3 Things That Zillow Screws Up
So….is my Zillow Zestimate accurate?
No, it’s not. Not even a little.
Alright, alright, I’ll go into a little more detail.
Many home enthusiasts have used the dreaded “Z” website to look at homes or find a rental. Beginning in 2006, Z began offering a Zestimate of a homes value.
And since 2006, individuals have been taking this value and using it as the gold standard for determining their homes value.
But how accurate are they really?
Well, the Zestimate home valuation model is Zillow’s estimate of a home's market value.
By estimated, they mean a home value assigned using proprietary computer algorithms developed by statisticians. And what are those algorithms? Not surprisingly, Z has not provided that information and has left a lot of us scratching our heads.
In fact, there have been four different versions of the algorithm released thus far (2006, 2008, 2011, and 2019) with probably more to come.
Per Zillow’s website:
“The Zestimate incorporates public and user-submitted data, taking into account home facts, location and market conditions.”
Wait, what? That’s right, Zillow incorporates user-submitted data. This means that I, as the homeowner, can adjust the details of my home so that Zillow can use that to make an estimate of the value.
So much for impartiality.
Also, per Zillow’s website:
“A Zestimate is not an appraisal and it should be used as a starting point. We encourage buyers, sellers and homeowners to supplement the Zestimate with other research such as visiting the home, getting a professional appraisal of the home, or requesting a comparative market analysis (CMA) from a real estate agent.
A Zestimate is computed based on data, not human touch, vision, interaction, etc.
Yea, yeah, yeah, but is it accurate?
Studies have indicated that the nationwide median error rate for off-market home Zestimates have a median error rate of 7.5%.
So for a $300,000 home, that could be up to $22,500 – ON THE LOW SIDE!
The foreclosure boom a few years back, along with the growing popularity of HGTV, has lots of potential home buyers really excited when they see a foreclosure because they usually think that they can score a great deal.
Enter Z’s pre-foreclosure listings. Zillow labels homes as “pre-foreclosure” when the home is in the early stages of repossession. Usually after 3 months of failing to make mortgage payments, a lender will file a default notice with the County Recorders Office. Once it’s recorded it becomes public knowledge- allowing Z to swoop in and capture that information and label the home as being in “pre-foreclosure.”
From that point, the lender works to hammer out a payment plan allowing the owner to get up-to-date. If the owner is unable to pay, the home may go to auction at which point the bank could get it back. This could be a lengthy process and it’s important to know that throughout this period- the HOME IS NOT ACTUALLY LISTED FOR SALE! It’s not on the market and you can’t go see it.
This can create lots of undue confusion for potential buyers looking to score a deal but here’s why Z does it….
3. Data is king!!!
Only recently did Zillow begin getting into the home buying and home selling game. Their major source of income is derived from selling data.
Of course you can find a home you’re interested in and tell your Realtor about it. The Realtor can then go into the local MLS, or multiple listing service, and verify the listing and the information.
Z’s goal is for you to be interested in a home, click “talk to an agent”, gather you’re information and then sell that information to Realtors. That’s where the big money comes from.
As a Realtor, I can tell you that I receive weekly calls and emails from Zillow asking to be a preferred partner on their platform. As a preferred partner, they want me to believe that they’re pushing my name higher on the list of Realtors who get these leads. Let’s face it, how high you get pushed is directly related to how much money you spend with them.
So, in a way Zillow is attempting to put Realtors out of business- and Realtors are paying for the opportunity! A wise move on Z’s part but many realtors feel that’s what they need to do to compete.
So, there you have it. In the end, I’ll admit that Zillow is a good place to START looking (aside from meeting with me first!) but use caution in putting too much faith in the information they provide.