When buying or selling a house, many people check the estimated value of the property on websites like Zillow or other real estate platforms. Let's explore whether this price is truly reliable.
The Three Little Pigs
You're likely familiar with the story of the Three Little Pigs – one builds a house with straw, one with wood, and the last one with bricks. If these three houses were built in the same neighborhood, on the same street, and with the same size, would their values be the same?
Certainly not. However, online platforms often display similar estimated values for houses in the same area.
Even if houses are built by the same builder in the same neighborhood, their values can differ over time due to variations in materials, appliances, interior decor, and overall maintenance. Well-maintained homes tend to have higher values.
Algorithms used by online platforms like Zillow calculate estimated values based on the prices of recently sold houses in the surrounding area, considering factors such as location, size, and shape. However, online estimates may struggle to account for the specific details mentioned earlier.
As a result, significant variations can occur between different websites. Furthermore, even identical houses in the same block can have different prices due to their specific locations. Exploring newly built developments by builders reveals varying prices for identical houses, influenced by the quality of the land.
Online platforms that assess land quality based on satellite photos also face limitations, contributing to discrepancies in estimated values compared to actual sale prices.
In conclusion, it's advisable not to place too much emphasis on online estimated values. Instead, consider them as rough guides, acknowledging a potential deviation of around +/- 10%. Approach them with the mindset of a general reference rather than an absolute indicator."
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