Comparing 10 appraisals with Zillow Values

I had a conversation recently with a home owner about the online valuation site Zillow, and it went like this:

humans vs machinesOwner: Your value was right on.
Me: Wonderful. That’s great to hear.
Owner: It was right in line with Zillow.
Me: Oh, okay.

This conversation made me smile since like many consumers, the property owner thinks of Zillow as the standard for accuracy. After all, Zillow is a very well-known brand that is becoming a household name. Heck, even President Obama used Zillow to moderate a conversation on housing a few months ago. We still need to ask the question though, how reliable is Zillow? Let’s take a look at 10 recent actual appraisals compared with “Zestimates”. I would be curious to hear your take too – especially if you’ve had a recent appraisal. How much of a value difference was there between the “human” (appraiser) and “machine” (Zillow)?

  1. Tahoe Park Area House:  Appraisal: $133,000;  Zillow: $114,173 (-14%)
  2. Del Paso Manor House: Appraisal: $332,000; Zillow: $305,000 (-8.1%)
  3. Midtown Fixer: Appraisal: $130,000; Zillow: $203,000 (+56%)
  4. Citrus Heights House: Appraisal: $278,000; Zillow: $240,000 (-13.7 %)
  5. Citrus Heights House: Appraisal: $138,000; Zillow: $194,000 (+40.6%)
  6. College Greens House: Appraisal: $259,000; Zillow: $282,000 (+8.9%)
  7. Fair Oaks House: Appraisal: $630,000; Zillow: $612,000 (-2.8%)
  8. Galt House: Appraisal: $191,000; Zillow: $188,000 (+1.5%)
  9. Mather House: Appraisal: $255,000; Zillow: $238,000 (-6.7%)
  10. Capital Village House: Appraisal: $233,000; Zillow: $191,000 (-18%)

appraiser vs zillow

Appraisals vs. Zestimates: First off, I am not anti-Zillow since I believe there is a place for Zillow in today’s world. I’m actually a fan of their graphs, rental estimates, neighborhood information and the power of their brand. Ultimately I tend to give little weight to “Zestimates” for the following four reasons:

  1. Condition: Zillow has no idea about condition or upgrades. This often makes an enormous difference in value (obviously).
  2. Knowing the Niche: It is very challenging for Zillow to capture the idiosyncracies of niche areas that fetch higher or lower prices for whatever reason.
  3. Margin of Error: Zillow posts their margin of error, and it shows they are off by quite a bit (click the link). Of course to be fair, appraisers can be off too.
  4. Distressed Sales: I’ve noticed at times Zillow struggles to see beyond distressed sales. For instance, the vast majority of sales in Capital Village (#10) have been short sales recently that sold for too little, and Zillow was unable to interpret true market value around $220,000 to 230,000 compared to all the distressed data points around $190,000.

Question: Any thoughts, insight or stories to share? I’d love to hear your take.

If you liked this post, subscribe by email (or RSS). Thanks for being here.

Comments

  1. Erin says

    Good to know. The Zillow estimate for my home doesn’t include upgrades or the second unit on our lot and for some reason says we have 8 parking spaces! I mostly go to Zillow to see what homes in the area sold for, not for what Zillow thinks they are worth. And maybe for the overall increase or decrease of value.

    Here’s a question: at what point (or not) does Zillow have any influence on either a appraisal and/or what the County Assessor values the property? If Zillow is as off as indicated by your post, then how much influence does Zillow really have?

    • says

      Thanks for the comment Erin. I’m not surprised that the estimate is not close – especially considering the upgrades and second unit. I don’t know what area you are located in, but my area has spotty information in Tax Records when it comes to 2nd units. This means when Zillow gets information like this from public records, the results will often be far off.

      Zillow does not have any influence on an appraisal. It’s of course interesting to see what a tool like Zillow comes up with, but what Zillow says has no bearing on what an appraiser actually comes up with (or at least it shouldn’t). It’s the same with what a county assessor says too. An appraiser really needs to analyze the market rather than what a website or even an Assessor says. Assessors are using their valuations for tax purposes too, which usually means a date such as January 1 of any given year is used to determine the value. In California a property purchased in 1980 might have an assessment based on the purchase price in 1980 (plus 2% each year), which means the assessment could be wildly off compared to current market value).

      I think you bring up a great question, and that’s something consumers and the real estate industry needs to answer. Zillow has really built quite the brand and they seem to be putting themselves in a position to be a main voice in the real estate industry (even if there values are very spotty like many of the ones above). As a side note, the unspoken irony I see is that many agents privately grumble about Zillow because of how powerful they have become, but at the same time these same agents don’t say anything negative publicly because they need positive reviews on Zillow…. Interesting, huh?

      For starters, consumers can visit Zillow’s accuracy tables here: http://www.zillow.com/howto/DataCoverageZestimateAccuracyCA.htm

  2. says

    Great information and thanks for sharing. Many consumers take Zestimates to be true and accurate. As you’ve pointed out it’s an estimate and not as accurate as some would believe. Zestimates and appraisals are opinions of value.

    Computer generated values are just that, what a computer estimates the value to be based on data that’s been put in.

    Appraisers give much more accurate values because they are trained to consider a lot more details, look at the condition of homes and do a more thorough analysis.

    Appreciate this article from an appraiser’s perspective. Thanks again for sharing.

  3. says

    Zillow goes back and changes prices in the past too. The also post ‘sales’ that are really interspousal transers where a $400k home ‘sells’ for $100k. This might change things. Other sites have estiumates that are even more different from Zillow. My $390k house changes to $357 in a few hours at Zillow, and zip realy thiks its worth $249k.

    • says

      Well said, Steve. Thanks for sharing the inside scoop on your house. Some other big data companies include transfers as sales at times and consider them as cash sales. This can really skew data and make it look like there is way more cash in the market than there really is. The same holds true in principle for counting foreclosures or certain transfers as sales. It doesn’t make for strong data.

  4. Brett says

    I agree with your article. Too many people are relying on what zillow actually says. People need to stop using that amount and rely more on actual appraisers. Like you stated, it does not take in to consideration condition and any updates. I have updated almost all of my house inside, as well as numerous things outside such as a new walkway and professional landscaping. In March 2014 zillow said it was 175k. Now it says 157k. I am sure it is because of sales in the area but there is no way it should have went down. I live in Boardman Ohio.

    • says

      Thanks so much for the comment and story Brett. People want to be able to see their home’s value whenever they wish, which is great, but sometimes homeowners end up putting way too much weight on what Zillow says. Just yesterday I emailed a property owner who I did an estate appraisal for a while back. Now that the property is on the market and pending at a similar level to the appraised value, a family member of the heir is challenging the contract price because Zillow shows the value is 8% higher. Unfortunately Zillow does not account for this house being outdated, and it may not give much weight to a busier street either. We’ll see what the family member says after the email.

  5. says

    Interesting article. When we first started looking at Zestimates of our house and others, they seemed a bit high, but could reasonably be at the upper range. Zillow seems to do a poor job of separating distressed sales and foreclosures from normal sales, as you point out. What they do that traditional CMAs don’t do is try to project trends and apply general trends to where prices MIGHT go. And of course, as you also point out they give no consideration to the condition of the property.

    Since listing our house on Zillow we’ve closely followed the Zestimate as it trended upward. One house nearby closed really low and overnight we saw the Zestimate drop by over $30k. Fortunately we never took that at face value and also had CMAs from a few local realtors, and also used Zillow’s recent sales data to corroborate.

    Part of what Zillow seems to do is drop zestimates in the blink of an eye, then project what the estimated sale price will be, and phase it in over a period of weeks. When there are more closings in an area, it allows the zestimate to be updated more quickly. If there’s a slow period and one or two below-market sales, the zestimate can drop like a rock.

    I believe Zillow also looks at the time since the last recorded sale (and as other commenters have pointed out, some of these recorded sales are interspousal transfers and other “paper” transactions). The house next door to us sold in December 2013 and was a fairly solid corroboration of our own pricing, and Zillow did not drop its zestimate as it did with ours.

    • says

      Thanks for the commentary Henry. It’s interesting to hear your take, and it sounds like you’ve paid very close attention. It’s a bit of a mystery how the Zillow algorithm works. I clicked on your link, and it looks like you are selling your home. I wish you the best!

Trackbacks

Leave a Reply

Your email address will not be published. Required fields are marked *


*