I shared a recent LA Times article on my Facebook page a few days ago titled Inaccurate Zillow ‘Zestimates’ a source of conflict over home prices, which discusses the accuracy of property valuation information provided by Zillow, the most popular online real estate information site.
Unlike some of my colleagues, I am a fan of Zillow. I spend a significant portion of my advertising budget with Zillow and am a Premier Agent. Zillow is a user friendly portal for home searches via desktop and a nifty mobile app, and many of my prospective customers and clients spend lots of time searching for homes there. Whether my customers are registered with my site or not, I don’t discourage them from using Zillow for their home search.
Zestimates are another story. As described in the LA Times article, consumers are quite dependent on Zestimates when disc
ussing pricing homes for sale and for making offers on homes. The problem is that zestimates are generated from an algorithm, while local agent market analysis has a more personal touch. Zillow’s CEO Spencer Rascoff admits a national “median of error” rate of 8%. Remember from accounting 101 that “median” means the midpoint of a distribution, such that there is an equal probability for falling above or below it. 8% is a $200,000 house, that is $32,000 spread. Shelby County’s error rate is somewhat better at 7.6%. The chart also shows that about half of Zestimates are within 10% of sales price, but 10% can amount to a lot of money.
So what to do with the Zestimate? Remember it’s just a TOOL, not an absolute. Our local Association has a similiar tool aptly named Starting Point which any local agent can provide for you. As you might expect when computers are making decisions, Starting Point and Zestimate seldom agree on property values, but these algorithm generated values are in the ball park, It takes an experienced “boots on the ground” real estate professional to determine a reaonable selling price for a property, or a licensed real estate appraiser if an certified valuation is needed. But neither guarantees the ultimate selling price of the property. That’s between the buyer and seller.
[UPDATE: Zillow has announced that home owners now have direct input into their Zestimate, which will be immediately updated in the Zillow system. Read about it HERE.]
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What do you think? Leave your comments.