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.
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.
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.
What can we learn from this situation?
- A machine can only do so much to value properties. The humans win in this case.
- 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.
- 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.
- 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.
- 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.
- 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