The decision to buy or sell a home is one that requires consideration of many different factors. One question that any buyer or seller will ask is what the potential sales or purchase price of a home may be. Today, everybody has access to online tools to research whatever they want, and looking up a home’s value is no different. But how accurate are online estimates?
Zillow Values
One of the most popular ways to look up home values online is through the website Zillow. The site is so popular, it has become its own verb (“Zillow it”), and Zillow estimates even have their own nickname: Zestimates.
Many people look up home values online, confident that what they find online is complete and accurate and a definitive statement of the value of a home. However, users should be aware that Zillow is not a replacement for an actual evaluation.
Zillow is getting more reliable; the company recently announced that it awarded a $1 million prize to a team of amateurs who developed a new algorithm for making Zillow estimates more accurate. Zillow says this will lower its error rate from 4.5% to below 4%. This is a dramatic increase from the 14% error rate that existed in 2006.
Long criticized for only utilizing comparable home sales, the new algorithm promises to take into account things like commute times, road noise, possible lease/rental rates, and other factors that impact value.
The Importance of Accurate Appraisals
Zillow estimates have become important to homeowners. A 2017 lawsuit against Zillow alleged that the company was undervaluing properties, and thus making it harder for homeowners to sell their properties at their true values. That lawsuit was dismissed because Zillow says that its values are a “starting point” for appraisal and price evaluation, and does not represent that its values are completely accurate.
A correct and accurate appraisal can have a huge impact on the closing process of a home. Aside from the obvious benefit of helping to set an accurate offering price, any lender will do its own appraisal of a home, to make sure that it is not lending more than what the home is worth. Many people who look up home values on Zillow and find them inflated are disappointed to learn they cannot get financing for the amount that they need when the property actually appraises at less than the Zillow amount.
Factors Used in Appraisals
Appraisers use factors that even the best computer algorithm cannot detect. For example, an online service normally cannot detect if there is major structural damage to a home. It cannot detect whether there is a huge building project scheduled which will obstruct a property’s view. It cannot detect whether the property has a garage that is not built to code.
Problems often arise even in routine real estate closings. Contact a real estate attorney at The Law Office of Agnes Rybar LLC to help you from the very start of the process of buying or selling a home.
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