So, your teetering the thought of maybe selling your home. You have been doing some browsing and simple research about buying a new home and how much your current homes value might be. You come across, Zillow, a very popular real estate website, where you can find the “Zestimate” of your home. It gives you a estimate of your home that makes you see dollar signs.
No more teetering the thought of selling your home, you have picked up the phone and called Tampa Bay’s best real estate team, John Soliman and Associates of HomeXpress Realty, Inc (813.642.7653 incase you need it). This is where John Soliman says, “I would love to help you out and give you a free Home Evaluation” and then asks you a few questions regarding your home so he can get an accurate comparable market analysis (CMA) asks if he can give you a call back in five minutes to configure the CMA. A few minutes later John, gives you a ring back and your eagerly awaiting the same amount that you found that Zillow gave you from their “Zestimate” but *gasp* John’s CMA is not close to that amount! This is were your eye starts to twitch and you look sorta like this… You explain to John that this isn’t the same estimated value you were given on Zillow, maybe he did something wrong?
Here at John Soliman and Associates we can’t stand to be the bearer of bad news or in this case bearer of lower home values. It has nothing to do with your home, in fact the real estate market has been steadily climbing! So, we found a great article (see below) that we wanted to share regarding those “Zestimates” to help you better understand and put the knowledge in YOUR hands so you know when your researching your homes value what to expect.
Zillow’s wild off online price estimates hamper sales
By Kenneth Harney
When “CBS This Morning” co-host Norah O’Donnell asked the CEO of Zillow recently 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 likely pull up key information — square footage, lot size, number of bedrooms and baths, photos, taxes — plus a Zestimate.
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 seller’s 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 agent who posted on the industry blog ActiveRain, they are “the bane of my existence.” Consumers often take Zestimates “as gospel,” said Tim Freund, an agent with Dilbeck Real Estate in Westlake Village, California. If either the buyer or the seller won’t budge off Zillow’s estimated value, he told me in an interview, “that will kill a deal.”
Back to the question posed by O’Donnell: Are Zestimates accurate? And if they’re off the mark, how far off? 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 Manhattan, the median valuation error rate is 11.1 percent — which could translate into a $109,000 disparity on an apartment selling for the median $980,000. In Brooklyn, the error rate is 10.4 percent. In some rural counties in California, error rates range as high as 32 percent. In San Francisco, it’s 11.2 percent. With a median home value of $1 million in San Francisco, according to Zillow estimates as of December, a median error rate at this level translates into a price disparity of $112,000.
Some real estate agents have done their own studies of accuracy levels of Zillow in their local markets. Last July, Robert Earl, an agent with 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, an agent with Solutions Real Estate, did a similar analysis on sales in two ZIP codes. 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.” In a second ZIP code, Dowler found that 100 percent of Zestimates were inaccurate, and that disparities were as large as $190,000.
So what do you do now that you’ve got the scoop on Zestimate accuracy? Most important, take Rascoff’’s advice: Look at them 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.
Articles URL: http://therealdeal.com/issues_articles/erroneous-zestimates/
John Soliman and Associates of HomeXpress Realty, Inc.
Contact us 813-642-7666 or email John@TampaHomeExplorer.com