My Realtor or My Zestimate is WAY OFF

On December 1, 2011, in Listings, Uncategorized, by David Monsour

Very few things cause more problems for Realtors than the availability of Zestimates.  For those of you that are not familiar with Zestimates the website www.zillow.com has a computer algorithm that automatically evaluates your home based on bedrooms, bathrooms, sq footage and some other criteria compared to other sold homes in the area.  It generates a value which Zillow has called a Zestimate.   The average consumer believes this value to be accurate.  I attribute some of this belief to our dependency on computers and the fact that Zillow has built up a very successful brand when you think of real estate.

This post about Zestimates was actually triggered by a Question asked on Zillow’s website.  Someone was suggesting that they wanted to sue Zillow because their value was so far off.  Interesting.  Back up the bus for a minute, so you’re saying you want to sue a computer for a perceived value based on limited criteria?  The poster was quickly corrected by both Zillow and Real Estate Agents.  Let’s discuss when a Zestimate is valuable.  As a real estate agents we are cognoscente of Zestimate values because most consumers know what their home is (I’ll create a word) Zestimated at.  It can be valuable to a person who wants a quick indication of value.  According to people working at Zillow the Zestimate can vary up to 28% which is significant when talking about home values.   This variance however tends to be smaller in densely populated area where the number of properties sold is higher.  Zillow can more accurately determine value with a larger sample of sold homes.  In real estate markets like Gettysburg and Hanover the value tends to vary greatly from true market value due to a relatively small sample of homes sold.  For example if your neighbors home was foreclosed and sold at a bargain price and the guy down the street short saled his property at 30% under market value Zillow is going to generate a value based on those properties despite the fact that they are distressed properties.

Why you hire a real estate agent even when Zestimate is free.  In the real world few things are free although they may seem it at first glace.  That free credit report was free but all of that spam email makes you reconsider the prospect of paying the 6$ you may have spent to avoid the headaches of an overwhelmed spam sorter (YOU).  How many times do you have to hit unsubscribe to rectify that error in judgement?  So the Zestimate is free and what you get in exchange is a rough estimate only the most naive person would take as fact.  I mentioned we are programmed to believe computers but in this one instance humor intervention is a much needed side show.  A real estate agent first and foremost has access to far more sold data than zillow will ever have.  At this point some agents have listings that aren’t even making it to Zillow, Trulia, or Realtor.com.  If the information isn’t there then the Zestimator can’t use it so that is the first edge a real estate agent has over our electronic counterpart.  Realtors also have the ability to make adjustments for comparable properties that are distressed.  In fact most distressed properties are selling around 25-30% below market value so it can have a significant image on your homes value.  My last point, although I could go on, is that a computer will never have an intimate knowledge of a hyper-local area.  Some streets or neighborhoods can come with a premium which is something Zillow has not yet figured out and may never be able to figure out due to the information needed to generate the values.

The bottom line is that Zestimates are a great tool to get an Idea of value.  If you’re planning to sell let a real estate agent evaluate the property for a potential list price.  If you need a true appraised value you will have to consult with a licensed appraiser.  Appraisals are necessary for HELOC, refinances, mortgages and so on.  Anything related to the sale can be handled by a real estate agent.

Zillow has requested that I had the following link about the accuracy of their zestimates – Click here to read more

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