An old saying in real estate sales is “your land is worth what someone is willing to pay for it.” This suggests that there are many different factors, some arbitrary that go into the valuing of land.
In today’s internet driven world, many look to industry leader Zillow for real estate information. But the questions is, “Should I Trust Zillow to Determine My Land Value in Tennessee?”
No.
Don’t trust Zillow for valuing your land. Here’s why.
Should I Trust Zillow to Determine My Land Value in Tennessee
Zillow’s Margin for Error
Zillow has been reported to average anywhere from 18 to 20 percent higher or lower in property estimates. There are even reports of estimated values on Zillow climbing in declining market areas.
Let’s think about this for a second. For a $50,000 lot of land, a 20 percent deviation is $10,000. For higher-priced markets, a $100,000 piece of land could see unrealistic estimations varying from $18,0000 to $20,0000 or more. That’s a huge difference in pricing.
Looking at Zillow estimates could discourage potential buyers who might think a parcel of land is well out of their price range while giving sellers an unrealistic idea of a selling price point. In the end, this is the starting point of many disagreements land owners have with selling agents regarding properly pricing land.
Simply put: land owners see the price on Zillow and think that is the starting point for their land.
How Does Zillow Create Estimates
Zillow named its proprietary estimating tool a “Zestimate.” Even with all the pricing factors included in the formula, there is still a high margin of error because Zillow isn’t actually looking at your land. Let’s take a further look…
The proprietary formula looks at the market pricing in the area. It will factor in the size of the land parcel and its features. However, even Zillow will say this is a starting point for a true valuation of your land and should not be considered an appraisal or true value.
The reason they say this is the information Zillow utilizes is dependent on accessing public records and user input such as realtor sales. However, Zillow cannot discern if your land is raw hilly undeveloped woods or flat clear land that is ready to build.
Additionally, Zillow doesn’t discern community pockets. These are very common where you can have more developed neighborhoods near undeveloped ones. These “pockets” can skew or be skewed by data of neighboring areas.
The More Accurate Model
Any professional realtor will tell you that pricing land to sell requires a full understanding of the land itself, the location and current market trends in that area. In fact, most realtors look at Zillow pricing with a bit of disdain because it does make pricing and managing realistic client expectations more challenging to deal with.
A realtor will take a look at sales in the pertinent area, creating a radius based on your pocket rather than an entire zip code. He will then compare your land based on size, characteristics and features to those parcels of land that were recently sold, thus appraised, in the previous 3 to 6 months. This range is contingent on how hot the real estate market is in the area.
He will then compare this information to existing land on the market, looking at how your land compares to what else buyers are seeing on the market. After all, if yours is less developed land being sold next to more developed land, you might not be able to get the same price per acre as the other.
Additionally, realtors will consider whether it is a buyer’s or seller’s market. If you want to create a frenzy with a lot of eyes on your property in a seller’s market, you can under price the land and let the bidding begin. This tactic works in many markets including Tennessee.