Do you rely on Zillow and other digital real estate marketing platforms as your real estate price indicator? If so, it is time to rethink that approach. In early November, the Wall Street Journal published an article citing the inaccuracy of Zillow’s “Zestimates,” or inside pricing indicators.

…Chief Executive Rich Barton said Zillow failed to predict the pace of home-price appreciation accurately… “We’ve determined the unpredictability in forecasting home prices far exceeds what we anticipated and continuing to scale Zillow Offers would result in too much earnings and balance-sheet volatility,” Mr. Barton said.

Forget About Zillow: Local Appraisers to Optimize Sales Prices

As we’ve mentioned in multiple posts, Volusia County is still riding the wave of a seller’s market. This means prices continue trending upwards, and websites like Zillow, Redfin, and even Realtor.com are always lagging, despite what they advertise.

Some of the main reasons their prices are so inaccurate are:

Marketing websites rely on a mix of data

Zillow is only as accurate as the data made available to the algorithms. If that data is incorrectly input, outdated, or just plain inaccurate, their numbers are not authentic. For example, if home prices are trending upwards, but data used by your “sell my home” marketing website of choice is one or two months behind, you may be pricing your home at a lower price than its worth.

Errors around property taxes and assessments

Property taxes and assessments are almost always based on a home’s previous sales price. If the house was last sold in 1998, the current property taxes and assessments wouldn’t be anywhere near what they are today, which can be misleading. Sometimes Zillow’s data is just plain wrong and the average homebuyer wouldn’t know without accessing the county’s public records.

Zillow doesn’t understand upgrades and remodels

Zillow is using very basic “comps” when it publishes Zestimates. So, suppose your three-bedroom/two-bath home has a basement that’s legally converted into an in-law unit. When you search “Sell my home” and look at comps, your home’s pricing potential should be notably higher than a nearby home with the same floorplan that has kept its basement as is. If those prices are equal, it’s because Zillow lacks information on your upgrades.

Reputable Appraisers Get it Right

As appraisalinstitute.org states, “The role of the appraiser is to provide objective, impartial, and unbiased opinions about the value of real property—providing assistance to those who own, manage, sell, invest in, and/or lend money on the security of real estate.” To do this, appraisers compile a range of information and then provide a figure for the home’s value that reflects accurate, real-time data and statistics. 

Appraisers must be licensed/certified and very familiar with the communities in which they work. Ultimately, the results of the appraisal inform lenders to make sure they don’t overlend to their clients. However, appraisers are also used to assess property values in other situations, so they work for various clients, including buyers and sellers, real estate agents, developers, mortgage lenders, lawyers, and so on.

Most appraisers use the Uniform Residential Appraisal Report from Fannie Mae for single-family homes in the residential real estate sector. This form helps to focus a home’s assessment into specific categories, including:

• Overall summary of the home. They provide detailed descriptions of the interior and exterior of the house and support their findings with digital photos.
• Accurate square footage. Appraisers are very discerning and often catch mistakes on record via their own measurements and calculations.
• A sketch of the exterior of the building. This sketch includes notes about special features or may reflect new upgrades (like roofs, siding, windows, etc.) or that there are significant signs of damage or aging.
• Photographs and information from comparable properties. When appraisers send their final report to the lender or their clients, they also include pictures and information about comparable properties (called “comps”) in the area and their recent sales prices. Ideally, we want their comps to reflect the market within the past 90-days. Although, in a buyer’s market, that isn’t always possible.
• Additional, relevant information. Appraisers go directly to public records sources (not Zillow or other websites) to glean additional information to help them assess the home’s market price. Their sources include market sales data, public land records, and public tax records.

If you don’t have an accurate idea of what your home is worth, you could leave thousands of dollars on the table while your buyers enjoy the deal of a lifetime.

Reasons to Consider Ordering an Appraisal

Here are some of the main reasons we may recommend bringing in one of our trusted appraisers. 

You’re thinking about dropping the price of your home

Be very careful if you’re thinking about dropping your sales price because Zillow says it is worth less than you’ve priced it. Ordering an appraisal may be just what you need to put your mind at rest. Yes, DeLand area real estate inventory is moving quickly, but the average sale still takes around 120 or more days to close. Read our post, 3 Questions to Ask Your Realtor Before Dropping Your Home’s Listing Price.

The lender’s appraiser came in lower than your asking price

By and large, appraisers are neutral, objective, and conscientious because, like real estate agents, their license and livelihood depend on integrity. However, there are exceptions.

Sometimes, appraisers form pretty tight connections with specific lenders, developers, or agents, which can lead to using and posting low-end comps or diminishing a home’s attributes to come up with a lower price to help their client. Getting a second opinion is the solution, and any differences can be worked out in the contract.

All or mainly cash deals

While lenders are the primary source of an appraiser’s business, there are times when hiring an appraiser is in a buyer’s best interest. For example, if you are offering cash or more than the typical 20% down payment, hiring your own appraiser can help you make more informed decisions before offering more than a property is worth.

In case of a dispute

While not that common in a typical residential real estate transaction, there is always a potential for dispute. In our experience, this most often occurs when a property is sold as part of an estate sale, and an heir/beneficiary argues it was sold for less than it was worth. Real estate disputes requiring support from astute appraisers also occur during divorce proceedings, property partition suits, foreclosures, zoning issues, or to settle insurance disputes over a claim.

It’s a For Sale By Owner (FSBO) deal

Selling your home without a licensed realtor is rarely a good idea. Click Here to read why we don’t advise FSBO deals. That said, if you do move forward with selling your own home, absolutely hire an appraiser to ensure you’re asking the right price and that your home and property stats are accurate.

Do you feel there is a discrepancy between Zillow’s sales price and the price of a home you’re buying or selling? Maybe it’s time to work with a real estate agency with solid contacts in our area. Schedule an appointment with Southern Exclusive Realty, and we’ll make sure you don’t leave a single dollar on the table.