Jan 08, 2010

Home Sellers Beware of Buyers Who Believe in Internet Price Estimates

The January 2010 issue of Smart Money magazine has a fascinating article on the impact that Internet sites such as Zillow have on negotiations over home prices.

When websites such as Zillow first rolled out their databases of comparable home prices -- where you can simply type in an address and get a "Zestimate" of the house's worth -- most industry experts thought it was cute, but essentially irrelevant.

No database that pulls together public sales records can, after all, incorporate knowledge of street desirability, views, charm, and other such factors that play into a buyer's willingness to pay more or less for a, say, "2 bedroom 1 bath." And pricing houses isn't an exact science, but depends on buyer psychology -- what the market will bear.

But what if buyer psychology is being molded by websites showing comparable values, so that the online data becomes a self-fulfilling prophecy? That's in essence what the Smart Money article is suggesting, with stories of deals going awry because the buyer insists that the house is worth no more than its Zestimate -- or being suspicious when the Zestimate is far higher than the list price.

What's a home seller to do? Start by looking at how your house fares on the online databases, then at what you can do to change it. Zillow does allow sellers to enter certain data about their home, such as renovations and home features, and add some descriptions to entice buyers. (You need to register, then enter your home address to get to its "detail page," then look for the tabs allowing you to edit the data.) I just did it for my house -- with no immediate changes to my Zestimate, but they warn that it may take some time. I'll check back in when I find out!