Recently, I received a call from a woman who has been thinking of selling. She said, “Robyn, I need to hurry up and sell because the housing market is going downhill.”
I replied, “Well, I am working with several buyers right now and they’ve all been in multiple offer situations thus far in 2023, so I’m not sure that’s accurate. From what I’m seeing, prices are holding or increasing. Where are you getting that information?”
She replied, “Redfin says that my value is $600K and when we met in the fall, it was $725K.”
“You do realize that’s based on an algorithm, not actual comparable sales, right? They’re probably pulling in a sale or two that have closed recently, but that aren’t in as good of condition as your property. Have Redfin or Zillow ever actually been inside your home to see its condition?”
“No, and that’s a good point. I never thought of that.”
And that folks, is the problem with relying on online estimates to determine the value of your home. In this blog I’m going to break down why online estimates of value are complete nonsense here in Texas, and how you should go about determining a more accurate market value for your property. You’ll want to read all the way to the end, even if you’re not thinking of selling, because this information can also help you determine whether or not the market value assessment that you receive from the appraisal district is an accurate basis for your property taxes. Afterall, everyone wants to sell for as much as they possibly can, and pay as little tax as possible.
Home Sale Prices Are Not Publicly Disclosed
Sale prices of real property (commercial or residential) are NOT publicly disclosed because Texas is a non disclosure state.
What’s real property? The term “real property” refers to land and improvements on it, like buildings and other structures.
What’s a non disclosure state? Texas is one of about a dozen states in the US where there is no law requiring the sale price of real property to be disclosed to the state or local government, or local appraisal districts. Period. Bottom line.
The only place where home sale prices are disclosed is the local Multiple Listing Service (MLS). The only people who have access to that information are those who pay to have access to it, like local realtors and appraisers the appraisers who evaluate your home when you’re getting a loan or refinancing.
Where Do Online Entities Get Their “Info”?
So where are these online entities getting their information to ascertain the “value” of your property?
Well, I am not privy to their intellectual property or algorithm, but I can tell you that list prices for homes are publicly disclosed. Most realtors push their listing data to consumer websites like Redfin and Zillow and even the websites for our own brokerages. It’s part of how agents market or raise awareness about properties for sale. So a seller’s list price is public information.
In addition to list prices being publicly disclosed, so are mortgage amounts. When a home buyer closes on a property in Texas, and has acquired that property with financing, the mortgage amount is included with a batch of information that’s sent to the county. It’s my guess that these websites are looking at list prices and mortgage amounts to develop their assessment of the sale price.
What’s Left Out of Their Valuation?
Any homes that sold for cash. Obviously there is no mortgage amount if a buyer uses cash to purchase their home.
Second, and probably most importantly, what these websites do not know is the actual condition of your home or any of the homes in your neighborhood, because they’ve never set foot in them.
Why would you rely on someone or some thing, who has never even seen your home, to dictate the market value of it?
Every Day Example
Two homes next door to each other, with the same square footage, bedroom and bathroom count, and built the same year. In the real world, not the online world, these homes can vary in value by hundred of thousands of dollars if one has been completely updated and the other has never been touched.
The websites that consumers are relying on do not differentiate between the two. And that is exactly what happened with the example that I used when I started this blog.
The site that my client was referring to, in order to determine the “market value” for her home was pulling in estimated sale prices from properties that did not even compare to the improvements and updates that she had put into her home.
How To Get an Accurate Value
Contact a realtor who will actually visit your home to observe its condition, and then pull the most recent sales from the multiple listing service that are truly comparable. And, if you work with me to do this, I will actually put together an electronic presentation that shows you the sales that I pulled from the MLS so that you can see all of the details, (photos too) for the most comparable sales.
Want to know the value of your home?
If you have questions about market value of your home, or any of the other content I post online, or send via email, please reach out to me! I am happy to answer your questions as they relate to your specific situation.
Have a great day!