How Do I Know What My Home Is Worth?
Thinking of selling? Want to refinance your home?
If so, the first thing you're probably asking yourself is, how much is my house worth?
There is no shortage of online home value tools in today's digital world, but how accurate are they?
To calculate the actual value of your home, you must consider a broad spectrum of factors. Here's what you need to consider, plus how to get started!
How Much Is My Home Worth?
Wondering what your house is currently worth?
The quick answer is: whatever someone will pay for it in an Arms Length Transaction.
A more comprehensive answer will depend on several variables, including what's happening in the Central Ohio housing market, particularly in your city or neighborhood. In today's seller's market, the demand for houses is high but supply is near record lows. Due to these market conditions, there's a high likelihood that what your home was worth a year or two ago may no longer represent its current value.
When supply and demand are not balanced, values become more of a challenge to determine.
So, how do you find out what the value of your house is?
You lean on tools and industry experts to paint a clear picture. This leads us to our next question — is one more favorable than the other? How accurate are online valuation tools, and how do they stack up to working with a local industry expert?
How Redfin and Zillow Value Your Home
If you search "how much is my house worth?" online, you will get dozens of hits, showcasing the top home value estimators. According to NerdWallet, 22% of homeowners in the United States determine the value of their home using this method. The technical term for these tools is "automated valuation model."
Two of the big players in this space are Redfin and Zillow.
These tools leverage the data available from public records, such as tax assessments and property transfers. Using mathematical modeling, these tools aim to predict the value of your home based on the most recent listing prices and sales in your area.
Both companies are transparent concerning their national median error rates. For example, Redfin reports that its current median error rate is just 2.72% for houses for sale and 6.79% for off-market homes. This means that the estimate is within these margins of error half the time. So, for when a home is on the market and sells, Redfin's estimate will be within 2.72% of the sales prices half of the time.
In comparison, Zillow reports that its national median error rate for on-market homes is 1.9%, and for off-market homes, that error rate increases to 6.9%. Zillow used the same home valuation model in their homebuying program called Zillow Offers, which was halted in November 2021 leading to it laying off 25% of its employees.
The issue here is that a median national error rate does not represent your local market. So, the error within your local real estate market may be better, or far worse, than the advertised national medians.
The Pros and Cons...
Both Redfin and Zillow are easy-to-use and convenient, but the price you pay for that is low accuracy. There have even been instances where homeowners (unsuccessfully) sued Zillow because the estimates were so far off.
Both of these companies warn users that the estimates provided should be used only as a starting point. The figures provided are not appraisals — they are simply algorithm-based computer estimates. They should certainly not be used as part of a bargaining strategy when selling or buying a home.
They are good "estimate tools" — they are not all-knowing tools.
- Tools like Redfin and Zillow are good starting points, giving you some insight into what you can expect from your journey ahead.
- The figure you receive can then be discussed with a local industry expert to determine if you can ask less or more depending on a more comprehensive analysis.
- Online home value tools only consider certain factors because they do not often have access to the same information that a local real estate database has. This lack of information creates skewed results. This means you will only get a partial estimate, resulting in a figure that isn't accurate.
- These tools are not ideal when dealing with fast-moving markets, especially when homes are selling in a matter of days. That is why an estimate on Redfin may significantly differ from the one you got on Zillow.
Your County Assessor's Office
Some people go to their local county assessor's office to determine the value of their home. That makes sense if you're calculating the value for property tax purposes, but it doesn't usually work for your home's market value.
In Ohio, county auditors conduct a full reappraisal of real property every six years and update values in the third year following each sexennial reappraisal. So, every three years, the county is reviewing your property's value.
Since real estate values are changing monthly, weekly, and sometimes daily, you can see why this isn't always a reliable information point.
Nothing Beats Working With a Local Real Estate Agent
Online home value tools can provide a good starting point, allowing you to get a ballpark estimate. Your county tax assessed value is useful when determining, you guessed it, your house's taxable value. However, there isn't any substitute for a local industry expert. Unlike most third-party real estate sites, local real estate agents have access to the information you need to ensure greater accuracy. They can also walk you through what experts are predicting for the near future, which will aide in your decision making.
Your local real estate expert will dive deeper than your county government, Redfin, or Zillow, providing you with a comparative market analysis. They will also be able to give you a more accurate value based on when your house was last renovated, the condition of the property, the type of view you have, the amount of natural light inside, and the list goes on. These are the type of key variables that online estimate tools and the algorithms responsible for estimated values miss.
I like to say that the comparative market analyses I put together for my prospective clients are based on 90% objective material, and 10% based on what I've been seeing in the local market.
How Can I Get a More Accurate Home Valuation?
Online automated home value tools are just one piece of the home valuation puzzle.
If you want the most accurate estimate, you'll want to lean on a local real estate expert.
Ready to talk about the value of your home?