Why You Should Not Rely on Your Zestimate

If only I received a dollar for every person I heard say “Zillow says my house is worth $XXX” I could possibly retire…. Well, that may be a slight exaggeration, but it doesn’t negate the fact that people trust what they deem to be reliable information. My advice to you is that you should not trust the stated Zestimate as a reliable source to determine what your house is worth. A Zillow estimate IS NOT an appraisal. I am not anti-Zillow since I do believe there is a place for them in todays big data world, however, it cannot be relied upon as a trusted source to determine the value of your home. Let me explain why.

First, the source of the information for your house might be unreliable. They use available public record, real estate industry data and user-submitted information to determine the features of your home. In my 22 years of real estate experience, I have found that these records are often inaccurate when determining the style, size, bedrooms, bathrooms, etc. In addition, these records never indicate to what degree a home has been maintained. Some people are very proactive at keeping their home well maintained and others…. well, not so much. I’ve seen it all in 22 years. Over the life of the home, there are items that affect the quality and condition of a home related to remodeling/updates and overall ongoing maintenance. Public records often don’t give a true insight into these finer details.

Second, the algorithm they use relies heavily on the zip code. Zip code does not typically relate to neighborhood or market area. The algorithm has improved due to location but using zip code can be misleading. In our area, we have a good example with the zip code 15601 which corresponds to the Greensburg City post office. All the zip code relates to is which USPS office handles and distributes the mail to that address. Within the 15601 zip code you have multiple municipalities such as Greensburg City, Hempfield Township, Salem Township, South Greensburg and Unity Township. That is 5 different areas that are serviced by 3 different school districts. As one would suspect, all of these areas are not similar and would include a higher density area with older structures in the City of Greensburg, residential rural areas with multiple acre parcels like some of Salem Township and newer suburban residential plans often found in Hempfield and Unity Townships. The algorithm used to determine the zestimate includes sales prices from all of these areas since they are all located in 15601 making the result less reliable even if it was only a portion of the factor in the algorithm.

Let me give you a real life example. I live in a homogeneous condominium community with townhome styled units built in the 1970’s. One of my neighbors just listed their townhome for $185,000. The zestimate for this property is around $248,000. It would not make sense for it to be listed for almost $65,000 less if it really was worth that much. The most likely reason for the high zestimate is the effect of living in a municipality with predominantly higher sale prices than the price point of our properties. The highest sale in the past 3 years has never exceeded $200,000 and only recently, have the sale prices been inching above $175,000 due to current increasing predominant sale prices overall.

Click here to read an article on the accuracy of online estimates

Instead of using a free but inaccurate source for information, trust an experienced professional real estate appraiser to indicate the correct estimate of market value for your home. Just think. If the algorithm was even remotely accurate, why did Spencer Rascoff, the owner of Zillow, sell his property in 2016 for 40 % less than the zestimate?

Experience Matters

When making a decision to contract just about anyone to perform a service, one of the most important qualifiers for most is the experience one brings to the table. You really don’t want someone building your deck who has never built one before or replacing your transmission if they have never worked on cars. It works the same with performing real estate appraisals.

I’ve gone back through my files and found that since starting my business in 2009, I have performed over 6,200 valuations for all kinds of clients: lenders, lawyers, accountants, home owners, estates, real estate agents, etc. Add to that the reports I completed during my training process and then as a certified appraiser in a different office for over 8 years.

So if you need an appraisal performed on a piece of residential real estate, what should you look for that will help you to know that the appraiser has the experience necessary to produce a credible assignment result giving you a valuation that is something that can be deemed reliable?

1. How long have they been appraising?

While it is true that newly certified appraisers do have experience performing appraisals because the profession still is constructed as an apprenticeship program, it takes a good 3 - 5 years to feel fully confident in your ability to perform appraisals on all types of properties. The more unique the property, the more experience necessary to produce a credible report.

2. How many assignments have they performed in your market area?

Time appraising is one factor. Experience in your market is a whole different ball game. I have been performing appraisals in the southwest Pennsylvania areas of Westmoreland, Armstrong, Indiana, Butler, Allegheny and Cambria Counties for years. However, I have never performed an appraisal in Greene County. My experience as an appraiser in some areas does not make me an expert in others.

3. Does the appraiser have experience appraising the type of property you need appraised?

Standard “cookie cutter” properties are those properties that are homogenous to the market area. Think about an established residential plan that has over 200 homes in which there is a steady sales activity. These are typically easy to appraise and does not take a significant amount of additional research or analysis. What about a home that was built on a slab in an area where 99% of the homes have a basement? Or a condo in a plan that is the only condominium plan in the entire county and you are lucky if one sells per year such as in Armstrong County? How about a 1 bedroom home where less than 2% of the homes in the county are 1 bedroom homes? These more unique properties take additional effort, time and expertise to be able to know how to extract what factors have the highest marketable indicators and contributory value in the market. Additionally, the report writing takes longer in order to make sure that your intended user understands the analysis and conclusions contained in your report.

When you are in need of a residential real estate appraisal, it is important to know that you can confidently rely on the conclusions. It doesn’t mean you will always agree with the value, but if you choose wisely, you can be sure to rely on the report as a good representation of that properties estimated market value. At Town & Country Residential Appraisals, we can give you that type of confidence for all types of residential properties in the counties we cover. We have the experience that matters!