meet in a middle that is actually off center and list at a price they feel will work. Unfortunately, the Zestimate can also scare away buyers that fear a bidding war as they undoubtedly look it up the themselves.
Another approach could have been to price it just under the $1,000,000 mark. A renovated Airplane Bungalow is a great home that many potential buyers can see, however, it is an amazing prize to an architectural enthusiast that knows what an Airplane Bungalow is. A price under the seven-figure mark could have brought in more people therefore increasing the odds of finding a fan that is willing to bid more than list price. Finding multiple fans of architecture could have been done through some targeting marketing.
Home values constantly change and online estimators like Zillow's Zestimates, called an Automated Valuation Model (or AVM) are most often inaccurate. Recent sold data in Bungalow Heaven from the summer of 2017 showed Zestimates being as far off as $120,000 in under-valuation and $48,000 in over-evaluation as seen in the story above.
This very issue of massively incorrect home values has stemmed a massive class-action lawsuit against Zillow and I can only imagine more disgruntled homeowners will be coming forward.
There is often a major difference between Zestimates and actual sold prices and the reasons are pretty obvious once you know how Zestimates are calculated. Zillow’s Zestimate is purely an estimated market value and is to be considered just a “starting point” according to Zillow’s website.
Zillow readily admits that the accuracy is based on how much data Zillow has. Their data is from public records and they “do not know about home updates and remodels” and is generated by a computer algorithm.
It is 100% impossible for Zillow to know about your original hardwoods or that you have restored the wood trim in the living room from years and layers of white paint. Zillow Zestimates are more of a conversation started that anything else.
Zillow itself recommends that if you want the real value of your house, you pay a professional appraiser to complete one or contact a Realtor to generate a Comparative Market Analysis (or CMA) for your property.
A CMA is a tool us agents use to get a true sense of what the market will pay for your home. We can scrub out that total dump down the street that is pulling down values or the crazy over the top one that is jacking up prices, we control what comps go into the CMA, and we can adjust for repairs needed and remodels done.
A CMA is a great tool for those preparing to sell, but it also good for any homeowner that is curious to know what his home would sell for in a current market.
For mortgage refinancing and homeowner’s insurance, you will need to pay for an official appraisal.
But if you are curious to know how off Zillow is, I would be glad to generate a CMA on your Bungalow Heaven home. Just click the link below. It will generate an automated report, if you want a customized report with specifics to include the work you have to you home, fill out the form to the right and I will be in touch.
Generating a CMA is quick and best of all…free.