Zillow should stick to what it does best. Post listings. The Zestimates they provide are not worth the paper they are printed on…..oh wait they are not printed on paper. Do you think this is harsh? Realtors don’t. Honestly I don’t hate Zillow. But they should not offer information they know is not accurate to the public…..especially since people take this information as gospel. A comparative market analysis can not be generated in 2 minutes……you need to put some effort into it.
When “CBS This Morning” co-host Norah O’Donnell asked the CEO of Zillow recently about the accuracy of the website’s automated property value estimates, known as “Zestimates,” she touched on one of the most sensitive perception gaps in American real estate.
Zillow is the most popular online real estate information site, with 73 million unique visitors in December. Along with active listings of properties for sale, it also provides information on houses that are not on the market. You can enter the address or general location in a database of millions of homes and likely pull up key information — square footage, lot size, number of bedrooms and baths, photos, taxes — plus a Zestimate.
Shoppers, sellers and buyers routinely quote Zestimates to real estate agents — and to one another — as gauges of market value. If a house for sale has a Zestimate of $350,000, a buyer might challenge the seller’s list price of $425,000. Or a seller might demand to know from potential listing brokers why they say a property should sell for just $595,000, when Zillow has it at $685,000. Disparities like these are daily occurrences.
Back to the question posed by O’Donnell: Are Zestimates accurate? And if they’re off the mark, how far off? Zillow CEO Spencer Rascoff answered that they’re “a good starting point,” but that nationwide Zestimates have a “median error rate” of about 8 percent.
Whoa. That sounds high. On a $500,000 house, that would be a $40,000 disparity — a lot of money on the table — and could create problems.
But here’s something Rascoff was not asked about: Localized median error rates on Zestimates sometimes far exceed the national median, which raises the odds that sellers and buyers will have conflicts over pricing. Though it’s not prominently featured on the website, at the bottom of Zillow’s home page in small type is the word “Zestimates.” This section provides helpful background information, along with valuation error rates by state and county — some of which are stunners…..
In Zillow’s own words…the Zestimate is a good starting point as well as a historical reference, but it should not be used for pricing a home. In the long run they suggest talking to a Realtor. Then the Realtor needs to explain why the Zestimate that they love is say $40,000 off.
Is a Zestimate an appraisal. Once again in their own words…..No. The Zestimate is not an appraisal and you won’t be able to use it in place of an appraisal, though you can certainly share it with real estate professionals. It is a computer-generated estimate of the worth of a house today, given the available data. Zillow does not offer the Zestimate as the basis of any specific real-estate-related financial transaction. Our data sources may be incomplete or incorrect; also, we have not physically inspected a specific home. Remember, the Zestimate is a starting point and does not consider all the market intricacies that can determine the actual price a house will sell for. So why look at it?
The disparities vary…..For example, in Manhattan, the median valuation error rate is 11.1 percent — which could translate into a $109,000 disparity on an apartment selling for the median $980,000. In Brooklyn, the error rate is 10.4 percent. In some rural counties in California, error rates range as high as 32 percent. In San Francisco, it’s 11.2 percent. With a median home value of $1 million in San Francisco, according to Zillow estimates as of December, a median error rate at this level translates into a price disparity of $112,000.
Some real estate agents have done their own studies of accuracy levels of Zillow in their local markets. Last July, Robert Earl, an agent with Choice Homes Team in the Charlottesville, Virginia, area examined selling prices and Zestimates of all 21 homes sold that month in the nearby community of Lake Monticello. On 17 sales, Zillow overestimated values, including two houses that sold for 61 percent below the Zestimate.
In Carlsbad, California, Jeff Dowler, an agent with Solutions Real Estate, did a similar analysis on sales in two ZIP codes. He found that Zestimates came in below the selling price 70 percent of the time, with disparities ranging as high as $70,000. In 25 percent of the sales, Zestimates were higher than the contract price. In 95 percent of the cases, he said, “Zestimates were wrong. That does not inspire a lot of confidence, at least not for me.” In a second ZIP code, Dowler found that 100 percent of Zestimates were inaccurate, and that disparities were as large as $190,000.
So what do you do now that you’ve got the scoop on Zestimate accuracy? Most important, take Rascoff’’s advice: Look at them as no more than starting points in pricing discussions with the real authorities on local real estate values — experienced agents and appraisers. Zestimates are hardly gospel. Often, far from it.