We admit it; one of the greatest evolutions in real estate over the last decade is the power of the Internet! In fact, according to some, more than 90 percent of homebuyers begin their real estate search on the Internet. We applaud this evolution, we would even go so far as to admit it’s great!, as it empowers buyers to do their own property research and searches. However, we advise prospective buyers and sellers to beware!
While real estate websites such as Zillow offer an array of helpful information, they also offer data, information, and estimates (or “Zestimates®”), that are highly inaccurate and often outdated. For example, Zillow’s “Zestimates®,” use an “automated valuation model” — AVM for short — that purportedly present a great estimate of the current market value of millions of homes. It’s innovative technology, which amasses an enormous amount of information from publicly available sources and then scrubbs the data using sophisticated algorithms, to predict value. And while all of that is presented in an easy-to-use user interface, even Zillow cautions users to beware.
According to Zillow, “The Zestimate® home value is Zillow’s estimated market value for an individual home and is calculated for about 100 million homes nationwide. It is a starting point in determining a home’s value and is not an official appraisal. The Zestimate® is automatically computed three times per week based on millions of public and user-submitted data points.”
As real estate agents, we know that one of our most difficult tasks is pricing a home. That holds true whether we are representing a seller or a buyer. Market pressures change from week to week, not to mention from neighborhood to neighborhood. The motivation of the parties is always a factor, as is the condition of a home and those around it. No algorithm, however sophisticated, can quantify the value of a kitchen that was remodeled just before a home was put on the market or a yard that is poorly maintained. It simply isn’t possible for any AVM to predict the value of a home with a level of accuracy sufficient to make a housing decision. Accurate estimates require the work of experienced, qualified real estate professionals.
Even Zillow knows this is true, and they say as much on their website. That’s why their Zestimates® feature the option to, “Get a Professional Estimate” and offer links to the contact information of local, professional real estate agents.
They even include this statement regarding their “Zestimates®” of value: “The Zestimate® is not an appraisal and you won’t be able to use it in place of an appraisal, though you can certainly share it with real estate professionals. It is a computer-generated estimate of the worth of a house today, given the available data. Zillow does not offer the Zestimate® as the basis of any specific real-estate related financial transaction. Our data sources may be incomplete or incorrect; also, we have not physically inspected a specific home. Remember, the Zestimate® is a starting point and does not consider all the market intricacies that can determine the actual price a house will sell for.”
While we agree Zillow is a helpful tool, research shows that, on average, “Zestimates®” are within 5 percent of the actual value of a home, only 50% of the time. If we as real estate agents got within 5 percent of the value of a home that infrequently, we’d be out of business!
So if you want to base their valuation of a home purchase or sale on what they find on the Internet, we suggest they take out a coin and flip it. Heads — that value is within 5 percent (high or low) or what the home is actually worth. Tails — that value could be 10 percent, 20 percent or more off target. Better yet, why not contact us to obtain an accurate estimate!