i frequently get calls from investors or prospective home buyers and sellers who use Zillow or other tools to estimate the value of their home or a home they may be interested in purchasing. These tools can sometimes provide an accurate analysis but are limited in providing a detailed and accurate market value. I will share my experience with three recent transactions.
I recently refinanced my primary home in Cedar Park. It is a large single story home with an extended three car garage and large patio cover. It also has a swimming pool and backs up to a greenbelt. Some lenders use an automated valuation model, or AVM to estimate value of subject property. The AVM estimate will include recent sold comps in the neighborhood. My lender used RealQuest.
RealQuest provided a value range in the $210,000-$263,000 with an estimate of $236,700 for my primary residence. Zillow estimated the value of my home to be $257,400. My appraisal came in at $300,000, which was within a few thousand dollars of the current tax assessed value provided by Williamson County. Because of the high appraisal amount (I assume), the lender ordered a desktop review of my appraisal. The desktop review was completed successfully confirming the value of $300,000. This example is probably more of an anomaly due to unique features of my home. However, it does prove the appraisal amount of $300,000 was 20% higher than estimates provided by Zillow or RealQuest.
I helped an investor purchase a rental property this year in the Cedar Park/Leander area. The subject property was previously the builder’s model home. Most builders convert the garage and use as an office until they close out the neighborhood. The office space was converted back to a garage when home sold years ago. Williamson County listed the home with 400 more sqft than actual sqft. RealQuest’s AVM estimate was $13,000 higher than the actual appraisal, and Zillow’s estimate was $4,000 lower than the actual appraisal. Williamson County’s tax assessed value was also within $5,000 of the appraisal amount.
Another home owner called and inquired about selling his home in Cedar Park/Leander. The subject property was located in a large subdivision. This subdivision included Centex, DR Horton, and KB Homes. Centex and DR Horton built two series of homes. One series had fewer upgrades and smaller lots, while the other series included more standard upgrades and larger lots. KB Homes was the value builder. Zillow estimated the value of the home to be $165,700. When I did my market analysis, I estimated market value to be in the $140,000-$145,000 range. My comps included same builder with similar features and sqft. There were quite a few short sales and foreclosures in this subdivision, and this explains the difference between my market analysis and Zillow’s estimate.
This last example is a more common scenario. There were multiple builders in the same subdivision, and prices and features are different for each home in different sections of the same subdivision. The distressed sold comps were more common in the subject property section of subdivision. When doing a market analysis, you must use similar sold comps with similar features and upgrades. Zillow, AVM’s or other online tools may not include these details in their calculation algorithms.
In summary, Zillow, AVMs, and other value tools can be useful. Your local tax assessed value may also be accurate. All are tools that estimate the value of your home. Of my three examples, one estimate was within 5% of the appraisal, the second was within 15% of my market analysis, and my home appraised more than 20% than the AVM or Zillow estimate.
To obtain an accurate estimate or value of your home, I recommend you hire a Realtor who knows the area and is has many years of experience. If you plan on selling your home, fair market value of your home is what a willing and able buyer is willing to pay for your home at a given time. The best or most accurate market analysis or appraisal will not guarantee a home will sell for a specific price.
If you have any questions, please call us at 512-257-9836. Our office provides sales, leasing, property management, and mortgage services.