Thinking about using a home value estimator in Fargo to help you with your listing price? How accurate are home value estimators?
Are you selling a distressed property in Fargo and you aren’t quite sure what the price should be? Here’s why you should contact us to let us help you.
Home value estimators from Zillow’s “Zestimate” to Chase Bank’s “Home Value Estimator” promise to give you a rough idea of how much your house is worth.
Do they work? Will your house sell for more or less than what the estimator says? Are they biased? How can you trust it?
In this article, we’ll answer all the questions you have about home value estimators. We buy distressed property in Fargo, so if you’re selling a house that’s in need of repairs, we can give you a better idea of how much it’s worth. Just give us a call.
Every one of these calculators claims to have some ground-breaking algorithm that they use to determine home values.
The gist of the algorithm, though — the backbone upon which it all rests — is square footage of living space. One of the biggest determinants of how much a house is worth is how big it is, particularly if the other houses in the neighborhood were built around the same time and are in similar condition.
So most home value estimators attempt to find comparable homes by calculating the average price per square footage (how much the houses sold for, divided by how big they were) and then they multiply that number by the size of the house.
From there, there are any number of adjustments that the algorithm might use to make a final determination of how much the house is worth, like the numbers of bedrooms and bathrooms, whether or not there’s AC, and heat — and anything else that they can pull from public records.
This is actually remarkably similar to the same process that professional real estate appraisers use to determine home values.
The result? Home value estimators are pretty accurate.
However, there’s a caveat: home value estimators are pretty accurate as long as the information behind them is also accurate.
So, the accuracy of the estimate depends on whether or not realtors and public records workers entered the correct information.
Here are some key factors that go into the algorithm, to give you an idea of what could gunk up the works:
To top that off, the Zestimate — or any other home value estimate — might not include the owner’s upgrades or improvements. Whatever is hard to quantify is also hard to put into an algorithm.
This creates two potential problems: 1) the algorithm is easily abused (and people have a financial incentive to abuse it) and 2) if you have a property that’s in serious need of repairs (or has recently been completely redone) the estimate is going to leave that out entirely.
In 2018, the CEO of Zillow listed his home for sale. The Zestimate said it was worth $1.75m, and it only ended up selling for $1m. The Chief Data Analytics Officer said that they didn’t factor in the property’s location on a busy road and its irregular lot size.
Needless to say, it raised some eyebrows, but it does also bring up another question: Can the estimates be abused?
If you know that the estimate is largely based on square footage and the numbers of bedrooms and bathrooms (typically above-grade), it isn’t too difficult to fudge those numbers in the direction that would allow for a higher estimate — and many data entry personnel have an incentive to do just that.
But there’s another problem:
The estimate wasn’t able to account for the CEO’s busy street.
Similarly, if you own a property in Fargo that’s in serious need of repair, the estimate isn’t going to pick that up, either. You might think that your house is worth tens of thousands of dollars more than it’s worth.
The estimate assumes that your house is in normal condition. There aren’t improvements or depreciation outside of the norm for your neighborhood.
If you want a good idea of how much your home is really worth, it’s best to contact a real estate professional.
Home value estimators can be very accurate, as long as the data that they use to calculate home values is also accurate.
However, there are a lot of reasons why that data might be inaccurate. For one, some data entry personnel have a financial incentive to fudge the numbers. Additionally, there are some factors that the algorithm can’t capture.
As we saw with the owner and CEO of Zillow himself, the estimate was off by as much as 40%.
If you have a house that’s in serious need of repair, if you own a distressed property in Fargo, contact a real estate professional to get a better idea of how much it might be worth.