On Real Estate & More – March 2018

Clients repeatedly ask me about Zillow. For those who aren’t familiar with Zillow, it’s a website offering an opinion of a home’s value called a “Zestimate” and it is prominently displayed on each property’s listing page.

While that information is helpful for buyers and sellers, Zillow’s Zestimate can be highly inaccurate. Zillow uses a proprietary formula to determine the value of a home from information the website has obtained from public records and information entered by users. Home characteristics, such as square footage, location or the number of bathrooms, are given different weights according to their influence on home sale prices in each specific geography over a specific period of time, Zillow says. The site also mixes in property tax information and prior sale prices for a home, as well as for others nearby.

But there are several areas where this information usually falls short:

Zillow can’t determine the actual condition of a house. Has it been recently renovated—or is it in dire need of remodeling?

Zillow accounts for the number of bedrooms, baths and the total square footage, but these don’t always correspond to a higher or lower price: Sometimes a bathroom is poorly located, or a bedroom is tiny.

Zillow doesn’t consider permitted versus unpermitted structures or other property nuances.

Physical characteristics that impact local demand and value, such as architectural style, year built, and layout and flow of a home, are not factored in.

As real estate agents, we know that one of our most difficult tasks is pricing a home. The motivation of the parties is always a factor, as is the condition of a home and those around it. No computer formula can quantify the value of a kitchen that was remodeled before a home was put on the market or a yard that is poorly maintained. It simply isn’t possible to predict the value of a home with a level of accuracy sufficient to make a housing decision.

Zillow knows that’s true, and says, “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.”

When I assess a property, the first thing I do from my computer is study the home. I note whether it backs up to a busy street, the size and condition of other homes nearby, the vegetation and landscaping, and, if I’m lucky, there might be a photo of the exterior.

I also establish a range of value based on surrounding home sales that do not vary much in configuration and type, which provides a value based on square footage, including the values of all sold, pending, and active listings.

Using that information as a base, I then inspect the home and look at it through the eyes of a buyer, how an appraiser will view it, and where we need to be positioned against the competition. It’s not unusual for me to enter a home with a prepared price in mind and then change the price after viewing the home. Automation does not take the place of personal assessment.

The Zestimate is formulated to give website visitors a range of value. It’s not meant to replace an appraisal nor a real estate professional’s opinion of value. I look at Zillow values before I visit a seller because I know the seller is looking at those values. Not because there is value to me as a professional in the estimate. Real estate agents do not use Zillow to price a home.

Yet, Zillow offers so much more information on homes than the Zestimate. Zillow provides data on specific properties, such as square footage, number of bedrooms, lot size, etc. It also provides information on price and tax history, schools, and nearby homes for sale. All of this can be invaluable information to any home buyer or home seller in a real estate transaction.