Whether you’re considering selling your home in the near future, or you’re simply a curious homeowner who wants to get a better feel for what your current financial standing is, it’s always nice to know what your home is worth.
And if you run a quick Google search to learn more, you’ll almost certainly be directed to Zillow’s “Zestimate” feature. But are Zestimate numbers an accurate reflection of what people on the market will pay? This is a question worth exploring in more detail.
Understanding Zillow’s Zestimate Feature
If you ask the average person to tell you what their home is worth, 90 percent of people simply go off what Zillow tells them. But have you ever taken the time to study how these Zestimate calculated numbers are produced? Have you verified the accuracy of their estimated values?
While the exact formula is proprietary, Zillow Zestimate is calculated using public and user-submitted data, home facts, location, and market conditions.
And because it relies on historic data to compute values, this should mean the algorithm gets smarter and more accurate over time.
And while it has improved tremendously in recent years, it’s still not perfect.
According to Zillow, the nationwide median error rate for the Zestimate of on-market homes is just 1.9 percent, which is pretty good!
However, the median error rate for off-market homes is 7.5 percent. And even though that may sound like a small number, it’s actually pretty significant.
Let’s say, for example, that you own a three-bedroom house in Katy housing market and Zillow Zestimate tells you that your property is worth $323,750. That sounds like a super precise number, but let’s assume that it’s 7.5 percent lower than the actual value someone would pay on the market. In that case, your home is actually worth $350,000!
That’s a pretty significant difference. In fact, it’s so significant that it might affect whether you want to continue living in the home or stick a for sale sign in the front yard.
While a Zestimate can be a good starting point for estimating your home’s value, it can be inaccurate and should not be the only tool you should use.
Even Zillow is clear on this. They’re quick to tell users that a Zestimate is a starting point in determining a home’s value – not an official professional appraisal.
So, feel free to use Zillow as a tool to get an approximate valuation of real estate you own (or want to own), but don’t use it as an infallible benchmark.
If you want a super accurate estimate that’s specific to your property with all of its upgrades, features, and nuances, you’ll need to pursue additional methods.
More Reliable Ways to Calculate Your Home’s Value
There’s nothing wrong with using Zillow as a starting point, but you’ll eventually want to get some more accurate numbers.
Whether you’re getting ready to put your house on the market, or you’re just curious, here are a few reliable ways to calculate your home’s value:
Become a Student of Your Local Market
Between Zillow, tax records, and other online tools, you can easily become a student of your local real estate market and get a good feel for what sort of value and demand exists in your niche.
Even when you aren’t in the market to buy or sell, it pays to keep tabs on homes. You can set up automated emails from different websites, which will alert you when a home goes on the market and/or sells within certain parameters (like zip code, price, and square footage).
If nothing else, this provides you with an intuitive understanding of value that you can use in combination with hard numbers to determine a good, estimated value of your property.
Get a Comparative Market Analysis
Consider asking real estate agents or brokers to run a comparative market analysis (CMA) on your behalf. This is essentially what a real estate agent does prior to listing a home. It pulls data from the MLS, analyses, comps, and produces a recommended list price.
If you’re going to order a CMA, just make sure you’re honest and straightforward. This can take an agent a few hours to complete. If you’re actually thinking about selling your home, you’ll want to reward this agent with your listing who may be using multiple listing services.
If you’re just curious, that’s fine too. Just be sure to tell the agent this up front and offer to pay a fair selling price for their time. Many will do it at little or no cost.
Try the FHFA House Price Index Calculator
Looking for a really quick estimate of your home’s value to either confirm or invalidate a Zestimate figure? Try the Federal Housing Financing Agency’s house sales price index (HPI) calculator.
The HPI calculator relies on the repeat sales method. It studies millions of mortgage transactions between the time you bought the property and when you intend to sell it. This information is then used to estimate how values have fluctuated over this period of time and what it means for your property. It usually provides a good ballpark number of the local housing market.
Hire a Certified Appraiser
The best option is to hire a certified appraiser. By having a qualified professional actually visit your property and put eyeballs on the layout, upgrades, and features, you can get a more accurate number. A good appraiser is generally able to estimate a home’s value within two or three percentage points.
Buy and Sell With Green Residential
With so many user-friendly tools available online, it’s easier than ever to represent yourself in a real estate transaction. However, please consider the ramifications of doing so and understand the risks that come with a DIY approach. Even a one- or two-percent error can cost you thousands of dollars in equity.
At Green Residential, our real estate professionals are not only having the experience you’re looking for, but we also promise to charge you a fair price for selling your home. We’re one of the few real estate companies in the state that operate on a flat fee basis (as opposed to charging a typical three percent commission). This allows you to keep more of your hard-earned equity at closing.
For more information on how you can buy or sell your next Houston home with Green Residential, please contact us today!