Tim’s Two Cents – How Reliable are Zillow’s Property Valuations (aka Zestimates)?

I hope that our January periodical reaches you with all the anticipation of a great 2016 as we are a few days into the new year.  The market is hot!  We have 7 new listings/escrows combined as we begin the year.  The Federal Reserve Bank finally increased the member bank’s overnight borrowing rate by .25% at their December meeting. Although mortgage rates are more closely tied to the 10 year treasury, this increase will more directly impact credit card rates, equity lines of credit, auto loans and other short term credit linked to adjustable interest rates. This move signals a belief in the strength of our nation’s economy and a shift in economic stance. This is what I believe is providing a lot of consumers with the confidence to buyer or sell real estate now rather than later.

I read an interesting article that was written about a year ago, but that touches on a subject that I encounter every day.  Zillow.com is now the most widely used consumer real estate web site.  While the site provides useful information on active listings that we post in our broker maintained Multiple Listing Service (MLS), maps, photos and specifications on properties, I believe that they grossly over step their bounds with the Zestimate valuation link. 

There are so many facets that go into providing an accurate appraisal of a property’s current fair market value.  The article even states that Zillow CEO Spencer Rascoff said that consumers are to look at their valuations presented in the Zestimates 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.”

To properly provide an accurate valuation an experienced broker or licensed appraiser has to walk the entire property inside and out and take in the full experience.  An interview of the current owners, if possible, provides loads of valuable insight to learn what has been added, but not visible to the eye, any disclosure issues with the property and what the incurable defects are, if any.  I look at how the current owner has kept up with deferred maintenance of both the home and yard space, sun angels, does the home have a lot of natural light, sounds such as road or airplane noise, the existence of odors from pets or moisture, condition and current relevance of the fit and finish items in the home and intangibles like storage, functionality of the kitchen, bathrooms and garage all go into evaluating a home’s current  worth compared to similar properties that have sold over the last 3-6 months. See, these all involve a human being utilizing their senses to assist in determining what a home’s true value is at a current point in time.

For these reasons, I see it to be irresponsible to feed the general public a computer generated number on their home address.  Pricing a property appropriately to sell or evaluating and guiding a buyer through the offer process are two of the most important tasks I’ve performed every day for the last 21 years!  I relate the Zestimate to inputting generally observed conditions regarding your body and expecting a web site to tell you that you are healthy or not.  Our office manager is Ryan Brodmann . Through his recent research we have determined that San Diego has a Zestimate median error rate of 6.1% and still gets a four star rating. That’s a $30,500 difference on a $500,000 home! That is a big difference in terms of selecting a proper sales price for a listing or a buyer attempting to rely on this information and drawing a line in the sand with a seller when negotiating for a purchase!

Please enjoy the article and provide me with any questions and/or feedback.  I am available to assist you or anyone you know with determining the current value of your/their home anytime.  Just call or email me to schedule my visit to your home!

I hope that you have found me experienced insight useful and be sure to look out for our February newsletter when I will tackle a topic that a lot of our followers have asked me to write about-Set Price vs. Value Range Marketing, Why would a Consumer Ever Offer Anything but the Lower Price on a Property with a Range?

If you have a topic that you would like me to address, please send it over.  It is always great to hear from you!

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Skoglin