There are two aspects of the Zillow website that I don’t find value in: their ‘Zestimates’, and their lack of accuracy in listing information. The listings many times can be out of date as to their status, and the Zestimates are very often off by a significant percentage.
Zestimates have been wrong more than they’ve been right. The reason they are is because they use an algorithm to formulate values all across the country. The same computations in every location. It’s not even remotely feasible that a “one-size-fits-all” mathematical equation could get it right, when determining a home’s value is dependent on so many local and subjective variables.
A complicated formula can come up with a uniform value, but the problem with that is that all real estate is not uniform, it is local. ‘Bricks and sticks’ in one neighborhood can have a different value than the ‘bricks and sticks’ in another location, due to all kinds of subjective factors. Proximity to highways, power lines, and unsightly commercial areas are an example of things that affect a home’s values in a subjective way.
All real estate is local, even micro-local. Values for similar homes in one neighborhood can be completely different in a neighborhood only blocks away. Zillow can’t get inside a home and see the differences in amenities…like an updated kitchen with pristine hardwoods, granite countertops, custom maple cabinets and top-of-the-line appliances; compared to a similar home with basic builder grade finishes and 15-year-old carpet.
Local Realtors Know Values
Only a local Realtor who knows the area can provide a realistic estimate. He or she knows the local neighborhoods and values based on everything that is objective as well as subjective. A local Realtor knows what the trends are in the neighborhood. Some areas hold their value better than others, due to a lot of factors: Type of construction, age of home, added amenities, and what’s going on in the neighborhood or area.
Our recent experience is that some neighborhoods are more effected by the downward drag of foreclosures and short sales on the market than other neighborhoods are. Two particular neighborhoods here in Frederick were primarily built during the years from 2003 – 2006, and the majority of the homes were financed with ARM’s…Adjustable Rate Mortgages. Unfortunately, when the rates adjusted after the values had fallen…these neighborhoods were filled with short sales. Comparable home sales were really difficult to calculate with a generic mathematical equation. It takes a local Realtor who understands the trends.
To many consumers, the aspect of listing accuracy doesn’t cross their mind when they are looking online for homes for sale. Zillow is by far, the most trafficked website in the real estate sphere, with 70 million views a month! There is obviously a wealth of good information that consumers find valuable.
However…consumers regularly find inaccuracies. We get contacted regularly about homes that are listed on Zillow as active, but have either been under contract for days or even weeks, and many times have sold weeks or months ago. The inaccuracies include a lot more than status; consumers often find many details wrong, including the number of bedrooms and baths, the square footage, and even the information from the tax records. Among the different categories of “potential listings”, the pre-foreclosure category is very misleading.
As Bill Gassett points out in his article, Some Zillow Listings Are Not For Sale, the data Zillow collects on these homes comes from Realty Trac, a site that collects data on distressed housing, these homes are most often, not even on the market.
Data can be faulty. It happens. Sometimes it’s no one’s fault, it’s an imperfect system that data engineers are still perfecting. But sometimes it’s by design. The longer homes are listed as available, the more traffic the website gets. The more homes listed, like preforeclosures, the more “eye candy” on the website to attract visitors. Add to that more push notifications that people get on the Zillow app as they search neighborhoods.
Zillow is, afterall, a marketing site that makes money from advertising. It is not a site designed or monitored by licensed real estate professionals. They aren’t bound by the Realtor Code of Ethics, which requires that any information the we publish be accurate, to the best of our ability.
Why Does It Matter?
“If I just want to see houses, who cares?” Fair question. Let’s consider the Zestimate…
When a seller contacts an agent to list their home for sale, the agent conducts a Comparable Market Analysis, or CMA, to get a close estimate of what the home will likely sell for, based on comparable home sales, local trends and market analysis. Experienced Realtors who have local knowledge have been helping buyers and sellers in the local market and have been active in your neighborhoods. They’ve probably even seen firsthand many of the comparable homes in their market as they’ve worked with buyers and sellers.
Damage to the Seller
So imagine when the agent presents their hard-earned knowledge about the home’s value in the CMA (comparable market analysis), only to hear from the seller: “But Zillow says my house is worth $50,000 more?!” That seller is already set up for failure because of the inaccuracy of that Zestimate, sometimes a gross inaccuracy. First of all, it puts doubt in their mind about the Realtor, Secondly, if they disregard the agent’s advice and they overprice their home, they will do damage to their prospects of actually selling the home for the highest amount in the shortest time.
[In a recent Washington Post article, a Washington D.C. brokerage was quoted for documenting that Zestimates are getting worse. Of 500 estimates, the values ranged from 62% under, to 150% over the actual sold figures.]
Damage to the Buyer
It’s easy to see that the expectations of the buyer will also be skewed when they see an inaccurate Zestimate. Right below the list price you can see the Zestimate, so at the very outset of seeing the home, a buyer will have it in their mind that the seller is asking too much, or too little.
If the list price is lower than the Zestimate, imagine the buyer’s disappointment when they get to the home and realize it’s not the bargain they thought it was. The expectations that Zestimates give buyers can be damaging, and can result in a lot of wasted time.
If they believe the list price is high, it will be hard for them to take the Realtor’s advice about what price to offer. We’ve seen our share of lowball offers from buyers who just didn’t take their buyer’s agent’s advice. We’ve seen just as many offended sellers rejecting those lowball offers!
Lousy Expectations Caused by Inaccuracy
Because of inaccuracies, we regularly see missed opportunities, discouraged buyers who show up at a home that’s already sold, and lots of wasted time looking at homes that are nothing like the buyers thought they would be. We’ve seen wasted time on the market for sellers, and we’ve seen these sellers fire very good agents for things that are not their fault.
In my opinion, that is the real damage of inaccuracies…Lousy Expectations. Zillow discloses the percentages of their inaccuracies…way over on the page that you can barely see for the small print. It’s there. But most buyers and sellers never see it. They are unfortunately, subject to the disappointments of lousy expectations.
So contact a local realtor to find local values. And use Zillow for other useful information. Take Zestimates with a grain of salt…if you even look at them at all.
More Great Explanations of Zestimates
But don’t take my word for it…here are several articles from some excellent real estate bloggers that have much to say about the topic of Zestimates and Zillow:
To see Frederick Home Values, we’ll be happy to do a complimentary CMA for you. Contact the Highland Group today: 301-401-5119
Related Reading: 15 B.S. Facts About Real Estate That AREN’T True
Chris & Karen Highland – Cell: 301-401-5119
eXp Realty – 410-777-5714