It is likely that anyone who has been looking at the real estate market comes across Zillow at some point. Zillow is a website that lists properties for sale and offers insight into how much those properties are worth compared to their sale prices.
Because of the amount of information Zillow offers, many use it as their one-stop-shop when trying to learn about a property. But, it may not be the best source for fix-and-flip investors for researching home values. Keep reading to learn more about when Zillow can be a good source of information and when fix-and-flippers should seek other ways to assess home values.
How Zillow Estimates Values
At first glance, it might seem like Zillow is just as good as any other source when it comes to estimating home values.
Most brokers use one of two methods to determine a home’s value. They either use an approach known as Comparative Market Approach (CMA) or the Broker’s Price Opinion (BPO). Both of these methods involve looking at the surrounding area to help determine a home’s value. The idea is simple: If one home in an area is worth a certain amount, then homes in the same area that have similar sizes and features like square footage, lot size, number of bedrooms and bathrooms should be worth just about the same amount.
Zillow comes up with its own estimates (known as Zestimates) the same way. It looks at the value of other comparable homes in the same area and uses that information much as a broker would. Because it has information on virtually every property in an area already stored on its servers, this process is quick and constantly updated as home values fluctuate.
How Zillow Gets it Wrong
While this method might seem okay at first, it is not as cut and dry as it may seem. Zillow may be able to help you get a rough idea of the value of a home, but in reality, there are several reasons why Zillow just simply gets it wrong and should never be used as your end-all-be-all of home value estimation, and why it is better to use a reliable resource like an agent instead.
Zillow simply does not have access to all the information it needs to make an accurate estimate. When agents estimate the value of a house, they use the latest information from listing services like MLS. This resource has the most up-to-date listings and estimates and is considered the highest standard possible when making comparable estimates. Zillow, on the other hand, does not have access to the MLS. Instead, it has to rely on secondary resources such as tax listings and other Zillow users, which means that Zillow is starting out with lower-quality information, which can tank its estimates.
Another reason why Zillow isn’t always accurate and reliable is that a source like Zillow completely relies on digital information and takes the human factor out of it completely.
When an agent values a house, he or she looks at the comparable value, but there’s more to it than that. Numbers like square footage and lot size do not tell the whole story. Factors like the condition of the house, how well it has been maintained, the condition and age of the appliances, and how much work it needs to be livable all need to be taken into consideration. What sort of shape is the house in? Has it been maintained? Are the appliances up to date? How much work does it need to be livable? These factors seriously impact the estimate of a given property, and Zillow is just not able to address these issues.
An agent, on the other hand, is able to look at these factors as well as others such as market trends to come up with a more realistic appraisal of a property’s value.
A third reason Zillow is not reliable is that people simply are not always trustworthy. A Zillow estimate is based on the latest data, even if the data is wrong. It is easy for a homeowner to go onto Zillow and edit a home’s information. This capability is good in cases such as home improvement, where a homeowner expands a home’s square footage or adds a bathroom. But, nothing on Zillow forces someone to prove that those improvements have been made. So, there is no way to know if the Zestimate is based on truthful information or not.
How Brass Financial Can Help
While we at Brass Financial cannot help you with your home estimates, we’re ready to be your partner once you do. With competitive rates and easy terms to work with, Brass Financial is here to help the fix-and-flip investor when he or she is ready to commit to a property. Contact us today to help get you on the path toward fixing and flipping your next property.