We’re not going to bury the lede here: Pricing houses is absolutely an art. And as such, is best left to those with plenty of expertise and experience with the local market. As in real estate agents, not algorithms.
Look, we get it. We rely on the internet too. It’s no surprise to anyone that shopping for real estate has become heavily dependent on websites and online searches…and the past year and a half of lockdown has only increased how much of the process of home buying and selling is done in front of the computer. Zillow and Redfin have become very adept at offering up home values with just a few taps of the keyboard. We also understand the appeal of spending less on agent commission when using an online company. But keep in mind two important things: first, commission savings at an online or discount brokerage only work out to be about .5 to 1.5% and 2) this can come at a great loss on total net return with an experienced agent as well as service and guidance.
A few interesting numbers to think about:
- More than 90% of those thinking about buying or selling their home start the process online.
- During 2020, Zillow saw a 41% increase in traffic to their sale listings.
- 63% of buyers on Redfin in Nov/Dec 2020 made an offer on houses they hadn’t even seen in person.
- According to a July 2020 survey 36% of respondents said they would buy a house completely online.
- 3-D and virtual tours as part of house listings shot up 500% in February 2020.
- Whether it’s to find a new house or, most commonly, to estimate current home value, quick answers are just a few keyboard taps away. So, it’s important to know just how accurate the information is that you’re getting online.
- Redfin claims their estimates are generally within 3% of the home’s selling price while Zillow reports a median error rate for on-market homes nationwide is 1.9% and 7.5% for off market homes.
We live in an ever-evolving world and a rapidly changing real estate market, and it is precisely for these reasons that experienced real estate professionals should be tagged in when it comes time to value a home. Many factors go into pricing homes, many of which can only be learned from an in-person walk through and knowledge about the surrounding neighborhood. Things like nearby busy or loud streets, an abundance of natural light, room layout or ceiling height really can’t be quantified by an algorithm. Similarly, other tricks for successfully giving a value of a home are simply derived through experience. Currently, we are seeing changes in the market outpace the release of monthly market stats. In other words, available comparables may not be as dependable as they are when the market is slower. In a rapidly changing market, agents frequently rely upon their existing collegial relationships to obtain the most current pricing information before it becomes public record. Can your algorithm do that?
We should also note that home value, list price, offer price, and sales price are NOT the same things, particularly when the market is highly competitive. A seller wouldn’t list right at the price they’d like to sell for just like a serious buyer probably wouldn’t offer the list price. Pricing isn’t simply about landing on a number based on comps, but taking advantage of experience in the industry, knowledge of current market conditions, and tried and tested strategy. Also, keep in mind that online data can be incomplete or incorrect and is not provided for the purpose of price evaluation, as companies like Zillow and Redfin readily admit. Both sites recommend walk-throughs with real estate agents.
TLDR? (We know, we know.) Here is a little comparison of pricing and strategy in action for a few of Scout’s recent transactions.
So, in a nutshell, the Internet is great for research…but it isn’t a replacement for an amazing real estate agent. And amazing is what we strive to be at Scout. Do you have questions about your home’s value or simply want to learn more about what this crazy Portland market is doing? We’re just a click or a phone call away!