Real Estate Round-Up: Z is for zestimate
Last updated 11/4/2021 at 2:01pm
A zestimate by any other name is really a guess-timate. Algorithms provide a “value” on a property based on data. The data measures, in the case of real estate, the size of the building, the age of the building, the size of the parcel it’s located on, and the location of the parcel. It takes this data and compares it to other properties within a specific geographic area.
The zestimate can be fairly accurate when it is applied to a home in a planned unit development, where the homes were part of a neighborhood, like Peppertree Park or Shady Grove. But where zestimates fall short is on custom homes, and Fallbrook has many of these. The simple reason zestimates miss the mark, is that it takes personal reference out of the equation. A zestimate is only as good as the software program created. No personal perspective is involved in the zestimated value.
The zestimate often falls short even in neighborhoods like Sycamore Ranch, where many owners updated their homes, but others did not. All the algorithm knows is the size of the home, the size of the parcel, the age of the home, and the home’s location to the other homes within that data base.
Let me share some examples of zestimates missing the mark. The first example is for a home built in 1972. It is in a lovely area of Fallbrook and has panoramic views from the backyard. No improvements or upgrades had been done over the years, except those that were required due to necessity. The home is vintage 1972. The zestimate, by many of the syndicated sites, said that home had a value of $700,000, primarily because the algorithm lowers the value in older homes. Our opinion of value, based on the recent activity in Fallbrook, was $750,000. This undervalued home received 10 offers and closed escrow for $852,000. A zestimate, in a market like we are currently experiencing, is not able to keep up with what the market is actually doing.
Another notable example of a zestimate that missed the mark is on a property we currently have in escrow. The home was originally built in 1925. Over the years, it has had numerous improvements and additions made to it. In its current condition we would call it a “Country Cutie,” because it is a doll house, a shiny penny, a Thomas Kincaid painting. The multiple zestimates gave it a value under $600,000, due to the age of the original building and perhaps because the algorithm didn’t take into account the additions and upgrades. The property is in escrow with multiple back-up offers above $923,000.
Let me tell you about two new listings. The first property received zestimates between $650,000 and $750,000 depending on the syndicated site. The owner told us that he had recently put a new roof on the home and new decking around the property. He has had a tenant in the property since he purchased it in 2003. At face value the zestimates should have been fairly accurate.
Most homes purchased in the early 2000’s have experienced appreciation in the neighborhood of three times the value of when it was purchased, presuming that the home has been maintained and updated over the years. In the case of this property, other than the roof and the deck, nothing had been maintained, updated, or improved. The home has absolutely no landscaping, the exterior paint is tired, and it has no drive-up appeal. In its current condition, an anticipated selling price is somewhere between $580,000 and $600,000.
The second property reports living space of 3261 square feet. It was built in 2009 and sits on 2.56 acres. The zestimate software program, however, does not know that there is additional living space of 1200 square feet, that there is an attached RV barn, and that the appointments and upgrades in the home are exceptional. The truly funny thing about the zestimates is the disparity between the sites. On the low side, one zestimate was $1,055,000 and on the high side, one zestimate was $1,509,500.
The thing is, our personal experience says that both zesitmates are considerably lower than the market value of the home. Personal knowledge of the marketplace provides the additional perspective to value the property correctly. In real estate, 1 + 1 is not always = 2.
Every seller and every buyer we work with is familiar with what their home’s zestimate is. Knowing that number is a great starting place when determining the true value of the property. But a zestimate is not the gold standard. Some companies are using a zestimate to seek out sellers who want a fast sale. They offer the seller the zestimate price, sometimes adjusted for major repairs needed to the property, and the seller closes escrow with this company in under 10 days. This would be incredible, if the zestimates were more reliable.
Don’t be fooled by an algorithm being more accurate than an experienced Realtor. The nuances of custom homes are specifically what make values in Fallbrook and Bonsall more challenging to determine. A professional, experienced, local Realtor, understands the data, they understand the algorithms, they understand the market conditions, and they understand the nuances within the distinct neighborhoods and the custom homes in those neighborhoods.
Remember 1 + 1 does not always = 2. You’ve worked hard to gain equity in your property, don’t let a zestimate be your guide. Hire a Realtor and enjoy your well-earned equity.
Kim Murphy can be reached at [email protected] or 760-415-9292 or at 130 N Main Avenue, in Fallbrook. Her broker license is #01229921, and she is on the board of directors for the California Association of Realtors.