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.

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How does Zillow compare with 10 real appraisals?

I have people ask me about Zillow all the time. In fact, it came up last week at a discussion I led for Realtors. Is Zillow accurate? Do I use Zillow as an appraiser? Let me share 10 recent appraised values in 2013 and compare them with “Zestimates”.

1) Elk Grove Condo:  Appraisal: $90,000; Zillow: $79,454 (-11.7%)
2) Rancho Cordova House: Appraisal: $172,000; Zillow $155,567 (-9.5%)
3) East Sacramento House: Appraisal: $315,000; Zillow $399,893 (+26.9%)
4) Elk Grove House: Appraisal: $262,000; Zillow: $267,676 (+2.1%)
5) South Land Park House: Appraisal: $217,000; Zillow: $273, 293 (+25.9%)
6) Roseville Condo: Appraisal: $111,500; Zillow: $113,914 (+2.1%)
7) Roseville House: Appraisal: $415,000; Zillow: $396,763 (-4.4%)
8) East Sacramento House: Appraisal: $232,000 ; Zillow: $368,000 (-36.9%)
9) Elk Grove House: Appraisal: $305,000 ; Zillow: $264,340 (-13.3%)
10) Del Paso Heights House: Appraisal: $65,000 ; Zillow: $76,348 (+17.4%)

Is Zillow accurate? It’s hit and miss. Ultimately I don’t consider Zillow to be reliable. As you can see above, some of the values were really close, but others were not close at all. An online valuation site cannot possibly know the idiosyncrasies of a real estate market – not to mention interior condition, level of charm or quality of updates either. Sometimes tract neighborhoods with a high level of data seem to have more accuracy on Zillow (not always true), while neighborhoods where each street and house are different can be very far off (even hundreds of thousands of dollars off the mark). For instance, in Yolo County data can be very sparse, so an online “valuation” without actual data isn’t all that compelling. I would say if you use Zillow regularly, use it for what it’s worth, but understand its limitations.

Do I use Zillow in my appraisals? I never use Zillow to guide or support values in my reports. Sometimes out of curiosity I will check Zillow because I wonder how a lender might view a property if they run an AVM (Automated Valuation Model).

By the way, I don’t have any problem with Zillow. This post is simply written as an FYI for clients and consumers.

Questions: How do you use Zillow? Any comments or stories to share?

If you have any questions or Sacramento home appraisal or property tax appeal needs, let’s connect by phone 916-595-3735, email, Twitter, subscribe to posts by email (or RSS) or “like” my page on Facebook

Does a low sale on your street kill your property value?

It can be a huge concern when you go to sell a property and a home down the street just sold for way less than what you planned to list your home for. Does this one sale hurt you? Sometimes lower sales will indeed harm your property value, but there are also reasons why lower sales might not pose a threat to your value. Here are a few things to keep in mind from an appraiser’s point of view:

  1. One sale doesn’t make or break the market: Appraisers need to consider multiple sales throughout the neighborhood and competitive market area. For instance, if one sale on your street closed at $250,000, but everything else has sold at $350,000, the lower sale is probably more of an outlier than anything. This one “lone ranger” doesn’t establish the trend of values in the neighborhood or trump all other sales either because it’s not consistent with the rest of the data (even if it’s the most recent sale). This assumes of course there has been no big issue to cause a dramatic decline in property value. On the other end, just because one sale closed $50,000 higher than everything else does not mean the market is now willing to accept all other properties at that level either. Outliers can be on the low end and high end of the market.
  2. Not all sales are “comps”: It’s easy to think of all sales as comps (comparable sales), but just because a property sold does not mean an appraiser is going to use the sale as a comp. After all, a “comp” is a property that a buyer would theoretically consider purchasing instead of yours because it is similar. If the sale down the street is 800 square feet smaller, has two less bedrooms or a lot half the size of yours, it’s probably not anything to sweat about because it may not even be grouped into the same comp pool by the appraiser (hopefully not – keep your fingers crossed). If there are no truly competitive sales though, the appraiser may need to use less comparable properties and then make adjustments up or down based on the market’s reaction to those differences. Ultimately, it’s usually better in my opinion to use older more similar sales and then make appropriate adjustments based on how the market has changed over time.
  3. Distressed sales: It’s important to sift through distressed inventory because these sales tend to close at lower levels. Real estate markets are often segmented with traditional sales at the highest level, and then bank-owned sales and short sales at lower levels. Sometimes there is a hefty difference of 10% or so between traditional sales and distressed sales, while other times the difference is minor or non-existent. The large price gap in many cases is often due to things like inferior condition, quick marketing to dump the asset or a swift sale to avoid seizure by the bank (short sale). Distressed sales don’t always sell at lower levels, but that’s often the case. In short, before you stress out about a low sale, realize a competent appraiser is going to analyze the lower distressed sale and either not use the sale or give it less weight in the report if need be.

Do these sales kill property value? I wanted to share these scenarios above to help show that a lower sale in the neighborhood may not always be a “value killer” because it’s not always reflective of the market. Bottom line. However, there are definitely scenarios when a lower sale is going to impact your property value. If a truly competitive property was listed on the market for a reasonable time and had a reasonable number of offers all around the list price, it’s hard to discount data like that (especially if it is widespread through the tract, which means the “lower” level might actually reflect the market). Moreover, sometimes home owners are not in touch with just how far the real estate market has declined in the Sacramento area (and throughout the United States). Keep in mind too some owners rely on valuation websites like Zillow, but there can be a huge difference between appraisals and Zillow.

Anything you’d like to add? Feel free to comment below. I’d be curious to hear the perspective of Realtors especially.

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