Jul 6, 2018
by Julie Toon Timms – REALTOR, ABR, CCIM, CRS, E-PRO GRI, RRS, CLHMS[arve url=”https://player.vimeo.com/video/278200931?autoplay=1″ mode=”normal” align=”right” title=”Ask Julie: What’s my home worth?” description=”Julie answers a common question about home values and online home evaluation tools” upload_date=”07/03/2018″ duration=”2M56S” /]
One of the most common questions I hear from clients is “Julie, what’s my house worth?” My answer is always the same. Simply stated, the market value of any home is determined by what both the seller and buyer agree its worth is at the time of sale.
Unfortunately, the market is not concerned with how much money or loving care an owner has put into a home. It doesn’t know the buyer’s financial position, urgency or size of their family. It doesn’t care what a homeowner needs to get out of the sale or how hard the owner worked on the lawn. The market value is determined by numerous other factors and the buyers weigh them all and choose the best option that fits their needs and budget. So ultimately, the market value is what the buyer and seller finally agree upon.
And market value is most decidedly NOT what some popular online home valuation websites or look-alike software tools say it’s value is … because they have never even seen your home. Their software only looks at data. And let’s be candid here. There’s a reason they call it “A-I” (Artificial Intelligence). Software can’t see things like flooring, walls, structure, roof condition, built-ins, crown molding or landscaping. Only real people can see and evaluate these.
So how do you determine what a home is really worth?
There are 4 steps you must take to get a fair, “human” valuation of a home.
Step 1. Evaluate comparable SOLD properties
Not offers made. Not withdrawn offers. Only recently SOLD properties similar to yours in size, care, condition, geographic location, and amenities should be reviewed. This will give you a good idea of what “real” buyers are paying for homes like yours in your marketplace. And remember, no matter what an owner believes the home is worth, the market will determine value.
Step 2. Determine the MARKET UNDERCURRENT (Buying climate)
This is a look at what the current market conditions are. What is the buying temperature like? Are people hot to buy and making reasonable offers right now … or looking for bargains? Is mortgage money hard or easy to obtain? Examine current lender appraisal levels and any home inspection deal rejections. A seasoned, competent, local Real Estate Agent is an invaluable asset in this step.
Step 3. Examine comparable ACTIVE LISTINGS
This will tell you what owners are hoping to get for homes similar to yours or the size home you are looking to buy. And remember these are not yet sold properties. They simply represent the competition and current inventory level of homes available for sale. Homeowners should even try checking some out in person to see how their homes measure up within the current market.
This list shows the pitfalls you must avoid. They all failed to sell but you should examine why they failed. Each failed listing tells a story. Owner price expectations too high? Something discovered wrong with the home or gone wrong in the neighborhood? Buyer market conditions change? Lack of available lender money? Once again, a veteran in-market Real Estate Agent is incredibly helpful evaluating this data.
The Zero-Human-Effect of online home valuations
Buyers will always quote an online home evaluation when it’s lower than the listing price and ignore them when they’re higher than the listing price. Owners are the opposite.
Of course, it’s the first place homeowners and buyers look to see what a home is worth. It’s anonymous, fast, free, completely loaded with homes to look at and always right at your fingertips. But there are many holes in software evaluations and it should really only be used as the beginning tool for a search or sale.
Even the most popular online home valuation site “Estimates®” margin for error typically ranges from 5% to up to 20% off the true value. If you take the middle ground position of a 10% error on a $500,000 home that’s a $50,000 mistake for the buyer or seller. You can’t base a home’s value just on a dollars per square foot software formula.
Why the errors? All these sites and other computer modeling services are only relying on data. And almost all the data about a home listing is input by the seller or seller’s agent. There can be mistakes made. Missing data. Old data, all impacting the true value of a home. And no person from a website ever does a live walk-through of a home. Never sees the view from the front door or does the “sniff test” inside the house checking for pet odors, mold, mildew or dampness. Never sees a home’s wall or floor treatments, window décor, or landscaping curb-appeal. Never takes into account the neighbor next door had to sell their home at a bargain price and fast because their business had failed. It’s only a computer model and a computer can’t “see” all that needs to be seen to evaluate a home.
The online software evaluation services are not in the Real Esate business. They’re not Real Estate Agents. They ARE in the lead generation business and get paid for connecting buyers and sellers and from advertisements on their web sites. Not for executing the home sale.
Zillow’s own disclaimer* about their Zestimates® states: “The Zestimate® home valuation is Zillow’s estimated market value, computed using a proprietary formula. It is not an appraisal. It is a starting point in determining a home’s value … We encourage buyers, sellers, and homeowners to supplement Zillow’s information by doing other research.” The meaning is clear. You literally must do your homework to get the right valuation for a home. And to do it right, you should get the help of a professional real estate agent that knows the market.
And remember, always Expect the best… and get it!
* See www.zillow.com/zestimate/ for a complete explanation of their methodology.
If you want to make a little piece of The Island your own, you need more than just a road map and a REALTOR. You need a partner who can make things happen.
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