I don’t have an axe to grind. I’m not angry. And I’m not worried about Zillow replacing my job. I am concerned about the public trusting Zillow way too much though, so I wanted to share an eye-opening “Zestimate” example to help create conversation. Please give it a read and let’s talk in the comments.
Here’s the Zestimate history of a single family home in Carmichael, CA. I’ve been following this property for the past two months.
1) OVERPRICED: This home was originally overpriced in MLS at $380,000 and the Zestimate happened to be $380,414 when the home listed for sale.
2) PRICE & ZESTIMATE REDUCTION: The price was reduced to $335,000 in MLS and very soon after the Zestimate was changed to $346,364. Seeing this definitely gave me pause and made me wonder how much weight Zillow’s algorithm gives to the list price. Does it usually match the list price when a property is first listed? How much do price changes affect the Zestimate? These are reasonable questions. By the way, I shared about this house on Twitter and Inman News included it in a story.
3) ZILLOW DIDN’T GIVE MUCH WEIGHT TO THE SALES PRICE: The property sold at $350,000 eventually, but then Zillow’s estimate said the property was worth $327,960 after the property recorded at $350,000. So it looks like Zillow’s algorithm did not automatically give strong weight to the actual sales price.
4) ZESTIMATE DECLINES 8% IN 30 DAYS: Despite selling at $350,000 one month ago, Zillow now says this property is worth $301,972, which is a whopping 14% less than it actually sold for last month. Moreover, in just 30 days Zillow states the value of this home has gone from $327,960 to $301,972, which is an 8% loss in value. Did the market really decline by 8% this past month?
ZILLOW’S TRENDS ARE OUT OF SYNC: I can’t speak for every property listed on Zillow, but the Zestimate history in this case is definitely out of sync with the market in Carmichael. Values are certainly softening for the season like I talked about last week, but a decline of 8% in 30 days is simply not accurate. Look at the trend line in my graph that shows the market balancing out, and then look at the Zestimate connected by dots. That’s a huge difference in direction, right? Obviously Zillow hasn’t been inside this house, so we can give grace to an algorithm not knowing the full picture of value for an individual property, but to say the market has dropped by 8% is just inaccurate (and you don’t need to go inside a house to know that).
QUICK STUFF ON MY MIND:
1) It’s not just a “ballpark” for consumers: Despite Zillow touting itself as a “ballpark” valuation or starting point for consumers, many people treat it like a definitive value. Bottom line.
2) Blind trust: I find many consumers trust Zillow without thinking too much about accuracy. I don’t say this to be insulting, but there is a deep trust with this brand right now without many questions being asked. My advice? Think critically about examples like I showed above before you trust with all your heart.
3) Pricing according to Zillow: Many sellers are growing disconnected from the real market lately and they’re prone to overprice. Having sensational real estate headlines for six years is definitely one of the reasons why this is happening, but I think some of it comes down to consumers having more information than ever about prices and value. The struggle is when sellers feel so strongly that a Zestimate is legitimate that they aren’t willing to price below it or hear pricing suggestions from others. My advice? Listen to the market around you as well as real estate professionals. Don’t get so caught up in a Zestimate that you cannot see anything else.
4) Feeling stressed: I had a friend who used to get stressed out when his Zestimate would dip. He has since passed away, but I can only imagine how he’d feel about an 8% price decline in 30 days if that’s what Zillow said about his home. He’d be freaking out, and the truth is he wouldn’t be alone because there are lots of people who think of Zillow as way more than just a “ballpark”. In short, I recommend being careful about letting a website’s value claim affect your mood or even your real estate decisions. By the way, the New York Time’s wrote a piece last week called Why Zillow Addicts Can’t Look Away.
I hope that was interesting or helpful.
SPEAKING GIGS: By the way, if you’re around, I’ll be speaking at the Appraisal Institute’s 2018 Fall Conference in San Francisco on October 19th and AppraiserFest in San Antonio on Nov 1-3. I’m also doing a real estate blogging class locally on October 11th at SAR. Just a heads-up.
Questions: What do you think of Zillow? Is the public trusting this website and brand too much? Any stories to share?