The Price is Wrong : What Zillow & Trulia Are Saying About Their Automated Valuation Models (AVM)

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Pricing your home correctly is the single most important thing you need to do when you decide to list your property for sale. With the correct pricing you will achieve the desired result of selling your property and selling it quickly. But if the Price is Wrong then the sale of your home will go in a different direction, and probably not the direction you want!

Read also : Selling Your House, The Price is Right

If you are listing with a Realtor®, your Realtor® will provide you with a Comparative Market Analysis (CMA) and help you determine a sale price.  If you are selling For Sale by Owner you can request a free CMA or pay for an appraisal. You can also opt to price it yourself using an automated valuation model (AVM) such as those provided by Zillow and Trulia, although this is not recommended and here is why…

The Price is Wrong

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AVMs are flawed and relying solely on them can send you wildly up or down in the wrong direction. Zillow CEO Spencer Roscoff unintentionally proved this point when he sold his home for 40% less than his own company’s Zestimate. In all fairness though, not all Zestimates are not that far off. But what if yours is?

Flawed Algorithms

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Zillow has a proprietary algorithm but it is not perfect.

Zillow states that they use a proprietary formula to determine the value of a home. The formula according to Zillow Chief Analytics Officer Stan Humphries is not able to account for factors such as unusual lot size. “We haven’t fully cracked the nut on that one”, Humphries commented regarding the inaccurate Zestimate of Roscoff’s home.

Zillow’s website states clearly that the Zestimate is not an appraisal and that their AVM should be the starting point of a conversation in pricing a property but not the final word.

“The Zestimate® home value is Zillow’s estimated market value for an individual home …It is a starting point in determining a home’s value…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…” Read more…

Trulia’s statement about Trulia Estimates echoes the same sentiment :

“A Trulia Estimate is an approximate calculation of a home’s market value. It is not an appraisal…To determine the value of your home, we recommend you also talk to a real estate agent in your area…” Read more…

Limited Data

In using AVMs the data which they use can lead to varying valuations of the same property. In the case of Zillow’s Zestimates for Seattle where Roscoff’s home is located they only have access to public record data and not to MLS data. As a result the Zestimate produced was not made up of all the available data.

Lost in Translation

If you have ever had to use a translator to translate something you know that they can either get the translation right or terribly wrong. The reason translators produce translations that are wrong is because they are automated and cannot account for factors for which humans can. This same concept is applicable to AVMs.

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What’s this view worth? To a computer, nothing. 

Computers simply cannot translate the value of views, location or improvements on a home into something quantifiable. This however is something which humans can do and which is critical when pricing your home. The mantra for selling is the Price is Right, so in order to price it right you need to rely on a human at some point to get it right!

Getting Human Help

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Connect with a local Realtor® to get a personalized CMA.

While pricing your home is not a simple undertaking, the good news is, getting human help is! The two ways you can get human help are :

  1. Request a free CMA from a Realtor®click here to request a free CMA
  2. Pay for an appraisal. Contact a licensed appraiser and have them to an appraisal on your home.

Getting the Price Right

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AVMs are a great starting point for a discussion on how to price a home. They are fallible though and it is important to get the opinion of a professional when setting the sale price of your home. Getting the price wrong will have a number of negative consequences for you as the seller. Conversely, when the price is right your goal of selling your house is within reach. Getting the price right is not hard to do and is so important, so why not just do it and get the price right?

If you can think of one good reason why not to do it, please leave your thoughts in the comments section. Otherwise, get your CMA done today!

Désirée Ávila was an award winning teacher for 10 years and has a doctoral level education in Educational Technology. Désirée is now a licensed Florida Realtor and committed to a high-level of professionalism and to helping others with their real estate endeavors through education.

To contact Désirée click on the link below or contact her at 954-993-4246 or by e-mail at desiree@desireeavila.com

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