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Zestimates

But Zillow says my house is worth a gazillion dollars

October 28, 2014 By Ryan Lundquist 17 Comments

“But Zillow says my house is worth….”. That’s a fairly common statement, and it highlights how much the public trusts Zillow these days. I’ve written other posts comparing 10 actual appraisals with Zestimates, but today I want to show you a property in Sacramento that is over-valued on Zillow by more than 100%. While Zillow is a neat tool, let’s consider some of the important factors that go into making values accurate, and where things went wrong with this property.

zillow details

Case Study: Let’s look at 5309 Broadway in Sacramento located in the Greenfair townhouse complex. You might be thinking, “C’mon, let’s cut Zillow some slack since this is a complex of only 45 units, and sales have been sparse for two years”. But Zillow sits at the adult table, and should have access to data from previous years. Moreover, notice above that Zillow actually shows the subject property sold in 2008 for $138,000, which gives Zillow a context to measure value.

Broadway Sales vs Zillow

The Zestimate: The Zestimate for this property is $321,679. The graph above shows all sales since 1998 in the Greenfair subdivision. As you can see, there have never been any sales above $300,000 in this complex – even during the height of the housing bubble in 2005. In this case Zillow is frankly wildly off since market value looks a whole lot closer to the red trend line.

Where did Zillow go wrong?

  1. nearby so-called similar sales to the subject propertyChoosing the Wrong Comps: The image to the right shows “nearby similar sales”, but these sales are single family detached homes, and NOT attached townhouses. When there are no recent sales in a townhouse subdivision, it doesn’t mean you should borrow from the single family detached market. Either you can use VERY old townhouse sales in the same subdivision, or maybe find a competitive complex somewhere in the market area. Again, it’s easy to cut Zillow some slack here since they might not know the units are attached, but even in that case the TINY lot size and history of sales should be given much stronger weight then.
  2. Data Fail: Zillow clearly didn’t consider even its own data in this situation. Despite an understanding that this property sold in 2008 for $138,000, something in Zillow’s algorithm is obviously not crunching the numbers correctly since the market has not increased from $138K to $322K. Moreover, not considering a listing in the complex that expired at $186,000 this month is also a failure. When there are few recent sales, sometimes much older sales and expired listings can tell us about the market.
  3. Wrong Neighborhood Boundaries: Zillow is considering single family detached homes in Elmhurst and other parts of Tahoe Park as you can see by the addresses in the “similar sales” image. These areas have far higher prices compared to the Greenfair subdivision. If you use the wrong neighborhood boundaries, there’s a good chance the value might be off-base too.
  4. Problems with Less Data: When there is little data to consider, it looks to be a struggle for Zillow. To be fair, it’s relly not easy for humans to crunch numbers either when there are not many numbers to crunch. Yet data is available. It’s just a matter of seeing the numbers in their proper context.

Zillow Values in Sacramento - by Sacramento Appraisal Blog

One Buyer’s Reasons for Using Zillow: I asked a current buyer how she is using Zillow as she hunts for a home. I thought her response was interesting and insightful. What do you think?

At first, it helps me get an idea of overall neighborhood values, so it helps me know where to look or not look. Then, when we do look at specific houses, it gives me a general value of the house. I like the low-high range tool better than the “Zestimate” because it helps me get a feel for the overall values of a neighborhood. So, if a house is priced near or less than the low end, I figure it probably needs a lot of work, and if not, it might be a good deal. If it’s priced near or over the high end, I expect it to be in very good condition or have some kind of bonus features. Likewise, if we really like a house and it appears to be a good value according to Zillow, we’ll consider making an offer.

We also use Zillow to see a price and sale history of the house (our realtor can do this too, but it’s easy for us to do with Zillow rather than constantly calling her!). We can see when it first came on the market and various price changes, whether it’s a flip or not, and sometimes even if it was a rental.

One thing I don’t like is that it doesn’t have very accurate listing information. There are many houses on Metrolist and Redfin that aren’t on listed as “for sale” on Zillow. So, I find myself going back and forth between the three resources and our Realtor’s updates! If Zillow and Redfin merged, I’d be happy!

I look at Zillow as a range or estimate. I know that it doesn’t replace a person on the ground, but we can’t bring an appraiser with us to each house! 🙂 Zillow can’t see a smelly smoker’s house or a house full of old wall paper that needs to be torn down, or a crazy neighbor with three boats on the front lawn, or a dog that barks at all hours. It also can’t see a potential great neighbor with kids our kids’ ages, or a shade tree that’s perfect for a tire swing or tree house. It also doesn’t understand that I’m OVER granite countertops! Enough with the granite!

Zillow isn’t usually off by 100%, but cases like this are worth noting because they highlight some of the issues a “machine” can have when valuing a property.

Quick Advice:

  1. Take Zillow with a grain of salt.
  2. Don’t excuse Zillow when it’s wrong. If it’s off-base, call it what it is. You can look at Zillow’s own accuracy rates and be the judge whether this is reliable data or not.
  3. Home owners, realize Zillow doesn’t know neighborhood boundaries, the condition of your home, all the same listings that are in MLS, and it may not even be comparing your house to the right type of property.
  4. Agents, be sure to look up the Zestimate before listing presentations so you can be prepared to answer when your potential client says, “But Zillow says….”. Consider some of the positive reasons why consumers like Zillow (there are some for sure), but then talk about the things you know as an expert – neighborhood boundaries, the mood of the market, sales and listings in the immediate neighborhood, expired listings, how long it it taking to sell in the neighborhood, the direction of values, the condition of the house, and what buyers are willing to pay more for in the neighborhood.

I hope this was helpful.

Question: Any stories to share, or any other points you’d add?

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Filed Under: Resources Tagged With: appraisals, appraiser vs Zillow, Greenfair subdivision, research, Sacramento, Zestimate vs Appraiser, Zestimates, Zillow, zillow's accuracy

Comparing 10 appraisals with Zillow Values

November 13, 2013 By Ryan Lundquist 14 Comments

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.

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Filed Under: Random Stuff, Resources Tagged With: accuracy of Zillow, appraisal vs. zillow, house appraisals, online valuation, real appraisals and Zillow, Sacramento Home Appraiser, Zestimates, Zillow 2013 values, zillow values, zillow vs appraisals

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

Are websites like Zillow accurate? My last five appraisals vs. Zillow

March 7, 2011 By Ryan Lundquist 7 Comments

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?

If you have any real estate appraisal, valuation consulting, or property tax appeal needs, contact me at 916.595.3735, www.LundquistCompany.com or via Facebook.

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Filed Under: Appraisal Stuff, Resources Tagged With: 95624 zip code, 95758 zip code, 96570 zip code, accurate appraisals, appraiser in Sacramento, appraisers in Sacramento, Elk Grove appraiser, Lundquist Appraisal Company, Rancho Cordova Appraiser, reliable appraisals, Sacramento Appraisal Service, sacramento appraisers, Sacramento Real Estate Appraiser, Zestimates, Zillow Estimates, Zillow vs real estate appraiser

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