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Health & Fitness

Home Value Accuracy - Agent Versus Software Estimates

For those looking to buy or sell a home: Learn just how inaccurate online real estate valuation software can really be

If you're considering buying or selling a home, I'm sure you've probably looked at various real estate sites to see how much homes are valued for.  As a real estate professional, I get clients that ask me about these home value estimates all the time.  Some of them have almost decided not to buy or sell a home, because they trusted these estimated to be accurate, and they got the impression they could not meet their selling or purchasing goals.

So, I decided to due my homework and see just how accurate these estimates are.  I went to the most well known site for home value estimates...Zillow.  Their "Zestimates," as they're called, provide home value estimates of any home, whether they're for sale or not.  Zillow states that this is not to be construed as an appraisal, but an opinion of value.

The issue is, these values are derived from county tax values, last sales price, surrounding homes in different communities and school districts.  It may also use homes that while close in proximity, are of varying quality, size, condition, age, and/or distressed (foreclosure or short sale).  The homes could be in a better or worse location as well (train tracks, near highway, on a main road, etc).

I attached a screen shot from Zillow's website that discloses the accuracy of their "Zestimates," which can be viewed at the following link as well.  ZESTIMATE ACCURACY

Being a Realtor in the Cleveland and Northeast Ohio area, I'll ask you to draw your attention to the Cleveland OH statistics. As you can see, the "Zestimates" are only 35.9% accurate within 5% of the true value, 63.7% within 10% of true value and 83.7% accurate within 20% of true value.  If an agent had accuracy numbers like these, he/she wouldn't be a very successful Realtor.

To put this in perspective, if a seller owned a $250,000 home, the differences at these 5-20% levels of accuracy could range from $12,500-$50,000!  If the seller's home is one of the 16.3% that weren't even accurate within 20%, this number could be even higher.

The point is, as I explain to all of my clients, using the internet to obtain real estate knowledge can be a great thing, but can also be misleading or incorrect.  Knowing the source of your information is very important, and it's the reason I wrote this article.  Specific to this topic, nothing replaces the valuation of a local real estate agent.  And when choosing a Realtor, be sure to interview more than one to make sure you're choosing a knowledgeable agent that will successfully guide you through your transaction.


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