So How Do I Find How Much My Home Is Worth?
The simple answer is there’s the quick way and there’s the right way.
The quick way is to look at an online Automated Valuation Model (AVM), the most famous of which is Zillow’s Zestimate so we’ll take a look at this one.
So how do Zestimates work and how accurate are they?
Zillow do not say how they come by the valuations that Zestimates produce. It is a fair assumption that they use a complex algorithm which looks at tax records and sales data from wherever they can get it. As mentioned in a previous post many MLS’s are not cooperating with Zillow so the most accurate source of sold prices is not available to them.
As far as accuracy Zillow’s own figures make interesting reading. In North Carolina the median error is 5.4%. That means half of the Zestimates for $300,000 homes are more than $16,000 wrong! This can be $16,000 higher than the true value or $16,000 lower than the true value. The current Zestimate on my personal home is 38% below its recently appraised value!
It is obviously human nature to believe the Zestimate if it shows a high figure and hate it if it shows your home is worth less than you think.
So please look at the Zestimate for a broad brush valuation but don’t take it a gospel.
Doing house valuation the ‘Right’ way.
The best way of valuing your most valuable asset, your home, is to ask an expert. Your local Real Estate Agent is that expert, they have the training and experience and they know the local market. Most agents will do a quick estimate for you for free. If you are looking to sell your home they will then do a full Comparative Market Analysis (CMA).
How is a CMA performed?
The main priority is to find at least three sold properties which are as close to the subject property as possible, these are known as the Comparatives, or Comps. Choosing the Comps is where the real skill and local knowledge comes in and we turn to the MLS. We have some ‘rules’ that we try to stick with, though it’s not always possible. Firstly we look at age, we want homes within 5 years of the subject. Secondly is proximity, it is ideal if we can find 3 Comps in the same neighborhood. This is not always possible so we have to look at other local sub-divisions. This is where local knowledge comes in, often the closest neighborhoods are not good Comps, they maybe production built vs custom, small lots and close together vs spacious, no neighborhood facilities vs pool, tennis, trails, etc. Once we’ve found suitable candidates we need to find Comps as close to the size of the subject as possible, square footage within 10% is ideal. Style of home is important, we wouldn’t for example use a ranch for a Comp of a two story home unless we really couldn’t avoid it.
Once we have our three or so Comps we do our adjustments to account for the differences between the Comps and the Subject. Adjustments are mad for such things as Square Footage, number of bathrooms, fire places, garages, screened porches, decks, patios, location, surroundings and several other factors. We also allow for any financial concessions made on the sale of the Comps and depending on the market appreciation. Finally the figures are weighted to give higher priority to Comps that are more similar to the subject.
Now we have a price range and an average. This is what we present to the client and start the discussion about pricing strategy, it is after all the client’s house and it’s down to them to set the price. We have an old adage in our firm, “The agent brings the range, the client sets the price and the market sets the value”.
So if you want a rough guess of your home’s value look at Zillow, if you really want to know call Kevin – 919-349-0096.