Are websites like Zillow accurate? Let’s compare my last five appraisals with Zillow estimates. These are all subdivision non-custom homes in the Sacramento area. I won’t give the property addresses of course because that would violate client confidentiality.
1) House in Tracy: Zillow high by 9.2%
Zillow said $295,000, whereas my appraisal was $270,000. The condition of this house makes a huge difference in market value. Actually, if this house was in decent shape, $295,000 would be a bit on the low side (quick sale value).
2) Elk Grove House: Zillow low by 1.4%
Zillow said $207,000, while my appraisal on this 95624 property was $210,000. Not too shabby. Pretty close.
3) Elk Grove House: Zillow high by 6.25%
Zillow said $170,000, while my appraisal on this 95758 property was $160,000.
4) Rancho Cordova House: Zillow high by 41.6%
Zillow said $177,000, but my appraisal on this house in the 95670 zip code was $125,000. Zillow most likely used an area as square footage that should not have been used since Tax Records shows this property with a much larger square footage than it actually has. Zillow was also unaware of condition issues. Even if the property was pristine, $177,000 would still be on the high side since remodels are typically $150-160K right now for this area. The market is fairly patchy too in this neighborhood as some streets show much better than others.
5) Sacramento Property: Zillow high by 30%
Zillow said $94,000, but my appraisal for this property in the 95824 zip code came in at $72,000. Remodeled or flipped properties tend to sell closer to $100,000 in this neighborhood. The subject is average in most regards- not a fixer.
Conclusion: It’s really hit and miss with Zillow. As I said in a previous article, websites like Zillow seem to have greater accuracy in tract markets with ample sales, but even then they are only so good because they cannot sift through value indicators like condition, important neighborhood boundaries, the difference between distressed sales and regular sales, upgrades, and a local appraiser’s knowledge of the market area.
Will websites like Zillow replace real estate appraisers some day? Personally, I’m not so concerned because: 1) These websites are not very accurate and therefore probably not a good source for making legal or lending decisions. 2) Lenders and other users of appraisal services need to use real humans who can do a professional and accurate job – and humans carry E&O insurance (ding, ding, ding). The bottom line is that it all comes down to money. Lenders probably can’t sue an online “machine” for messing up their value, but they can sue a human.
What do you think?