WHAT BUYERS NOTICE IN THE FIRST 30 SECONDS

Home School Podcast, Episode 4. Liz Sandwick and Tom Sommers of Coldwell Banker Realty talk through why instant home value tools miss the mark and what actually sets the price of a home in Lakeville and the Twin Cities south metro.

Almost every seller I meet has already looked up their home online before we sit down. That makes sense. It is free, it takes ten seconds, and it gives you a number. The problem is that the number often becomes an anchor, and a wrong anchor can cost real money when it is time to list.

In Episode 4 of Home School, Tom Sommers and I pulled back the curtain on automated home valuations. Here is what we covered, with a few Lakeville numbers added so you can see how this plays out in our market.

Why do online home values vary so much from one website to another?

Each website runs its own formula. They pull from different data sources, weigh features differently, and refresh on different schedules. That is why the same Lakeville home can show estimates tens of thousands of dollars apart depending on which site you check.

It is tempting to average the three numbers and call it close enough. Averaging three guesses does not produce an accurate answer. It produces a fourth guess.

What are the limitations of automated valuation models?

An automated valuation model (often called an AVM) is the software behind instant home value tools. It estimates value from tax records, prior sales, and nearby transactions. Here is what it cannot do:

• See inside your home. It does not know if you updated the kitchen, finished the lower level, or replaced the roof and windows.
• Judge condition. Two homes with the same square footage can sell far apart based on how they have been cared for.
• Read the lot. Backing to trees or a pond is different from backing to a busy road, and the data often treats them the same.
• Keep up in real time. Public records trail the market, so the most recent sales may not be in the model yet.

Zillow publishes its own accuracy figures, and for homes that are not listed for sale, the nationwide median error has been reported at roughly 7 percent. On a $500,000 home, that is about $35,000 in either direction, and by definition half of estimates miss by more than that. Estimates tighten up once a home is listed, largely because the tool starts leaning on the list price. That is the version you see after the pricing decision has already been made, not before.

How do sold comparable homes set the foundation for value?

Closed sales are the most honest data in real estate because they show what buyers actually paid, not what someone hoped to get. When I prepare a Comparative Market Analysis (CMA) for a Lakeville seller, I start with recent sales of homes that match yours as closely as possible: similar size, age, style, and location.

From there I adjust for the differences that matter, like updates, condition, garage size, and lot. Pending sales show where the market is heading, and active listings show your competition. Active listings are asking prices, though, so they help with strategy but they do not prove value.

What is an absorption rate, and why does it matter for pricing?

An absorption rate tells you how fast the market is using up the homes available for sale. The simple version is months of supply: take the number of homes for sale and divide it by how many sell each month. The lower the number, the more pricing power sellers have. As a common rule of thumb, markets under about four months of supply tend to favor sellers, and markets over six months tend to favor buyers.

Here is the part no online tool shows you: that absorption rate is different at every price point and in every neighborhood. A move-up home in one Lakeville price range can be moving quickly while a higher-priced home a mile away sits. Pricing strategy has to be built on the absorption rate for homes like yours, not the city average.

Why shouldn't you price your home based on what a neighbor is asking?

Your neighbor's list price is an asking price, not a sold price. It might be too high, and if it is, that home will sit while buyers use it to make yours look like the better deal, or the other way around. Their home may also have a different layout, different updates, or a different lot.

The better question is not what the house down the street is listed for. It is what similar homes have actually sold for, how long they took, and how much competition you will face the week you list. That first week matters more than most sellers realize, which Tom and I dig into in Episode 2 on pricing strategy.

What an accurate home value looks like

A real valuation combines the data with a walkthrough. I look at your home in person, pull closed, pending, and active sales from the MLS, check the absorption rate for your price range, and then recommend a pricing strategy built to get strong activity in the first seven days. Every home is different, every neighborhood is different, and the market keeps moving. Your number should reflect all three.

If you want to know what your home is worth today, you can request a free Lakeville home value analysis. It is no obligation, and you get a real answer from a real person.

Serving Lakeville and the Twin Cities south metro

I help sellers and move-up buyers in Lakeville (55044) and across the south metro, including Apple Valley, Farmington, Burnsville, Rosemount, Prior Lake, Savage, and Eagan. For clients moving out of the area, I connect them with top agents across the country who I trust to take the same level of care.

About the hosts

Liz Sandwick, REALTOR®, GRI, e-PRO is a Lakeville-based agent with Coldwell Banker Realty. Licensed since 2011 and living in Lakeville since 2016, she has closed 190+ transactions and focuses on sellers and move-up buyers across Lakeville and the south metro.

Tom Sommers is a REALTOR® with Coldwell Banker Realty serving Lakeville and the surrounding area. You can find every Home School episode on Tom's Home School podcast page and on the Home School YouTube channel.

Liz Sandwick, REALTOR® | Coldwell Banker Realty | 17305 Cedar Ave, Lakeville, MN 55044 | 952-491-3685 | Liz@CBRealty.com
Market data from NorthstarMLS, deemed reliable but not guaranteed. Equal Housing Opportunity.