#3) LOOK OUT: Valuations May Rely on Bad Facts

One of our first steps in running a comp on a property is to crosscheck it with the commonly used automation sites. This is mostly to know what figure is likely in a client’s mind. More times than not, we find wrong or missing information about the search property on these sites. When we meet with the client, we lay out all of the price range estimates and highlight the missing info on each site, and then transition to actual comps for their home based on accurate information and give them a real valuation on the property.

Based on the Madison Park property we’ve profiled in this article, and without naming names of the sites, one site is missing one of the house’s bedrooms on its profile, one site has a wrong lot size, and another site has mistakenly listed the size of the home-making it 450 square feet smaller than it really is. While a missing bedroom can adversely affect the value of a home by several thousands of dollars, missing several hundred square feet of living space drastically reduces the value of this home by hundreds of thousands of dollars.

If you are looking at an online estimation of your property, make sure the listed home facts are correct. If you are the homeowner and there is missing or incorrect info on a site’s profile, you will want to fix it.

#4) BEWARE: Estimates Are Heavily Influenced by a Home’s Past Life

Piggybacking on the previous warning, the home estimate sites only know the home based on the information it has access to (previous listing on the market, tax assessment information, etc.). The property profile showcases any old pictures and marketing information from when it was last on the market.  

Let’s say you bought a fixer upper at a price way below market value several years ago. Over time, the home has been remodeled, updated, and expanded in size. You may have added a new bedroom, expanded the square footage with a bonus room, and completely updated the entire house. The home estimate sites don’t know that. And therefore, the estimations they show for your off-market property is significantly less than it should be if the home were to be put on the market today. This not only affects your property’s value on the sites, but it influences the estimates on your neighbor’s homes as well.

Most changes to the property profile and estimate change when the property listing goes up for sale. At that point, the estimate usually changes to get closer to the new on-market price (a price based on a human real estate agent spending several hours comping the home).

All that to say, the more you do to improve a property, the further away from reality these automated estimates move, which makes them even less relevant than before.

#5) ATTENTION: Unfavorable Factors Are Viewed in a Favorable Light

Certain home or property features can be viewed as unfavorable to many prospective home buyers. This has a real market impact on the selling price of a home. Is the home on a busy street? Is the lot severely sloped and unsafe for pets or kids? Does the home have an unconventional floorplan? Is the home in desperate need of renovation and revitalization? Is the property in an unsafe or undesirable area? None of these factors affect the automated online estimate but have a tremendous impact on the price a property will fetch in the real time housing market.

The highlighted Madison Park home has peek-a-boo views of the lake, city, and mountains. But it also sits on a major arterial street. In real market conditions, a busy street with traffic noise often trumps peek-a-boo views. The Zestimate® likely didn’t factor in the busy street and its effect on buyer desirability. An agent will consider unfavorable factors when comping a home to give their client a more accurate pricing of the property. Because they know that ultimately, a home is worth what a buyer is willing to pay for it in current market conditions.

#6) BE AWARE: Most Agents Do Not Rely on Online Estimates for Real World Home Valuations

As we’ve said, real estate agents have access to a whole lot more real-time information than a computer.

Rather than reacting to dated changes in the public records or new listing information from the multiple listing service like the algorithms do, a real estate agent can:

(1) account for any improvements, updates, and remodeling done to the home by actually viewing it;
(2) measure the most current market conditions for specific neighborhoods, style of home, and price point;
(3) find and evaluate recent comparable homes that have most recently sold, gone pending, and haven’t sold;
(4) speak with other agents on comparable home sales for closing terms on their sale and gather intel on the demand for the home;
(5) distinguish unfavorable and favorable aspects of the home, property, and location;
(6) determine a specific price or range based on what the seller’s needs and goals are.

Real estate agents are humans looking at the current market for what it really is, while algorithms are looking at what the market recently was.

In a MarketWatch article, Rascoff said, “we call it a Zestimate and not a zeppraisal and not a zeprice.” In March of 2020, he listed his Brentwood Park estate on the market for $24,000,000…that’s $7-million over the Zestimate® for the home. The funny thing is that a graphic with a robot appears on the home’s listing on Zillow stating, “The list price and Zestimate® for this home are very different, so we might be missing something.”  What’s missing is a human skilled in assessing values on homes in current market conditions.