We're humans. Our home value reports are all researched thoroughly and made possible by years of experience and local expertise. Online estimates from Zillow, OpenDoor, Redfin or any other online home evaluator using an algorithm is not a valid replacement for a comparative market analysis from a real estate agent.
That's the million dollar question (literally). Zillow actually had a contest awarding $1M to whoever can improve their algorithm. Here's an exact quote on how they explain their calculations.
"We use proprietary automated valuation models that apply advanced algorithms to analyze our data to identify relationships within a specific geographic area, between this home-related data and actual sales prices." - Zillow.com
Confusing, right? We get it. Getting an "instant" home value is appealing. Not having to talk to someone is appealing, but there's a cost to that approach. Instant doesn't mean accurate. When something is as important as the value of your home, accuracy matters more.
"We encourage buyers, sellers and homeowners to supplement Zillow's information by doing other research such as getting a comparative market analysis (CMA) from a real estate agent." - Zillow.com
Unfortunately, estimates from these sites are often inaccurate, and the value of inaccuracy is pretty compelling. According to Zillow, their Zestimates are based on an algorithm that is pretty complicated to understand, even for us real estate agents. We understand the importance of comparing homes in the same area, but we also know how many other factors can increase / decrease that number that are not included in the "algorithm"
There are hundreds of factors that we take into consideration when estimating your home's value, and no two reports are the same. We first take a look at your address. This allows us to see how much neighboring homes have sold for, the desirability of the neighborhood you live in, unique features of your home and the surrounding geographical area and many more factors. After we have a good idea of what that looks like, we then go more in-depth with our research, including checking the condition of your home, taking into consideration any updates you've made that could make it worth more than your neighbor's. All of this is done by a human being. None of our home value reports run on an algorithm, and this information isn't available to us or you at the push of a button.
If you’re like most people that we meet with, you think that the longer your home stays on the market, the more offers will come in, creating competition around your home, resulting in the highest offer possible. It’s basically like an auction, right? Wrong. The longer your home stays on the market, the less likely it will sell for asking price (or above). Why? Well, if you go to an auction, the bidding price is set, and offers go up as time goes on. But your home isn’t a rare piece of art. Amongst a sea of other homes for sale, yours will quickly become stale and buyers will wonder why it hasn’t sold yet. According to a study by Zillow, homes that were on the market for about two months sold at 5% below asking price, and homes that were on the market for the longest amount of time (eleven months on average) sold at 12% below list price. Meanwhile, the homes that ended up selling at or above listing price sold right away.
Having an accurate, and more importantly, realistic pricing strategy from the start is how your home will be sold for the most money and quickly. You don’t want to price your home too low and neither do we. But you also don’t want to let it sit on the market for too long.