Local Realtors can better evaluate the worth of a home
Q: I’m buying a house and I’m trying to figure out how much it is worth. My Realtor has shown me the most recent sales from the multiple listing, but Zillow says something really different about the value. How can I figure this out? I don’t want to overpay.
A: A lot of people rely on websites like Zillow and Trulia to determine the value of a house and, sadly, it’s a big mistake. It seems as though the sites take into account all the sales in the area and come up with an average based on what’s selling around them. In extremely broad strokes, this might tell you what a house is worth, but it’s generally very inaccurate and can portray the value of a house as much higher or lower, depending on what’s happening in the area.
Let’s say you have a house in a very affordable area with much older homes. But the house in question is in a small subdivision that was recently built and has custom homes with lots of special features. A website like Zillow or Trulia doesn’t know this is a unique house that might have comparable properties in the immediate area. Instead, it takes the average of what’s sold in the larger area and will drastically undervalue the house in question. This can also happen to a house that needs a lot of work, but is in a more expensive area.
That is why it’s important to have an actual person come up with the value. It’s still based on what’s been selling in the immediate area. But it allows for human judgment, which is critical when determining the value of a house. It allows the person to consider condition, upgrades, age, size of the lot, size of the house, style and many other details that might influence value.
So, all of that said, your Realtor is probably going to be the most accurate gauge but, if you’re nervous, rest assured (if you’re getting a mortgage), you’ll also have an appraisal done, which will confirm the purchase price is appropriate. The appraiser will receive a copy of the contract and therefore know what you’re planning to pay, but they will also do an impartial analysis of the house and make sure you (and the bank) are not overpaying. If you’re paying cash for the house, you can still get an appraisal done.
Either way, enjoy the house, enjoy the process and know that, when it’s all done, you’ll be living some place you love and building a valuable asset for your retirement.