Ask any real estate agent you know, and they will tell you that the most complex negotiation in a deal is always the first one, with their client, the seller. Sellers have strong ideas about what their home is worth, what time of the year they want to sell, and how quickly it should be done. These three things are interconnected, and if one of the numbers doesn’t fit, the rest of the model gets thrown out off track. The number that rules them all is home price.
The number that rules them all is home price.
Zillow, the most clicked on real estate website in the world, has just awarded the winners of a public contest $1 million dollars for improving its algorithm accuracy by 1.2% nationally over a year and a half period. A recent article by Mike Rosenberg in The Seattle Times explores the trouble that really lies at the heart of determining what a house is worth with just a computer algorithm.
The computer algorithm we are talking about is the Zestimate. It's an automated evaluation model that Zillow offers online consumers. It's explained on Zillow’s website; “The Zestimate home valuation is Zillow's estimated market value for a home, computed using a proprietary formula. It is a starting point in determining a home's value and is not an official appraisal. The Zestimate is calculated from public and user-submitted data.”
“There are way too many factors for a certain algorithm to work."
In reality, Sam Mansour, a managing broker with John L. Scott in Lynnwood says it best; “There are way too many factors for a certain algorithm to work. I’ve been to homes and people say ‘my Zestimate is worth X amount,’ and I’m like, ‘no, no.’” and Sam is right. Mansour says, “the biggest factor a computer can’t track is the emotional appeal of a home, which can vary wildly from buyer to buyer and is a primary driver in how much people offer.”
“Humans are still better than machines. Homes nationally sell on average for about 2 percent less than the list price set by brokers”
Mike Rosenberg reports, “Humans are still better than machines. Homes nationally sell on average for about 2 percent less than the list price set by brokers, according to data from Redfin.” And this makes sense when you think about the fact that brokers have information available to them that websites don’t. Additionally, nothing can top a local broker’s knowledge of place, history or desirability of a neighborhood. Rosenberg goes on to say “the Zestimate relies on publicly available data and voluntary input from homeowners, which can give an incomplete picture of a house.”
While the Zestimate is a useful tool for a rough idea of home value, a real estate broker is almost always going to give you the most accurate gauge on how much your home is really worth.
If you are a seller and want to know what your home is really worth, give us a call today and have a broker create a custom market analysis for you.