Home value is interesting because it is derived from both tangible and intangible features, and together they usually add up to a lot.
Tangible features are easy to get a handle on; they include things like square footage, the number of bedrooms and bathrooms, lot size, year built, homeowner dues, garage size (or lack thereof), and home style.
Intangible features are harder to pin down just by looking at a home’s statistical information, however, and they play a huge role in adding to or detracting from home value. This is why online home value estimators can be so deceptive.
Two Homes that Look the Same Online
Consider two homes of the same age and style on the same street, each with 4 bedrooms, 2.5 baths, around 2400 square feet, a two-car garage, and on 8000 square foot lots. Statistically they look exactly the same, so an online value estimator like Zillow would price them very similarly.
However, here are the intangible features that would make one worth much more than the other:
- High ceilings in one versus low ceilings in the other.
- Good interior light versus poor light.
- Well-kept neighboring homes on either side versus a neighboring home that is rundown and has an overgrown yard.
- A private back yard versus one that has an apartment building looking down over it.
- An open, flowing floor plan versus a choppy, closed-off floor plan
- A flat driveway versus a steeply sloped driveway.
- A large master bedroom versus one that feels too small for the home.
- A large kitchen with good counter and cupboard space versus a cramped kitchen.
- A kitchen that is open to the family room versus one that is closed off.
- A home backing to a quiet area versus one that backs to a busy street.
These two homes could be directly across the street from each other and are virtually identical in terms of tangible features, but one is worth far more that the other. There’s no way to know this without actually walking into the homes, which is why online property value estimators, while interesting, are by no means consistently reliable.
The same goes for agents who don’t actually show their homes to their buyers, or who write up offers without seeing the home in question. There’s no way you can develop a good feel for what constitutes market value unless you actually take the time (years of it) to walk in and out of homes with buyers. After each one you hear from them why they are going to buy the home (despite those certain things they don’t like), or why they aren’t going to buy it (even though it has certain features they do like), and over time you become an expert in what buyers want – in other words, in resale value.
I’m actually a fan of websites like Zillow – generally, the more information, the better, I feel, as long as it’s accurate and interpreted correctly. It’s just important to understand the limitations of whatever you’re using as diagnostic tool, otherwise the information can stop being helpful and start leading you to the wrong conclusions.