A couple of weeks ago real estate columnist Kenneth Harney reignited a heated real estate conversation about the use and value of “Zestimates” — the automated property value estimates that appear alongside otherwise objective property information provided by Zillow, the dominant real estate information site on the Web.
Throughout the real estate community agents complain about these Zestimates, which — despite Zillow’s disclaimers — are often taken as gospel by both buyers and sellers. (Typically, of course, the Zestimate is accorded such status when it happens to support the position of the concerned principal. Buyers quote Zillow when the Zestimate is low, Sellers when it is high.)
Agents around the country have weighed in on comment posts and the blogosphere. Some say Zestimates are consistently too high, some say too low, and some say they are just too often erroneous — giving both low and high valuations.
In my own experience, a decidedly unscientific sampling of recent closed sales showed that the Zestimates had tended to be on the high side, with a median error rate of 10%. But, credit where it’s due, some of the Zillow estimates were, as far as real estate valuations go, right on the money. One Zestimate indicate a $480,439 value for a property that ultimately closed at $484,000. Pretty impressive for a remotely-located automated valuation system.
Zillow — which makes its money on advertising purchased by real estate agents who have supplied it with critical information (listings) in the first place — is sensitive to the problems that Zestimates can cause for agents. (It’s awkward to be an agent who appears to be endorsed by Zillow when your CMA indicates a value $50,000 lower than the Zestimate.) To that end, Zillow recently made available to its agent-customers a document entitled “Talking Points: Scripts for Explaining the Zestimate to Clients”.
Zillow spokespersons are fond of saying that Zestimates are not appraisals; rather, they are “a good starting point” or sometimes “just a starting point.”