As reported yesterday, Zillow and Mint.com have partnered. In the deal, Zillow will provide it’s ‘zestimate’ home valuations to Mint.com customers.
Mint is a personal finance site that helps users track expenses and manage their personal finances.
The partnership makes sense. Real estate – both primary residences and investment properties – make up a large part of Americans’ investment strategy.
But here’s the problem: Zillow’s ‘zestimates’ just aren’t that reliable in Charlottesville and Central Virginia. I’m not sure whether it’s their formula…or if there aren’t enough transactions in our area…or both. But the Zillow data in our area is inaccurate, missing, and just plain bad.
So what exactly is a ‘zestimate’? It’s Zillow’s term for what real estate has coined Automated Valuation Models…or AVMs. The rise of AVMs…or attempts at AVMs…have been much documented over the past several years. Many companies and software programs have tried to create an automated CMA (comparative market analysis) that can generate the market value of the property. The models are all different, but the formulas probably include some sort of combination of the following: assessed value, price per square foot of recent sales, price per square foot of active listings, ratios of sale price to assessed value of recent solds, etc, etc. The list of possible data points is essentially endless.
Sounds reasonable, right? You plug in all the information about your home into a form and the system spits out a number. In a perfect world, this would work. But, realistically, it doesn’t really…especially in a place like Charlottesville and Albemarle County.
There are numerous reasons that the current AVMs just don’t work. But here’s a quick example:
Let’s say you have two homes…both built in 2005 on 2 acres of land. Both are exactly 2500 square feet with 4 bedrooms and 2.5 baths. Both have hardwood floors, granite counters, and tiled bathrooms. So, basically the ‘bones’ of each home are pretty identical. But that’s where the similarities end:
House A has been immaculately maintained over the years and sits on a parcel that is impeccably landscaped. The land also offers mountain views and is very private. On the inside, the floor plan is open and flexible. The walls are painted the perfect color, the granite and cabinets are neutral, and the home is decorated like a model home.
House B hasn’t been maintained well. There are cobwebs along the ceiling and scuff marks all over the walls. The HVAC system is about to break. The land is the same size as House A, but it’s overgrown with tall grass and weeds. The house is cited poorly and there are no mountain views. Inside, the floor plan is choppy – the kitchen is on one side of the house and family room is on the other side. It’s got low ceilings and feels dark. The walls are covered with odd colored paint, the granite is purple, and the kitchen cabinets are just run down.
This is a bit of an extreme comparison, but those two houses – even though they are both 2500 sf homes on 2 acres – could have a $50k to $75k difference in value. Unless you go into a house and take every detail into account (condition, finishes, decorating, floor plan, landscaping, home citing, colors, etc, etc), you really can’t value a home accurately.
So, here’s te caveat: if you use Mint and they give you your home value, don’t believe it. Give your Charlottesville real estate advisor a call and have them run a CMA for you.