First, I reluctantly have to admit that Zillow really does have impressive algorithms, that sometimes yield surprisingly accurate results.
But, Zillow also often badly misleads homeowners, creating huge issues for lenders and agents alike.
The Problem With “Zestimates”
A few years ago, a friend of mine was irate when his appraisal came in $75,000 lower than Zillow’s “Zestimate®.”
But Zillow was correlating to a nearby “model match” with stunning views and a location at the end of a quiet cul-de-sac, whereas my friend’s home was on a busy through street and only had a view of his neighbor’s fence.
The Source Of The Zestimate® Issue
Our Appraisal Manager shared with us two excellent columns that illuminate problems with Zillow.
The first was a New York Times article titled “Why Zillow Addicts Can’t Look Away.”
The article discusses homeowners who obsess over their Zillow Zestimate and how this obsession is especially a problem for sellers, and therefore listing agents, when Zestimates differ from market value.
Even better is Ryan Lundquist’s recent blog titled “Is the Public Trusting Zillow Too Much?”
Ryan, a renowned Sacramento, CA-based appraiser and blogger, uses the recent history of a single property to make his point.
- On July 14th, influenced by Zillow’s bloated Zestimate of $380,000, the property listed over market value for $380,000.
- Shortly thereafter the price was reduced to $335,000 and the Zestimate dropped to $346,000, implying that Zillow correlates heavily to list price.
- The property then quickly sold for $350,000, but the Zestimate then fell to $328,000.
- A month after the sale, the Zestimate fell to $302,000.
Ryan went on to point out how the market had not dropped that much overall, how homeowners trust Zillow way too much, and how they need to trust real estate professionals instead.
How We Can Help You
If you’re a listing agent with a client who is clinging to a Zestimate that greatly exceeds market value, our Appraisal Manager would be more than happy to provide additional data or commentary to help explain reality. :)
Our Appraisal Manager, in fact, makes it a point to not look at online value estimates because they mislead so much and so often, even if you’re a seasoned professional.