I wrote a blog post earlier this year that showed you how to determine how accurate Zillow was in your area. The response on this was phenomenal so I thought I would follow up that post with one in which I explain to you why the Zillow “zestimate” can be so inaccurate. With so many people turning to Zillow to determine the value of their home I thought it would be a good idea to fill you in on how a full appraisal by a live person can be much more accurate than one done by a computer that knows nothing about your home.
The first and biggest reason that Zillow will never be able to give you an accurate estimate on the value of your home is that the people in charge of programming the Zillow computers DO NOT personally look at your house, either inside or out, to determine its quality, condition, or appeal in relation to other “comps” in the area. This is a vital step in the appraisal of a home because it helps the appraiser determine how the home compares to other recently sold houses. During an appraisal inspection the appraiser measures the heated and cooled gross living area (GLA) of the house, takes detailed notes on the construction quality of the home taking into consideration materials of construction, condition, and quality. These are all things that are not possible with services like Zillow because they do not personally look at each home as it is not physically possible to do so with the number of homes there are. You may say “of course it’s not possible to look at every house-that’s a no brainer”, but this is not a step in the process that should be taken so lightly.
The process of measuring and calculating the GLA is also very important when estimating the value of your home. This is one of the biggest problems I see because the zestimate is based on what Zillow things the GLA is. They typically get this from county records, which are notorious for being inaccurate. The price per square foot of recently sold homes is also calculated based on the counties square footage estimates which can multiply the inaccuracies. So what you have is a price per square of recently sold homes that is based on inaccurate information that is then multiplied by the inaccurate GLA of the home whose value is being estimated. This imperfect process leaves a lot of room for mistakes, which may be why Zillow covers themselves by giving such a wide range of estimated value. I’ve seen value estimates that provide a range in value of $50,000, which really provides no benefit to you at all.
After an appraiser collects the data noted above they use it to determine what the best sales comparables are to compare with the subject. The appraiser also uses proven appraisal methods developed over the years to calculate adjustment amounts to apply to the sales. These adjustments reflect value differences between the subject and sales. Appraisers dig deep to find out if a sale should be used in the assignment. There may have been extenuating circumstances that resulted in the comp. selling for more-or less, than it should have. After the adjustments are made, the sales provide a range of value that the appraiser then uses to reconcile a final value estimate. Again, the appraiser’s first hand knowledge of what the subject property is like can help determine what part of the value range is emphasized. If the home had lots of upgrades and was in very good condition then the upper end of the value range might be reconciled, however if the home was of basic construction and was not well taken care of then the lower end of the range of value may be more indicative of its market value. An appraiser also considers the current supply of homes available for sale by looking at what other homes in the immediate area are listed for sale at.
As you can see there are many reasons why Zillow “zestimates” are not accurate, and why the services of a professional appraiser can provide you with the best valuation of your home. Do you have any Zillow stories you would like to share? Leave me a message below, I would love to hear them.