If you own a home, chances are you've done it.
You open Zillow, type in your address and immediately scroll down to see the number.
Maybe you're pleasantly surprised.
Maybe you're disappointed.
Or maybe you're thinking, “There is absolutely no way my house is worth that.”
And sometimes, you're right.
Online home-value estimates can be a useful starting point if you're simply curious about your home's value. But if you're actually thinking about selling, that number should not be the number you use to make financial decisions.
Here's why.
A Zestimate Has Never Been Inside Your House
This is probably the biggest thing homeowners forget.
An algorithm can see data. It can't walk through your front door.
It doesn't experience your home the way a buyer will.
It may know your square footage, number of bedrooms, number of bathrooms, lot size, previous sale price and nearby sales. But depending on what information is available, it may not fully understand that you remodeled your kitchen, replaced your flooring, finished your basement, updated your primary bathroom or completely transformed your backyard.
And it certainly doesn't walk into your house and think:
Wow. This house shows beautifully.
Or:
We're going to need to address this before we put it on the market.
Those things matter.
Even Zillow Calls It an Estimate
This is important because I don't think Zillow is bad. I use online real estate tools, too.
But we need to understand what the number actually represents.
Zillow describes its Zestimate as an automated estimate of a home's market value based on public records, MLS information, user-submitted information, property characteristics, comparable homes and market trends.
Zillow also specifically states that a Zestimate is not an appraisal.
And here's a number that may surprise you: Zillow currently reports a nationwide median error rate of about 7% for off-market homes.
Think about what 7% means on a $500,000 house.
That's $35,000.
On a $750,000 house, it's $52,500.
That's a pretty big range when you're trying to decide whether to sell your home, how much equity you have or what your next move might look like.
Your Neighbor's House Isn't Necessarily Your Comp
This is where real estate gets interesting.
Two houses can be in the same subdivision, have similar square footage and even have the same number of bedrooms and bathrooms—and still have very different market values.
- One may have a remodeled kitchen.
- One may back to a busy road.
- One may have a finished basement.
- One may have the lot everyone wants.
- One may have an incredible primary suite.
- One may have original everything from 1997.
- One may simply show better.
Those differences can translate into real money.
When I prepare a market analysis, I don't just pull every house that sold within a certain radius and average the price per square foot. I'm looking at which homes buyers would have actually considered as alternatives to yours.
That's a very different analysis.
Condition Matters More Than a Computer Can Understand
This is especially true in Northern Illinois, where our housing stock varies tremendously.
I can walk into two homes built by the same builder, in the same neighborhood, with essentially the same floor plan—and immediately know they shouldn't be priced the same.
- Maybe one owner has meticulously maintained the house for 20 years.
- Maybe the other has deferred maintenance everywhere.
- Maybe one seller spent $100,000 renovating, but spent it on things today's buyers don't particularly value.
That's another piece of this: cost does not automatically equal value.
Just because you spent $40,000 on something doesn't mean a buyer will pay you $40,000 more for your house.
My job is to figure out what today's buyer is actually willing to pay for it.
The Market Can Change Faster Than Your Online Estimate
Real estate is hyperlocal.
I don't just care about what sold six months ago. I want to know what's happening right now.
- What is your competition?
- What's sitting on the market?
- What went under contract immediately?
- What had multiple offers?
- What had to reduce its price?
- What are buyers responding to?
Sometimes one sale can change the conversation in a neighborhood.
That's why pricing a home correctly requires more than looking backward at historical data. You also have to understand what buyers are doing today.
Sometimes the Zestimate Is Too Low. Sometimes It's Too High
And believe it or not, both can cause problems.
If an online estimate is too low, a homeowner may think selling isn't financially possible when it actually is.
But an estimate that's too high can be even more dangerous.
I've seen sellers become emotionally attached to an online number before we've even looked at the actual comparable sales.
Then the market tells us something different.
The danger isn't Zillow.
The danger is treating an automated estimate like it's a guaranteed sale price.
It isn't.
So What Is Your House Worth?
The answer is actually pretty simple:
Your home is worth what a qualified buyer is willing to pay for it in today's market.
Our job is to figure out where that number is likely to land before we put a For Sale sign in the yard.
That means looking at your house individually.
- I want to see the updates.
- I want to see the condition.
- I want to understand your lot.
- I want to know what's been replaced.
- I want to see the things an algorithm can't see.
Then I want to compare your home against the properties buyers are actually choosing between.
That's how I determine value.
Before You Spend Money—or Make a Decision—Let Me Run the Numbers
If you're even thinking about selling in the next year, don't let an online estimate determine what you do next.
And please don't start ripping out kitchens, replacing flooring or spending thousands of dollars because you assume that's what you need to do before selling.
Let me take a look first.
I'll tell you where I think your home would land in today's market, what I would change before listing, what I wouldn't touch, and where I think spending money could actually make a difference.
Sometimes my advice is to make improvements.
Sometimes it's to make a few inexpensive changes.
And sometimes it's:
Don't spend a dime. Let's sell the house.
That's the difference between an online estimate and an actual strategy.
Wondering what your home is really worth?
Contact Lana Erickson and The Luxe Home Team for a personalized market analysis of your home.
