Zillow’s algorithmic measurements of home values have increasingly been relied on by potential homebuyers and sellers. But due to the flawed nature of this still-evolving home-market indicator, the question informed buyers and sellers should have is, “At what cost?”
The often-dubious zestimate recently made news when it was put into further question by—of all people—the CEO of Zillow. Spencer Rascoff’s Seattle home was given a zestimate of nearly $1.63 million. However, when he put the home on the market in July 2015, it was listed at just $1.295 million. Subsequent mark-downs brought the listing to $1.139 million. That means Rascoff’s home was on the market for a 30 percent discount (nearly $400,000 less) than what his company’s algorithm would suggest.
This does not necessarily mean all zestimates are errant, however it’s continued proof that navigating a market’s financial character takes more than just automatically computed data. To offer a beginning avenue to Bay Area buyers and sellers, McGuire recently released an AVM that provides two home estimates, as opposed to Zillow’s singular estimate. Still, McGuire partners will tell you that there is no better way of truly understanding a home’s value in this complex and ever-shifting marketplace than to contact a Bay Area agent. One quick way to accomplish this is through McGuire’s Market Analysis request option, which offers an agent’s input in addition to AVM data.
McGuire Partner and Top Producer, Sharon Faccinto explains, “Veteran Bay Area REALTORS® can put together a much more realistic idea of local home values by looking at decades of area sales figures, knowing a specific market’s supply and demand, and as importantly, understanding the human elements that will attract specific buyers to a given property. In other words, AVMs can give a general view, but when it’s time to hone in on a sale or purchase, there is absolutely no substitute for an experienced agent.”
Looking at a few standout sales from Q3 2015 against their zestimates can help paint a better picture of how more than just an algorithm is needed to truly know a home’s value. One of 2015’s most impressive sales was a 4-bed, 6-bath palace in Belvedere that closed in late August. It’s zestimate did not seem to account for a $30 million modern overhaul, and thus came in at $10.331 million—just a mere $37 million shy of the property’s eventual $47.5 million sale.
On the flipside, a $12.5 million July sale in San Francisco’s incredibly hot Pacific Heights neighborhood closed at nearly $1.6 million beneath its zestimate. The takeaway? Zestimates can be near and far from actual realized values, and can adversely affect both seller and buyer expectations if more hands-on market analysis is not relied on.
“Zestimates or any other AVM-generated home value estimates are sometimes-useful indicators but can vary widely,” says Faccinto. “And if even the Zillow CEO ultimately decides to price differently, it reminds all that nothing replaces the value of an agent.” As we move into a new year, home buyers and sellers are encouraged to reach out to a McGuire agent to receive an accurate market analysis—one based upon the in-depth local market information and experience that only a seasoned Bay Area real estate professional can provide.