“Zestimates” are one of a Realtor’s worst nightmares.
Zestimates are rarely accurate. It is such a problem that “CBS This Morning” recently just did a piece on them.
Co-host Norah O’Donnell asked the chief executive of Zillow 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.
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.
Almost every adult routinely quotes Zestimates to realtors and each other 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.
A seller might challenge potential listing agents when they say a property should sell for just $595,000 when Zillow has it at $685,000.
Disparities like these are daily occurrences and a real problem for Realtors and the market. Unfortunately, consumers often take Zestimates as gospel.
And if either the buyer or the seller do not budge off Zillow’s estimated value, it can kill a deal.
So, are Zestimates accurate, and if they aren’t, how far off are they?
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.
That is high, because on a $500,000 house, that would be a $40,000 disparity, which is a lot of money on the table and could create problems.
However, here is the most important thing and why you need to higher and consult a local realtor with expertise in your market: 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.
Kenneth R. Harney
Do American homeowners think their properties are worth less than the actual market value, as measured by professional appraisers?
Highly unlikely, you'd probably say. Everybody knows that owners tend to have optimistic impressions of what their homes are worth. They know how much money they’ve...
I did my own looking at the accuracy levels of Zillow in Ahwatukee Foothills by using my own home.
I live in 85044 and it listed the following zip codes as nearby 85008 and 85018. It did not even list the other two zip codes in the Ahwatukee Foothills of 85045 and 85048. It showed the nearest cities as Alhambra.
It also says Tempe, Chandler and Gilbert are close, but Alhambra is definitely not nearby and would have no bearing on home values in Ahwatukee Foothills.
Also, there are so many homes in our area that Tempe, Chandler and Gilbert are not comparables for our local market. My house was listed as having one bathroom, which is an 80 percent error on the number of bathrooms in my house.
In our market, Zestimates can be off by more than 40 percent. This creates a huge issue with perception and expectation when buying and selling a home.
So what do you do now that you’ve got the scoop on Zestimate accuracy? Most important, take Zillow’s CEO’s advice.
Look at Zestimates as no more than starting points in pricing discussions with the realtors in your local real estate markets. Zestimates are hardly gospel and often far from it.
-To get answers about any real estate questions, call Ahwatukee resident and Associate Broker Stacey Lykins, West USA, 602-616-9971 or at S.Lykins@LykinsProperties.com or visit her website at www.LykinsProperties.com.