Study Blasts Zillow. Hallelujah!
March 16th, 2010 categories: For Homeowners, For Sellers, Real Estate News, Technology
When the Web site Zillow debuted in 2006, it became an instant hit with the public. Homeowners, and buyers, loved visiting the site to see what residences around the Chicago area were worth.
It never seemed to bother people that the Zillow estimates, known on the site as Zestimates, were rarely accurate. The Zillow people claim that they base their home value estimates on public records and local real estate sales. But I always found their estimates of properties in Chicago neighborhoods such as Lincoln Park, Lakeview and Lincoln Square to be wildly inaccurate. And I haven’t been shy about expressing this view to my clients.
Still, people flock to the site. And they gossip about it whenever Zillow comes out with one of its lists claiming that home values in Chicago have either risen or fallen.
I now have some more ammunition to support my contention that Zillow’s home value estimates are next to useless. A University of Texas study conducted by Daniel Hollas, Ronald Rutherford and Thomas Thomson concludes that Zillow’s Zestimates are not even better than homeowners’ own estimates.
The University of Texas study focused on 2,045 homes in Arlington, Texas, that sold in the second half of 2006. According to the results, Zillow overestimated the value of 40 percent of the homes by more than 10 percent. Only 0.88 percent of homes had their values underestimated by more than 10 percent.
What does this mean? Only that Zillow tends to overestimate the value of homes by a rather large sum. It’s what I, and many other real estate professionals, have long said about the site.
Zillow has disputed the study, of course. The company earns its living by providing its Zestimates. But I think I’ll side with the university professors – they tend to be smart people, after all – on this one.
Zillow might be fun to visit. Go ahead and type in the address of your Lakeview condo or two-flat in Ravenswood. But remember this: The best way to find out the true value of your Chicago residence is to work with a REALTOR® who knows your neighborhood. The true value of your home isn’t what Zillow guesses it to be, it’s what buyers are willing to pay for it.
PLEASE CLICK HERE TO VIEW PROPERTIES NOT YET ON THE MARKET.
Greetings! Geoff from Zillow here.
This study examines Zillow’s Zestimate values in one city in Texas more than three years ago. In addition to being limited to only one city in the U.S., the study does not compare sales and Zestimate values during the same time period; it looks at sales in 2006 compared to Zestimate values in January and February 2007 – apples and oranges as it’s two separate periods of time. It’s unfortunate this limited study is being published and publicized so far out of date. It’s also unfortunate that they did not reach out to Zillow to learn more about our approach to home valuation for this study; we would have been happy to talk to them as we are very open and transparent about both our accuracy and the intended use of Zestimates as a starting point for learning about home values.
Zillow produces Zestimate values for 70 million homes, covering most of the U.S., and presents these values alongside a value range (high and low end of possible home value), comparable home sales, recent neighborhood sales, current for sale listings and other data as a starting point to help users understand home values. The site states that this is not an appraisal, and users should consult a professional appraiser or real estate agent for a full picture of a home’s value. The following text is presented on every home details page on Zillow, with links to more information, as well as Zillow’s county-by-county accuracy statistics across the U.S.:
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A Zestimate home valuation is Zillow’s estimated market value. It is not an appraisal. Use it as a starting point to determine a home’s value.Learn more: http://www.zillow.com/wikipages/What-is-a-Zestimate/
See data and accuracy in this area
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As per the link above, Zillow charts accuracy for every area covered across the U.S., and updates this data several times a year.
If you have any other questions do not hesitate to contact me.
Geoffrey O’Neil
Zillow.com
geoffreyo@zillow.com
Twitter: @geoffoneil
I am a Realtor in Charleston, SC, and I, too have often been frustrated by the “Zillow Situation”. I think the fact of the matter is that people are going to believe what they want to believe. It’s understandable, considering the situation that many Sellers are currently faced with. I think that Zillow is a great tool for giving Sellers a ballpark estimate, but I agree with the poster that a Realtor is going to be able to give you the most accurate estimate. Zillow does not take into account the intricacies of the local market that a Realtor is going to be aware of. For instance, I don’t believe that Zillow has info on planned improvement projects, new developments planned, etc., nor does it have knowledge of how these things will likely impact price and timing of the sale. A Realtor is going to be able to advise based on where the market is heading, absorption rate, etc. By the same token, I have been frustrated by appraisals. I constantly hear Sellers stating the appraised value of their home. Understandably, they don’t want to drop their price below their (often outdated) appraised value. The point that I frequently make when faced with this is that the appraised value and the price a Buyer is willing to pay have very little to do with one another in today’s environment. You are better off looking at sold comps, but also pricing to be competitive with other active listings. Your best bet is to look at Zillow, do all your research, and then find a Realtor that you trust (this part is important)and take what they tell you to heart. You are ultimately in the driver’s seat for pricing your home, but it is extremely important that you make smart decisions. A Realtor deals in your market day in and day out, and, if you have a good one, they know what they are talking about.
This just goes to show that there are many more factors that go into evaluating property values than just crunching numbers from a database. A real estate professional can take into account a lot of other factors when advising clients. Online information only tells part of the story. I recommend that buyers and sellers seek the assistance of a licensed real estate professional.
Hey, this was great
Thanks, I’m definitely subscribing
Great post! Thanks!