In 2022, Zillow's iBuyer program - which allowed Zillow to buy homes off-market and then immediately put them back on the market at a higher price - stopped buying homes.
Why?
It was losing a TON of money.
It lost so much, in fact, that after it stopped buying, it laid off 1/4 of its staff and stock dropped 80% from the peak.
What can you learn from Zillow?
In short, algorithms and computer models aren't trustworthy predictors of home values, today or down the road.
No one knows for sure exactly how the Zillow algorithm works, but one thing is for sure: the computer data has no senses beyond the math....and buyers use emotional and tactile senses when they shop.
You could argue that the look of a home is irrelevant to its value. In the most rational manner, this might even be right. In the real world, though, of course buyers care about the look of a home.
The same can be said of natural light, freeway noise, run-down homes next door, or beautiful gardens: each is not "known" by a computer but are known to buyers in the market and can impact how buyers feel about a home. That is, they impact desirability, which impacts demand...which then impacts the market value.
TALKING TO A REALTOR
Talk to a Realtor you trust to get a price recommendation. Ask them to show you where the number comes from and - if you like - make them sell you on the value they came up with. Your Realtor could come in too low; it happens. More often, they will come in too high.
Sometimes this, while unintentional, happens when the agent wants you to be happy with their figure...which will lead you to hiring them.
TALK TO AN APPRAISER
One advantage an appraiser might have over a Realtor is that they are paid for their opinion and then the job is done. They have no bias in pricing your home, which is an allegation made against Realtors for decades (though often not fairly).
An appraiser uses a couple different methods to derive a market value figure and they do so without knowing what you want for your home or without another job being available to them if they make you happy.
The downside of using an appraiser instead of an agent is that appraisers don't work directly with buyers. As such, they sometimes aren't aware of intangibles that can work for or against your home when it's on the market.
A good Realtor will better understand your home's first impression and how it might boost - or cripple - your home's desirability (and, therefore, sale price) from the moment the buyer arrives.
The other concern on appraisers is that their report gives you a single dollar figure, in the same vein as the Zestimate. Sometimes, it's better to get a range, which is typically how the market works. It's good to have a number you're aiming for - you and your Realtor can derive this together - but I'm hesitant to support reports that put your home value at a singular figure. This is, in my opinion, a bit misrepresentative (though not in the legal sense) of how the market works.
Market value always exists within a range.
This isn't a post about Realtors vs Appraisers; it's just worth noting there are advantages to each.
THE TAKE HOME POINT
Algorithms and models are good for macro level study and ideas. They can suggest what will happen to prices across broad areas if X or Y occur. They are very limited, however, in gauging buyer sentiment and understanding the nuances that impact the value of each and every home in your town.
Reach out if you'd like to discuss this further or would appreciate a complimentary updated price opinion for your home.
