By Elizabeth Hotz, First Time Home Buyer Specialist
In a time when technology rules the day, consumers have a number of resources at their fingertips. You can get your groceries online, take an eye exam, find out why your dog is sick, and, now, you can even assess the value of your neighbor’s home. Zillow.com emerged in 2006 as a new obsession for real estate Buyers and Sellers. Advertiser supported, this website offers free computer-generated estimates for home values to consumers. Oftentimes these “zestimates” not zactly accurate.
This Washington Park home has a Zillow Zestimate of value at $272,000. In real life, it just went under contract for more than it’s $299,000 offering price. So, if the contract closes, the real value of this home is at least 10% more than its Zillow estimate. Just how do they do they get their information to be able to estimate home values?
Basically, Zillow uses a computer program that taps into county records to find data on recently sold homes within a certain proximity that are physically comparable in size and construction to the subject property. It also gathers information on past listing history and most recent tax assessments.
All sounds good – right? Well, that would be true if county records were always accurate. What Zillow doesn’t take into account are factors that dramatically impact the value of a property. Zillow typically draws their comparable properties from a specific radius regardless of neighborhood boundaries. For example, it could be comparing one property in a desirable, safe neighborhood to another home in a different, adjacent neighborhood that has a higher crime rating or simply feeds into a less desirable elementary school.
Busy streets, highway noise, proximity to public transportation or community park are other neighborhood factors that vary block by block – these are also taken out of Zillow’s equation when pricing a home. Let’s certainly not forget about condition either. Public records simply don’t report on condition – especially if there’s been updating/remodeling done without a permit. Another thing to remember is that most often times public records don’t record tractions accurately when they are Seller concessions – ie. closing costs, Buyer incentives or credits. They also don’t reflect situation when title is transferred between family members, friends, or business partners for a token price. That goes for foreclosures or short sales as well, which can be sold below “market” just to get a fast closing.
To be fair, Zillow does mention a number of times on their website that they are simply a “starting off point” and not as accurate as a CMA (Comparable Market Analysis) done by a professional Realtor or an appraiser. Zillow, themselves, even reports on their website a 10% median margin of error for the Denver market (some sites claim Zillow has been off in their market by as much as 40%!).
I do know a number of people who like to use Zillow for their aerial views of the neighborhoods and their advertisements. And let’s face it, this site sure satisfies our real estate curiosity factor. If anything, it appears that Zillow actually works best for mid range homes in homogeneous neighborhoods. It most certainly does not have the ability to account for luxury, custom homes where Italian marble flooring or a one-hole golf course in the backyard can make all the difference.
I have tried to resist the chorus of Realtor complains about Zillow. I didn’t want to join the Zillow-hating bandwagon. As a consumer, I too want to gather as much information as I can before making an important investment. However, the inaccuracy that Zillow promotes could jeopardize my clients and actually prevent them from getting the house they want or selling their home for the right price. Furthermore, it’s giving the general public an unfair view of the market. In fact, the state of Arizona has issued two letters to Zillow asking them to “cease and desist” in their state. In another instance, the National Community Reinvestment Coalition issued a letter the US Federal Trade Commission stating that Zillow does not adequately explain their limitations when it comes to home valuation – see, us Realtors aren’t the only ones who are fed up! Unfortunately, life just isn’t about just about plugging number into an equation. Don’t you think one of the biggest transactions of your life deserves more than that?
After all my research, experience and horror stories regarding this hugely popular site, I now see Zillow for what she is: the neighborhood gossip – fun for a few drinks, but eventually going to spread lies about you to the neighbors.