Quote:
Originally Posted by CoachKandSportsguy
Zillow is a math algorithm, it will have its flaws due to limitations of publicly available data, and the data attribution, along with the significance to the price. However, in a place like TV where the houses are very similar, and there are many sales occurring, the algorithm is very good at predicting FMV, fair market value. However, that may not reflect the actual sale price due to the seller's desire for speed or for value, or for a house attribute not available for the algorithm.
I have seen Zillow off by a large margin 50% due to the condition of the house. I have seen RE appraisers interpret nearest comparables as the closest in distance, using a two mile radius, yielding a high valuation. I have seen real estate agents want to list low to be sure to get people into the house. I have seen bank R/E appraisers approve sales prices that are obviously too high, but without damning information, agree with the accepted bid to the sellers asking price.
There are humans, emotions, incomes and math involved, and that mix seldom yields unanimous agreement at any time, and is reasonable for a starting point most times, and egregious in places where the data is sparse.
I had to build my own pricing model similar to Zillow to be satisfied with the FMV of my parent's house due to 100K differences in FMV estimates. My model came in high for a known data/math reason, but it also came in at 85% explanatory, with 15% unexplained with the public/nonpublic data. The model was good enough to convince a buyer's R/E agent to pay 10K less that the model's FMV, which i took without hesitation. . . and the buyer's agent had access to the model output as one of the two selling real estate agents I used in my selection process.
its your money, spend it wisely if you don't have alot of it.
|
I also use algorithms. The matrix may drop differently, but data is only so accurate. One person puts in a pool, or pavers, or skylights, or a fireplace wall. Another changes to all tile flooring and does closets. Maybe the outside landscape is totally redone, none of which is recorded in county clerk records.
There has to be a standard deviation formula for human interaction verses years living in a place; please let me know if you ever come up with that. Maybe the product of medians and division of years? But again, some people do a lot, others just leave the home as the day they moved in. Neighborhoods do seem to dictate improvements though.
I still wholeheartedly endorse contingencies in any contract. Sellers don’t have to sign on the dotted line for them, but buyers have the upper hand because of inventory.