I remember when Realtors® learned how to do a Comparable Market Analysis, Broker Price Opinion and an Appraisal when estimating the value of a property. We used phrases like comps, variables, CMA and BPO.
That was then. Now we have words like “Zestimate” and spend more time telling prospective Berks County home buyers and sellers what it is and is not. And why they should not fear it.
A Zestimate is the brainchild of the real estate search site known as Zillow.com. It is Zillow’s preferred method of estimating the value of property.
You see, when Zillow was in its infancy they an attention getter. Few things draw more attention in real estate than getting an estimate of your properties value. It certainly did its job. As the site grew in popularity the Zestimate was no longer just an attention getter. It became controversial.
The heat was turned up and Zillow was forced to add a disclaimer to every Zestimate®. Which states the following…” A Zestimate home valuation is Zillow’s estimated market value. It is not an appraisal. Use it as a starting point to determine a home’s value.”
The problem with any algorithmic computation is information. Bad information leads to less accurate results while good information leads to more accurate results. This assumes the algorithm itself works.
If there is no information, about a property, Zillow will not show any Zestimate. For example, Texas is a non-disclosure state (the only one in the US). If your property is in Texas and your real estate agent does not enter
your home into Zillow there will be NO Zestimate. If your home is in any other state in the USA and public records are available along with limited information you will see a Zestimate®.
This creates an interesting conundrum in Berks County. Our public records relating to property are not exactly what I would like to use to value my customers home. There have been occasions where the Zestimate on a home I am selling is $374,000 and the property sells for $650,000.
One other challenge the Zestimate® has is that it does not compensate for an adjusting or changing market. If the market was down for the previous 6 months the Zestimate® is likely to reflect a lower price. This is the same challenge Appraisers wrestle with. The difference is that Appraisers understands the market direction better than a computer program and this compensates for it.
If nothing is done to correct the information relating to your property it could be stigmatized by an inaccurate Zestimate.
One solution is to become a Zillow Zen master. Go to Zillow.com and enter accurate information about your property. Be aware, the learning curve is steep. I have been using technology to assist my customers in the purchase and sale of Berks County homes for almost 20 years. I build my own websites and interact with real estate syndication companies nationwide. I am still challenged by the Zillow.com interface even after using it for over 5 years.
The second solution is to call your favorite REALTOR® and get a REAL estimate of the value of your home. There are several competent ways to assess your properties value. Recently, I published an article on ways to analyze the value of a Berks County Home. Click HERE to preview Part #1 and HERE to preview Part #2 of the article.
Would you invest your children’s college fund on stock picks from The Motley Fool or Jim Cramer’s Mad Money? Not likely. Neither should you consider the value of a Berks County property just by using a Zestimate® or any other marketing algorithm.
Call the Realtor® it’s worth it!
Knowledge is Power!