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 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. If either the buyer or the seller won't budge
off Zillow's estimated value, he told me, "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 CEO Spencer Rascoff answered that they're "a good starting
point" but that nationwide Zestimates have a "median error rate"
of about 8%.
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.
For example, in New York County —
Manhattan — the median valuation error rate is 19.9%. In Brooklyn, it's 12.9%.
In Somerset County, Md., the rate is an astounding 42%. In some rural counties
in California, error rates range as high as 26%. In San Francisco it's 11.6%.
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.
Last July, Robert Earl, an agent
with Choice Homes Team in the Charlottesville, Va., 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% below the Zestimate.
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 came in below the selling price 70% of the
time, with disparities ranging as high as $70,000. In 25% of the sales,
Zestimates were higher than the contract price. In 95% 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% 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.
Have you checked your Zillow 'Zestimate' lately on your property?
Do you agree with the price?
What should it be?
Call me Julia Kim
(424) 332-3204
I can tell you what your home is worth!
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