Zillow is a source to offer estimates of your home’s value.
BUT; It’s NOT Gospel…. The error rate can be as high as 8%
When “CBS This Morning” co-host Norah O’Donnell asked the Chief Executive Officer (CEO) of Zillow last week about the accuracy of the automated property value estimates — known as Zestimates — that so many consumers use….
She touched on one of the most sensitive perception gaps in American Real Estate. More often than not, Homeowners are using Zillow to determine their homes value, but beware…. Remember:
“Zestimates are “a good starting point” but that nationwide they have a “median error rate of about 8 percent.” said O’Donnell.
Zillow is the most popular online real estate information site, with 73 million unique visitors in December 2014. Along with active listings of properties for sale, it also provides information on houses that are not on the market. You can enter an address or a general location into a database of millions of homes and probably 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 realty 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 sellers’ 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 and, in the words of one realty agent who posted on the industry blog ActiveRain, they are “the bane of my existence.” Consumers often take Zestimates “as gospel,” said Tim Freund, an agent with Dilbeck Real Estate in Westlake Village, Calif. If either the buyer or the seller won’t budge off Zillow’s estimated value, he told me in an interview, “that will kill a deal.”
Back to the question posed by O’Donnell: Are Zestimates accurate? And if they’re off the mark, how far off? Zillow chief executive 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 Web site, 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 some rural counties in California, error rates range as high as 26 percent. In San Francisco it’s 11.6 percent. With a median home value of $1,000,800 in San Francisco, according to Zillow estimates as of December, a median error rate at this level translates into a price disparity of $116,093.
Some real estate agents have done their own studies of accuracy levels of Zillow in their local markets. Local agents try & educate their sellers on the in-accuracies, however, when a site like Zillow is so highly referenced, its difficult to recommend that homeowners use a more accurate tool for value.
The Multiple Listing Service (MLS).
In Carlsbad, Calif., Jeff Dowler, an agent with Solutions Real Estate, did a similar analysis on sales in two Zip codes. He found that Zestimates 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. Yikes……
So what do you do now that you’ve got the scoop on Zestimate accuracy?
Most importantly; 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.
This is so true……
Please, please, please…. Consider this as you go to list your home this Spring!
Oh & Guess What; Call US, we can help determine your home’s value 🙂