Question: How do I know how much my home is worth? Can Zillow, Trulia, or the county tax assessment give me an idea of value?
I have answered this question numerous times over the last few weeks. As the real estate market continues to heat up, it seems that sellers fear underpricing their home and buyers don’t want to overpay. A hot “seller’s market” can be rather tricky — and by tricky, I mean emotional. After patiently waiting for seven years, sellers are ready to maximize their value and take advantage of the limited inventory. Due to the limited inventory, buyers are now being forced to compete with other buyers for properties. That means bidding wars, folks, so emotions are running high.
In this emotional time, the same real estate rules still apply. A home is only worth what a buyer will pay for it and what a seller is willing to sell it for. After that, if a mortgage is being obtained, the buyer’s lender will then appraise the home to ensure that it is worth the purchase price. In this appraisal, the appraiser will use comparable closed sales (from the last six months) and pending sales in the immediate area to establish a fair market value for the home. That value must be equal to or greater than the sales price. These closed and pending sales are the most accurate system for establishing “fair market value.”
Now for those two dirty “six letter words”: Trulia and Zillow. As a Realtor, I love the syndication (online exposure) that our listings receive on websites such as Trulia and Zillow. The more exposure our sellers receive the better in my book. However, the valuation models on Trulia and the “Zest-imates” on Zillow are HIGHLY inaccurate. Kansas and Missouri operate as “closed record” states, meaning data on sold properties is not shared with the open market. That data is only shared with the Realtor community and tax entities. In some parts of the country, Trulia and Zillow are highly accurate — but those are areas with “open record” laws. In closed record states, Trulia and Zillow use tax appraisals for valuation. Again, in our market, the tax appraisals are inaccurate. Some are higher than market value, some are lower.
Think about it this way: When was the last time a Johnson County or Jackson County tax official was actually in your home? NEVER. The counties do their best to keep up with the market, but the market is a moving target.
In a lot of ways, the real estate market is like the stock market. Just as a stock can be worth a certain value one day and a different value the next, a home’s value can do the same. Sold comparables around your home can bring the value up in an inclining market, and distressed properties (short sales and foreclosures) can bring it down. It takes a full-time professional Realtor to confidently interpret market value. You just can’t beat the first-hand experience of being in and out of homes all day.
Photo by Truliavisuals