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Humans vs. Machines

Is Zillow accurate? You be the judge.

June 6, 2012 By Ryan Lundquist 8 Comments

After completing an appraisal recently on Ambassador Drive in Rancho Cordova, I wanted to see what Zillow said about values in the neighborhood (for kicks). While Zillow is sometimes not too far off in typical tract neighborhoods like this, I was very surprised in this case to see Zillow had not given more weight to recent sales prices in MLS to establish their Zestimates. See three examples below with my commentary. I did not appraise any of these properties, but I do know them well since I used them as comps in an appraisal report.

Example 1  –  10703 Ambassador Drive: This property sold at $220,000 on MLS and is really the top sale in the immediate neighborhood. But to its credit it has recent upgrades, a larger than typical square footage and it backs to the American River Parkway. Zillow recognizes the sale in MLS at $220,000, but still assigns a value of $178,000 for their Zestimate, which is 19% less than the MLS sale. For reference, there were six offers on this property in 14 days when priced at $220,000.

Zillow Sale 1 by Sacramento Appraisal Blog

Example 2  –  10625 Ambassador Drive: This renovated property sold at $194,000 in MLS, but Zillow assigns a Zestimate of $160,500, which is 17% less than the sales price in MLS. For reference, there were six offers on this property when priced at $189,800 in only four days of market exposure.

Zillow Sale 2 by Sacramento Appraisal Blog

Example 3  –  10504 Ambassador Drive: This house sold in only 9 days of market exposure and had 9 offers total. This property sold at $187,000 in MLS, which Zillow acknowledges, yet they still assign their Zestimate as $160,500, which is 14% less than the sales price in MLS. For reference, this property sold previously as a bank-owned fixer in the past six months, and was since rehabbed throughout.

Zillow Sale 3 by Sacramento Appraisal Blog

What can we learn from this situation?

  1. A machine can only do so much to value properties. The humans win in this case.
  2. Zillow doesn’t always do so great when the market is segmented like this neighborhood. There is a huge value difference between foreclosures needing fixing and renovated arms-length sales.
  3. Kudos to Zillow for recognizing that there is a difference between sales price and value. While their values are unfortunately way off in this instance, many in the real estate community confuse sales price with value. A sales price may or may not be the same as value.
  4. Real estate markets are complex and not easy to interpret – even for humans. The market has been changing quite a bit over the past few months as inventory has decreased in the Sacramento area. Zillow is not capturing this change for these properties at least.
  5. Find local real estate specialists you can trust. So many people sincerely rely on online valuation websites. “But Zillow says….” is a very frequent response to hear from home owners because they had a level of trust in the accuracy of data found there. I’d simply say to take the online sites with a grain of salt.
  6. Look up Zillow accuracy tables on their website and you be the judge if the margin of error is reliable enough for you. I recommend reading the definition of “median error” at the bottom of the accuracy page.

As an appraiser, I don’t have a beef with Zillow at all, and it’s not my mission in life to get others to not use them either. In fact, one of the things I like about their website is the historic graphs they provide in the data section. This was simply an FYI post for consumers.

What do you think?

If you have any questions or Sacramento area real estate appraisal or property tax appeal needs, contact me by phone 916-595-3735, email, Twitter, subscribe to posts by email or “like” my page on Facebook

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Filed Under: Appraisal Stuff, Internet, Resources Tagged With: analysis of Zillow, appraisal service sacramento, appraiser vs Zillow, Humans vs. Machines, is zillow accurate, is zillow reliable, online appraisals, Rancho Cordova Appraiser, Zestimate vs Appraisal, Zillow 2012, Zillow accuracy

How does Zillow stack up with actual appraisals?

October 21, 2011 By Ryan Lundquist 14 Comments

We can find almost anything online, right? But what about property value? How do Zillow values compare with actual appraised values? Let’s compare some recent appraisals with values from Zillow (“zEstimates”).

  1. North Sacramento home: Appraisal: $60,000;  Zillow: $87,000 (+45.0%)
  2. Del Paso Area home: Appraisal: $110,000;  Zillow: $70,000 (-36.0%)
  3. College Greens home: Appraisal: $270,000;  Zillow: $290,000 (+7.5%)
  4. Serrano home: Appraisal: $550,000;  Zillow $466,000 (-15.0%)
  5. Rancho Cordova home: Appraisal: $125,000; Zillow: $128,000 (+2.4%)
  6. Elk Grove home: Appraisal: $185,000; Zillow: $185,100 (0%)
  7. Elk Grove home: Appraisal: $280,000; Zillow: $255,000 (-8.9%)
  8. Sun City Lincoln Hills: Appraisal: $415,000; Zillow: $403,000 (-3.0%)
  9. Orangevale home: Appraisal: $145,000; Zillow: $165,000 (+14.0%)
  10. Land Park area home: Appraisal: $305,000; Zillow: $270,000 (-11.0%)

In my experience Zillow is very much hit and miss. It can seem more accurate in newer cookie-cutter neighborhoods, but wildly off in other cases when neighborhood boundaries are very tight, data is scarce or condition varies greatly in the local market. Additionally, it seems to me that the listing price in MLS is given strong weight because Zillow can pull that data over to use in its algorithm.

I know you’re expecting me to say all this, but it’s true. Online valuation sites can be a nice tool to tinker around with for real estate and rental values, but nothing replaces the human element. This is really a classic “Terminator principle” example where “humans vs machines” go to battle and humans win (sorry to give away the end of the movie). While algorithms can be very powerful, they cannot see important neighborhood boundaries, quality of construction, high-level craftsmanship, the motivation of buyers and sellers, condition, positive or negative location factors, any sense of charm or appeal, and so many other elements. On top of all of this, the real estate market in the Sacramento area has been a wild ride and it’s not easy to interpret. So many neighborhoods in Sacramento have close to 70% of all sales being either foreclosures or short sales, which complicates sifting through data to establish true market value. Distressed sales tend to sell for less, but not always, so it makes for a very interesting process to properly value a house.

My advice? Enjoy Zillow for what it is and take it with a grain of salt, but trust an experienced and local human appraiser for the final say.

Go check your Zillow value. Does it seem realistic to you? I’m curious.

If you have any questions, or real estate appraisal or property tax appeal needs in the Greater Sacramento Region, contact Lundquist Appraisal by phone 916-595-3735, email, Facebook, Twitter or subscribe to posts by email.

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Filed Under: Appraisal Stuff, Market Trends, Resources Tagged With: accuracy of Zillow, appraisal service in Sacramento, appraisers in Sacramento, Humans vs. Machines, Lundquist Appraisal Company, Real Estate Appraiser in Sacramento, Sacramento real estate appraisals and Zillow values, Sacramento Real Estate Appraiser, Terminator, Zestimates, Zillow values and appraised values, Zillow vs Appraiser

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