Don’t worry…we’ve all done it. Visited a realty website, such as Zillow, and requested a home valuation. The ‘Zestimate’ is probably the most common, or known, internet valuation. Don’t get me wrong, this is great for a quick estimate of your home. However, it is not an accurate home value.
Zillow’s CEO, Spencer Rascoff, shined a bit of light on how Zestimates can miss by a mile. How? By selling a property for less than its Zestimate – wayyyy less. Earlier this year, Rascoff sold a Seattle home for $1.05 million, 40 percent LESS than the Zestimate of $1.75 million shown on its property page a day later. See more here.
On Zillow’s website, it states the ‘median error’ of the Zestimate, which is 4.5% ( a huge difference from the past 8.3%). So, on a home that’s worth $300,000, the typical error is almost $15,000 – that’s ‘typical’! I couldn’t imagine the other home values across Zillow that are off more than that.
As a precaution, Zillow states that the estimate is not an appraisal and that a comparative market analysis (CMA) should be provided by a realtor.
What is a Comparative Market Analysis?
To gain an accurate value of your home, you will want a CMA, or Comparative Market Analysis. A CMA is an analysis of the active homes and recently sold homes, which are similar to yours, in your region. This report can range from 5 to 50 pages, depending on who conducts the analysis – this is a very subjective process. Keep in mind that a CMA has no legal or financial value, and is not an appraisal.
What goes into a Home Valuation/ CMA Report?
As mentioned, the CMA is a subjective exercise, which may include homes on the same block as yours or a couple of miles out. However, when constructing a CMA, some ideal elements that should be included are as follows:
- # of bedrooms & bathrooms
- Square footage
- Number of floors
- A detailed list of amenities and features, such as swimming pool, fireplace, etc.
- Location, including proximity to major roads, shops, schools, etc.
- Recent improvements, if any.
Square Footage: Square footage and home values don’t necessarily follow a linear relationship. After a certain size, larger homes are actually worth less per square foot than smaller homes. When comparing homes, a CMA should consider houses that fall within +- 200-400 square feet of your home size.
Amenities: Amenities such as a swimming pool, fireplace or large garage can go a long way in increasing your homes value.
Location, Location, Location: As any realtor would tell you, the location is one of the biggest determinant in your home’s value. However, since a CMA will likely consider sales within the same region, this shouldn’t be a huge concern. What should be considered are subjective features, such as whether or not your comparables face a quiet street or a busy road, or whether the bedrooms face a stunning view or a back alley, and whether schools, marketplaces and public transport are nearby.
Upgrades and Renovations, if Any: Upgrades and renovations should be considered in a CMA. A remodeled kitchen or bathroom can often add a few thousand dollars to your home value.
The internet home valuation tools are great for providing you with a quick and instant home valuation. However, the value is only an estimate using the internet to gather local real estate information and comparables in the area. If you decide to use one of the tools, take the value with a grain of salt. It can give you a good starting value. When you are ready to sell your home, please call us at 443-692-8800. The Pivec Group provides a true estimate value of your home as a courtesy and suggests an in-person home value by a real estate professional.