PHOENIX — The hot real estate market in Phoenix has many homeowners thinking about selling, especially since the home value growth is up more than 15% since December of 2019.
But Phoenix real estate agents are finding sites like Zillow, which use an Automated Valuation Model to determine a home’s value, are overestimating what a house is actually worth.
How can you know a home value estimate is too good to be true?
The median error rate of the Zestimate for on-market homes in Phoenix is 1.3%, Zillow spokesperson said in an email to 12 News. The company also clarified that Zestimates are supposed to act as the beginning of the home buyer's ezperience.
"The Zestimate is not an official appraisal, but rather a jumping off point in determining a home’s value and in starting valuable conversations between homeowners, buyers, sellers and real estate professionals," the spokesperson said.
If you’re looking to buy or sell a home in the Valley, do your homework. Carter says overestimating home values is a common practice on certain sites
“Zestimates are what we call Automated Valuation Models, they are not always 100% accurate,” Aaron Carter, associate broker and co-founder of the CarterMosier Group with HomeSmart, said.
Automated calculations are a starting point, but Carter said they can’t replace what humans can do to find out the actual value of a home.
How can experts help figure out the actual value of your home?
“We do what’s called a comparative market analysis, a CMA,” Carter said. “This looks at closed, past sales of similar homes and then we add or deduct value based on age, other criteria like location, conditions size, features and amenities.”
In other words, there are a lot of things that AVMs use which Zillow may not capture, like the most recent or complete public records.
Zillow and researchers know there is a margin of error
Zillow acknowledges they have a margin of error, which differs from region to region and it’s laid out on its website.
So, when does Carter most often find overestimates?
“The times when a seller may not get that high list price is if the property does need some work,” he said.
Other researchers agree with Carter. In a 2014 research paper titled "Accuracy of Zillow's Home Value Estimates," researchers determined that relying on Zillow as a home pricing tool is questionable.
"While Zillow may be a useful tool, providing an ever-changing snapshot of home prices, don’t bet the ranch on it," paper authors Dr. Charles Corcoran and Fei Liu wrote. "Even the best results in the four-star market produce mean error rates approaching 10 percent. Accuracy of 10 percent still implies an error of more than $20,000 for an average price property."
How can homeowners protect their home value?
Carter says that’s why it’s key homeowners who are hoping to cash in on the demand in the market, keep their properties in the best shape possible.
“The natural world is in a constant state of decay,” he said. “As soon as you paint that house and make it beautiful... there’s going to be something that you can improve.”
He suggests setting a small budget aside every year, to take care of your home.
“If you take care of your home, your home will take care of you when it’s time to sell,” Carter said.
According to a Zillow spokesperson, Phoenix led all major metros in yearly home value growth, up 15.3% compared to last December, snatching the lead away from San Jose, up 15.2% year over year and staying ahead of Salt Lake City, Seattle and Austin.