Ask the Expert
By Holly Schwartz
What’s My Home Worth?
Sounds like a simple question… But those 4 little words can have a BIG impact! Our homes are one of our most prized possessions and one of our greatest assets so it makes sense that we want to know the value. How we get it is where things can start to get messy. Here’s a look at some ways that they are derived.
The Merriam-Webster dictionary defines worth as “having property to the value or amount of ” and value as “monetary or material worth.” In short, your home’s worth is dependent on the amount others will pay for it. How do we know what our home is worth? A quick search on Google populates a ton of sources, the first of which is Zillow, known for their Zestimate. Basically, a Zestimate is Zillow’s market value estimate for homes based on computer data generated from public records. Homeowners are able to edit their home facts as well if they wish to get a more accurate computation.
The issue that comes up with Zestimates is that they can be inaccurate. In fact, in the Los Angeles/Long Beach/Anaheim area the Zestimate has a median error rate of 6.5%. This means that half of the homes on Zillow have a sales price that is within 6.5% of the Zestimate and the other HALF of homes sell for more than 6.5% of the Zestimate. Did you catch that? FIFTY PERCENT of homes on Zillow in our area have a 6.5% or more margin of error from the Zestimate. So as a homeowner, you have a fifty/fifty chance of the Zestimate being close to the actual sales price your home would have if it were for sale.
Those aren’t very good odds. Plus, anyone looking for homes that are for sale can view the Zestimate as well, which can play a negative role in the negotiation process if house hunters use an inaccurate Zestimate as their basis for sales price. An LA Times article in February 2015 brought up another problem – when homeowners want to list their home for a higher price because the Zestimate indicated that their home was worth more. Unrealistic expectations can cause drama, heartache, lengthy days on market and need for price reductions.
Other websites will offer similar data to generate a home value and some are more personalized that others. But there are other ways to get to the bottom of the home value mystery.
For one, you could ask a Realtor to prepare a comparative market analysis (CMA) for your home. Better yet, let them see the home in person so that when they put the CMA together for you they can give you the best information. Knowing how your home compares to others that have recently sold is key. Another way to determine value is to contact an appraiser and let them put an appraisal report together for you.
At the end of the day, a home is worth what someone else will pay for it. The greater the demand, the more the value ticks up. In our area, there are certain features that will create more value like a stunning view, a beachfront location, or a prime boat dock. Market conditions, features, location – these all play a big part in the value of a home. So while it may be fun to track computer generated values, there’s much more to it than that!
Holly Schwartz is a Realtor with Villa Real Estate who lives in Eastside Costa Mesa. She can be reached at HSchwartz@VillaRealEstate.com.
