Homeowners and buyers across the country often answer this question by turning to a figure known as a Zestimate, produced by Zillow.com. Zillow’s intention is to create an accurate value estimate for the over 100 million homes indexed by the site. Although it won’t give you a figure that’s right on the nose, it can provide a price range to start with during your real estate negotiation.

Wait, What’s a Zestimate?

A Zestimate is Zillow’s attempt to use algorithms and publicly available data points that influence housing prices to estimate a home’s value at any given time. While this is a good idea, in concept, it’s important for buyers and sellers to realize that there’s a bit more to predicting prices than the cold, hard facts.

Often, real estate becomes a very personal and emotional buy. Two houses with the same floor plan, but different shades of brick or different trees in the front yard can have different values to the person doing the buying. That’s really what matters. Ultimately, a home is only worth what the market will bear and what a buyer will give.

The Perception Versus the Reality of Zestimates

Zestimates became popular because outside of an appraisal or comparative market analysis generated by an experienced Realtor, it can be really hard to judge whether your home is gaining or losing value. After all, no one wants to bet on a losing horse, even if they live inside that horse and it provides them with shelter from the elements and a place to make memories (must be a Trojan horse).

Unfortunately, the Zestimate has been responsible for a great deal of confusion since Zillow started using the original algorithm in 2006. Even though the algorithm has been upgraded several times since its inception, it’s not perfect. Unfortunately, people deeply enveloped in the stressful process that is buying a house sometimes become ultra focused on the numbers that Zestimates provide, treating them more as an absolute than a flexible guide.

Because most people don’t really know what goes into valuing a home, this issue of getting married to a valuation that’s not quite on the dot isn’t new. Even before Zillow, many homeowners believed that their home was worth so many dollars due to tax assessments that were often based on outdated information, collected during the initial construction of their home and updated based on average inflation.

In order to determine the most accurate sales price of your home, I will create a Comparative Market Analysis Report that will include a list of similar homes sold in your neighborhood in the last 6 months. This report will allow you to evaluate how your home will fare against the competition.

Also read: “Even the CEO of Zillow Thinks You Should Ask a Real Estate Agent What Your Home is Worth”.

Why Have a Zestimate, Then?

Zestimates aren’t the most accurate way to assess the value of a home because they aren’t able to pick up on the harder to quantify items that go into determining the value of a home. They can’t tell a freshly remodeled 1960’s ranch home from one that’s still got the original shag carpet, for example. They aren’t appraisals. For many homes, though, a Zestimate will get you in the ballpark.

Zestimates work best in areas of high turnover, in neighborhoods with fairly similar homes. Because a Zestimate relies on public data like tax assessments and homeowner corrections of the basics, including the number of bathrooms and bedrooms, it can make a fine starting point for the potential home buyer or seller.

Since you don’t buy and sell real estate constantly, having an overview of the neighborhood’s stats is helpful when you do–but you have to allow for wiggle room. Just because a listed house on Maple Drive has a Zestimate of $203,000 and it’s almost identical to your house next door, it doesn’t mean you won’t get more (or less) when you go to sell.

Taking Your Zestimate to the Next Level

Zestimates can give you a very general idea about the value of your home or a home you’re considering buying, but they aren’t appraisals. The only way to know what a home’s actual value is in the moment (because this can change rapidly in some markets) is to reach out to a home pro for their formal opinion.

If you’ve reached that point where you’re ready to buy or sell a home and want a highly accurate price point to start from, contact your Realtor for a comparative market analysis. Once you have a contract in hand, a professional appraiser will take it from there and give you an exact dollar figure based on hundreds of factors that are a bit too nebulous for the technology we currently have available to reliably assess.

Would you like to know how much your home could sell for today? Click HERE to request my Free comprehensive Home Valuation Report.

Pricing your home accurately is the most effective way to ensure a successful sale.

Innovative marketing plan will help to bring the buyers through the front door, but no amount of marketing can sell an overpriced home. Please keep in mind, the agent will evaluate the price of your home to determine the current market value, but at the end, the agent doesn’t set the price, the seller doesn’t set the price – the market will set the price, or value, for your home.

Comparative Market Analysis

So, how will the right sales price will be determined? Real estate agents frequently use a Comparative Market Analysis (CMA) to estimate a property’s probable selling price. CMAs help sellers decide on a listing price, whereas buyers will use them to determine how much they want to offer for a property.

While sellers and buyers have naturally opposing price preferences, a CMA is designed to be a completely objective evaluation, and it’s based on recent and actual selling prices for comparable properties. Since real estate markets can change quickly, it’s essential to recognize that a CMA only provides a “snapshot” for a particular point in time.

The comparable properties included in a CMA should be similar recently sold homes. When selecting “comps,” the date of sale, location, and size of a home are the most important factors, but amenities, floor plan/style, age, number of bedrooms/bathrooms, garage size, improvements, and potential negatives may also be considered.

Insider Home Staging Tips: Here’s How To Sell Your Home Fast and For The Best Price

When reviewing a CMA to determine sales price on a particular property, it’s also helpful to examine the following:

Competing properties:

These are substantially similar homes that are currently listed for sale. Since they haven’t been sold yet, they’re usually distinguished from other “comps” in a CMA. Buyers know that sellers are competing against these properties, so it’s important to factor currently listed homes into the pricing strategy.

Days on market:

May indicate how appropriately a property has been priced for sale, especially when compared to absorption rates. If, for example, the absorption rate is two months, but a competing property has been listed for over three months, a potential buyer of that property might have a stronger negotiating position.

Absorption rates:

Are used to analyze the strength of a market, in terms of the supply and demand for current competing properties (the number of homes on the market relative to the number of homes sold). A low absorption rate indicates that sellers are in a stronger position, whereas a high absorption rate is favorable for buyers.

Sales price/List price ratios:

For specific categories of homes, statistics for Sales price to List price ratios will help you understand how much less than the listing price you can realistically expect to achieve.

Advantages of CMAs for

Sellers

Sellers receive a fact-based, objective assessment of their home’s value

Sellers don’t experience the stress and disruption that can occur when homes languish on the market.

Sellers are protected from undervaluing their home, to their financial disadvantage.

Sellers avoid the delay that occurs when they accept a high offer and the property does not appraise.

Buyers (experienced buyers’ agent will create CMA for their clients)

Buyers receive fact-based, objective information about homes where they might not be familiar with the local market.

Buyers are less likely to lose the home they really want because their offer is too low.

Buyers are less likely to encounter problems obtaining a mortgage because the house appraises below offer price.

Buyers are less likely to overpay for a home, thus preserving financial resources for other important home and life expenses.

Professional Home Appraisal

As a special service to my clients, I offer another very effective method of pricing your home – Professional Home Appraisal. When you list – and close – your home with me, I’ll pay for a pre-listing appraisal.

Benefits of having a professional appraisal:

You receive an unbiased third party opinion of the market value of your home by a trained professional.
You are positioned to quickly recognize and respond to a market offer.
You are positioned to effectively challenge a low lender’s appraisal of your home, maintaining your higher contract price. A lender will consider a well-known appraisers valuation – they will not consider an estimate provided by a real estate agent.
You avoid the common practice of a real estate agent “buying your listing” by suggesting a higher price than can be achieved. Because the agent would then be reluctant to suggest a price reduction early in the marketing process, you lose valuable time during those critical first several weeks on the market.

Your real estate agent is your best resource for professional insights on current market conditions. With your agent’s assistance, you’ll be in a better position to make an informed and realistic decision on the sales price of your home.

If you are ready to make a move, please contact me to schedule a free no obligation Seller Consultation.

Natasha Lingle Your Pricing Strategy Advisor (PSA).

And please, don’t forget to download

My Sellers’ Guide:

“Learn How to Have a Successful Home Sale”

This guide is a supplement to the information provided above, and it describes in detail traditional and modern marketing techniques and lists my real estate services you can expect me to provide including:

Accurately pricing your home.
Enhancing the perceived and real value of your home, enabling you to command a higher asking price by using latest marketing techniques.
Providing unmatched marketing including professional staging, photography, video and custom property web sites.
Showing latest statistics on how buyers search for homes today.
Securing a qualified buyer within your specific time frame.
And More!

The best part is, my Guide is free and available to download right now.

Just provide your name and email, and I’ll send it directly to you.

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Tag: CMA

The Truth About Zillow Zestimates