A few years ago, I was pitching a listing proposal to a group of siblings and after reinforcing the fact that I will list any home at any price point, as emotion and motivation are primary drivers, I suggested $10.5 as the ceiling practically speaking while bracing them to expect an offer in the $9 million range. Offended if not taken aback, one of the siblings instantly recoiled noting that Zillow had the property valued at $14.5. Whereas this was hardly my first rodeo, I noted that Realtor had assigned a value of $8.75. Several days later the listing broker of choice was revealed and as I was thanked for my time. Two weeks later the house would hit the market at $13.99. Three months later it would reduce to $12.99. After a thirty day soak, it would drop to $11.99 and two months later it would mercifully go under agreement for $9.65 million.
This exercise was a direct byproduct of manufactured expectation. Zillow’s value machine discounts several key variables that get sellers to a realistic opinion of value and by extension opinion of list. I consider opinion of list to be the outcome of the opinion of value when folding in motivation and emotion.
Zillow and alternate marketing machine calculations are comparatively generic and predicated on bed counts, zip code and the like. Here on Cape Cod, assigning a bonafide value to a home is a skillset that will not be taken over by AI anytime soon.
The unknown –
I recently put a $2.1 million listing under agreement after 140 days on the market and more than 65 qualified and otherwise enthusiastic buyers. The property was considered pre-existing non-conforming which in layman’s terms, in this case, meant that since the 50’ buffer from the coastal bank ran through the home’s kitchen and living room, we were deed restricted and as such could not add a square inch of living space. If I had a dollar for every garage or pool inquiry, I could have paid for it twice in cash. Zillow, analyzing from the cloud, pulled up a few homes with a water view, three bedrooms and +/- 2k square feet and slapped a number on it. An interesting aside. When uploading a listing to MLS, I always take a screenshot of Zillow’s best guess before executing as the number will instantly adjust to the opinion on the ground once the listing goes live.
Conversely, and for every encumbrance, embedded value may be missed and the genuine value misrepresented as deeded water access, dock rights, community amenities and the like are not factored into generalities.
Condition – Zillow is entirely unaware in regard to interior condition or grade of finishes from one home to the next. Boots on the ground will flesh out improvements and deficiencies and those with almost three decades of construction experience such as myself possess the ability to take a deeper dive to reveal the pluses and minuses beyond aesthetics.
Neighborhood – Considering the lower and outer Cape, it is remarkable to imagine that neighborhoods will tilt the scale despite being confined to +/-25 square miles and wrapped in water from one town to the next. In addition to my real estate brokerage, I manage 200 seasonal homes and not long ago, I had two appraisal requests from two owners in Orleans. Our first stop was a two bedroom one bath cottage on exactly ½ acre in coveted and traditional E Orleans. The second was on the bayside of the tracks offering an additional bedroom, half bath and two car garage on .45 acres. Despite knowing the answer, I would ask the appraiser to remind me again as to why E Orleans would pencil out vastly higher than the bayside and the predictable answer behind the smirk was “zip code!” That reality is not in the Zillow value machine. These properties are within 3 miles of one another.
Future consideration – Zillow may not be aware that Anytown USA just purchased the pristine woodlands next to your future dream home where a mixed use plaza will be completed within the next five years.
Districts and zoning – You may not aspire to convert your newly purchased home into a mixed use property but the fact that it is located in an area where that optional usage is permitted simply holds greater value especially from a resale perspective. Zillow isn’t taking a deep dive into such intangibles.
Market trends – Cape Cod’s supply will always fall short of demand and as such, I’ve never been one to subscribe to the notion of a seasonality regarding Cape real estate. If there was such a downtime, I would begrudgingly consider it to be November and December as most are preoccupied with the holidays though having listed and sold in this window routinely, I’m not necessarily buying what I’m selling. When COVID descended upon the world, off Cape real estate quickly became an endangered species while Cape Cod real estate saw a 100 year boom as buyers eager for a fallout shelter were willingly and consistently overpaying by upwards of 20%. What’s more, the volume of cash buyers, in spite of favorable rates, made the pre-approved segment look as though they were bringing 600 credit scores to the table.
Emotion and motivation – This would apply to potential sellers that gravitate to these general third party sites that base comparisons generated almost entirely on lot size and bed and bath count. Emotion and motivation is also why I counsel sellers to turn a blind eye to active listings and price points. If you believe your home is on par with the Jones’, recently listed property but feel as though they’re too low, you have to consider circumstance. Divorce, medical expenses and college tuition are common drivers that may compel owners to lean into a timely sale. On the other side of the street, entirely common to the lower and outer Cape is the complete lack of an inherent need to sell. Comparative affluence not only negates the need for a fire sale when circumstances intervene but oftentimes, status and emotion will drive a list price to the glass ceiling as these sellers do not have to sell and if they are parting with a generational property or long play, they’re getting their number and are beyond content to ride the market for years. When considering how motivation and emotion drive numbers north and south in addition to living in a market where a disproportionate number of homes are sold for $1 to family typically in the form of a trust, simple addition and division does not yield a clean picture of per unit cost.
Scores of real estate sites offer “free” valuation and upon entering your address, you are immediately redirected to one of the big marketing machines that will spit out an arbitrary number based on local and regional generalities. I offer a no obligation valuation based on the exact same process I utilize with qualified sellers and as you might imagine, that criteria looks well beyond lot size and bed counts.
