Donna thought my words were a little strong, but they need to be to emphasize the point. Zillow intends to change the whole game – they have from the beginning, and they demonstrate the killer instinct regularly. But they are so nice about it that they are sneaking up on most agents who don’t see it coming.
The lower-producing agents will be the first casualties, and they will just retire and watch from the sidelines as Zillow starts advertising that they have the best agents. They don’t mind spending $100 million per year on those ads, and no other real estate company comes close.
There are 11,000 agents in SD County, and around 3,000 sales per month. Agents who sell 2-4 houses per year won’t be able to keep up with superior agents teams that will be outfitted by Zillow to dominate the market.
Sellers shouldn’t get attached to any certain price – they aren’t the ones paying it. Instead, select an attractive list price, and judge the market’s reaction – and adjust accordingly.
In Carlsbad, Calif., 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% of the time, with disparities ranging as high as $70,000. In 25% of the sales, Zestimates were higher than the contract price. In 95% 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% of Zestimates were inaccurate and that disparities were as large as $190,000.
The owner of one New York home writes that a low zestimate is “hindering the marketability” of her home.
Zillow said its zestimates are just that, estimates, “not an appraisal” and are within 5% of the sale price just over a third of the time.
Zestimates are calculated using a formula that considers attributes like a home’s size, tax records and recent nearby sales.
Zillow argues a zestimate is also as likely to be high as it is to be low.
“So, that has become a problem because I understand that Zillow has a price, but in reality it’s not that. It’s what the market will bear,” Sievers said. “We will have to bring them back into reality and say, ‘hey, you know, there is a lot of different variations to a house and why a house would be higher or lower.'”
Anybody can evaluate a tract home with accuracy – the custom homes are much tougher, and depend more on personal visits. If you are in a custom area, hit the open houses (sellers and buyers)!
Zillow employs a team of economists who contribute to the Zillow Real Estate blog and release market data that competes with similar research from Case Shiller and others.
The company makes no money off the data but does it for audience growth. “We have a $10-million-a-year expense item for all this,” Rascoff says. “It goes much beyond PR,” he says. “This is data analytics.”
For Zillow users, the company’s trademark “Zestimate” is a way to gauge how much a home is worth. The company produces 110 million Zestimates three times a week, Rascoff says.
The margin for error can vary a lot by region and locale. In San Francisco, “we give ourselves two stars, which is not very good.”
In San Diego, “we give ourselves four stars.”
The wide range has to do with lots of different things, he says, including the quality of underlying data from county records and the like. And the data tends to be less accurate on the high and low ends of the market, because there are fewer comparison homes, or comps.
Still, he says, it’s a pretty good starting point, “considering that we have never been in the home.”
After all, he says, “we call it a Zestimate, not a Zappraisal.”
This is pertinent because I’m working on a Zillow add-on for the blog. Is Zillow relevant? It’s a starting point for most areas, but in pure tract-home neighborhoods they should be fairly accurate by now. Will sellers listen?
Hat tip to SM for sending this along, from the wsj.com:
On June 14th, Bill Trumbo, a 68-year-old retired financial analyst in Phoenix, Ariz., logged onto his bank’s online personal financial management account and found that his house in Phoenix had lost nearly $100,000 in value overnight.
Huh?
The explanation came that same day, when the real-estate website Zillow.com sent out a press release saying it had modified the formula it uses to estimate the value of some 97.3 million American homes, known as the Zestimate, to expand the coverage of its database of homes and improve accuracy. The company had added 25 million new Zestimates, incorporated user-submitted data about improvements and gave greater weight to more recent sales data.
For some, the value of their home went up. Others saw dramatic decreases. Overall, Zillow says, most adjustments in valuation were of 10% or less, and the overall margin of error for Zestimates dropped from 12% to 8.5%, not far off the typical 5% margin of error that most home appraisers claim.
Zillow says that slightly more Zestimates went down than went up, but declined to provide more specific information about exactly how many home valuations went one way or the other. The company also said that there was little variation by region, except that in some markets, Zestimates were made “more accurate” by the revision than others. In Denver, for example, the margin of error for home-value estimates went from 12.2% to 5.5%, meaning that Zestimates there are 55% more accurate than they were before, Zillow says.
