Today, In an article titled, The scoop on Zestimates, The Star, via an article from Kenneth R. Harney rips into the big Z.
When “CBS This Morning” co-host Norah O’Donnell asked the CEO of Zillow last week about the accuracy of the website’s automated property value estimates — known as Zestimates — she touched on one of the most sensitive perception gaps in American real estate.
Shoppers, sellers and buyers routinely quote Zestimates to real estate 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, a California real estate agent. 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? Zillow CEO Spencer Rascoff answered that they’re “a good starting point” but that nationwide Zestimates have a “median error rate” of about 8 percent.
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 Somerset County, Maryland, the rate is an astounding 42 percent. In some rural counties in California, error rates range as high as 26 percent.
Some real estate agents have done their own studies of accuracy levels of Zillow in their local markets. Last July, Robert Earl, of Choice Homes Team in the Charlottesville, Virginia, 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 percent below the Zestimate. In Carlsbad, California, Jeff Dowler, of Solutions Real Estate, did a similar analysis on sales. In one zip code, he found that Zestimates came in below the selling price 70 percent of the time, with disparities ranging as high as $70,000.
In 25 percent of the sales, Zestimates were higher than the contract price. In 95 percent of the cases, he said, “Zestimates were wrong. That does not inspire a lot of confidence, at least not for me.”
So take Rascoff’s advice: Look at Zestimates 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.
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Well, gosh, no kidding. But the Star didn’t have to go to Virginia and California to find that out. They could’ve, should’ve, and I wish they would’ve, looked right here in their own backyard. They could’ve asked me, I’ve been tracking Zillow’s Zestimates vs. real world prices for years.
HERE 1/21/2009
HERE 8/7/2009
HERE 8/12/2010
HERE 4/10/2011
HERE 8/10/2014 - when I noticed that zillow was showing some improvement in the accuracy of zestimates
HERE 1/4/2015 – where I predicted that Zillow is here to stay and will improve and become more credible.
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