Just Zillow It?

You can find out how to cover a text book using a grocery paper sack on YouTube (yes, my children’s school still requires text book covering), you can choose your next haircut off of Pinterest, and yes, you can estimate what your house might sell for on the open market using Zillow. The Internet has really dulled our problem solving skills over the last decade and now we can find an answer to just about anything using it. I love it when I’ve inexcusably forgotten the name of one of my favorite characters on Modern Family and voila! I’m smart again.

What does Zillow do for the home shopper/seller? I’m probably preaching to the choir, but It provides instant details related to any home, including your own, or gives you a list of homes for sale in a certain neighborhood or zip code.

On the buyer side, one word of caution. And if you’ve used Zillow, you’ve probably had this happen to you. You’re so excited because there is a house listed as “For Sale” on Zillow. However, you later find out from your realtor that the property is under contract. Zillow does not present the consumer with current, real time data on homes for sale. I tested it just now and it showed a home “for sale” that I am actually under contract on right now with my Buyer clients. We all know the rabbit hole that we can fast fall into when searching for something online and maybe looking for homes, so when you finally have your saved list of “for sales” and most are under contract (especially in these times) Zillow can prove to be a colossal waste of time. Solution? Work with your realtor to tie into the Denver Multiple Listing Service (MLS) to find homes that are currently active, or on the market. There are also apps that tie into the MLS and provide real time market data, such as Homesnap.

For sellers, Zillow can provide an unbiased, estimated value of a home, currently and over time. They call it an “automated valuation model” or AVM. Zillow amasses an enormous amount of information from publicly available sources in one place and then scrubs the data using sophisticated algorithms to predict value. At first blush, Zillow might be able to answer a couple of questions: Roughly, how much value has my home gained or lost since I bought it? What is the range of value of my home, relative to a similar home in a different neighborhood?

But, there is the question of accuracy of the Zestimate. Some research indicates that Zestimates are within 5% of the actual value of a home just half the time. Other data shows that Zillow is even less accurate with condos and properties over $1M. Zillow did their own study comparing Zestimate accuracy to the accuracy of initial listing prices set by real estate agents in Washington DC. Zestimates were within 5% of the ultimate sale price 46% of the time in the D.C. area. Initial list prices set by agents in and around D.C. came within 5% of the final sale price 76 % of the time. Neither human nor computer is infallible, but breathing professionals seem a bit more accurate.

Denver could be an interesting study since our market is attracting much national attention these days.

Ask any realtor and they will tell you that one of their most difficult tasks is pricing a home. That is true whether we are representing a seller or a buyer. There is a myriad of things that realtors (and appraisers) should consider. First, you need to pick the most appropriate “comparable” properties, or “comps.” Other considerations include the motivation of the parties, the rate of appreciation over time, and mathematical adjustments to account for upgrades, the condition of the property, etc. Are there amazing views? Is there central air? Deck/patio? Not much on the market in that particular neighborhood? There’s a lot to consider.

Even Zillow purports that the Zestimate is designed to be used along with many other pieces of information that your realtor can bring to light.  On their website, it reads, “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.”

And of course, beyond just pricing the home, talented realtors bring value to many other processes: marketing, contract negotiations, staging and home prep, etc. Who knows, over time Zestimates might become more accurate. Until then, the answer may not be to “Just Zillow It.”