While working recently, I was enduring the normal flood of emails pounding in from all points beyond. I use Outlook and love the email features it provides. Incoming emails superimpose themselves on my desktop for a second before fading into the oblivion of my inbox. It gives me few moments to decide how to respond. In many cases, I simply let the ads for homes in Aptos and timeshares in Tijuana pass by. I was jolted, however, by an email stating,
“Home Values in San Leandro Decreased.”
My thought was, “What planet is this person on not to know prices are INCREASING right now?” Alameda County home prices in the lower end of the market are definitely up. And rising.
I clicked through and ... it was from Zillow. While the first to agree that Zillow has some fun tools (I have Zillow’s app on my iPhone), as a professional REALTOR I don’t rely on Zillow to do my job. Especially when it comes to establishing property values. Nor do professional appraisers. And, if you really think about it, if appraisers had a tool that would make their job more effective and easier, they’d use it. They don't.
I wish I had a dollar for every time someone ran a Zestimate past me. Truth is, it means almost nothing. It’s Zillow’s name for a “Guesstimate” which, no matter how cutely you frame it, is still a guess. The word zest refers to spices, garnishes or spirited enjoyment. Tack that onto an estimate and you have a spirited or spicy GUESS.
· Buyers employ them to justify how much they’re willing to offer for a specific property.
· Sellers believe they can utilize them to justify selling prices way above actual market value.
Wrong on both counts.
Zillow takes previous sales from the MLS and factors in information from the county tax records. In other words, they use current data and records from a few years ago. As everyone knows, outdated data provides speculative results. Which is why two identical houses beside each other on the same block can end up with drastically different Zestimates.
Zillow is justifiably very proud of the algorithms behind the guesses. They state: “It is not an appraisal. It is a starting point in determining a home's value.”
I beg to differ.
I believe you should START with a REALTOR rather than a proprietary formula. In that way, all of the guessing is out of the way from the start. No matter how sophisticated a mathematical formula, it cannot replace a pair of trained eyes from a professional REALTOR sifting through all the market data to do a CMA (Comparative Market Analysis).
That’s not to say that there are not individuals out there who cannot crunch the data themselves. I’ve met some amazing engineers who’ve managed to nail the market spot on. But it takes a lot of work and daunting spreadsheets. Plus, the data is hard to gather in a cohesive format and doesn’t automatically update. Most average Joes are not up to that kind of a challenge. Which is why Zillow’s approach appears, on the surface, to be an ideal solution.
To use Zillow’s own figures for Alameda County their accuracy is as follows:
· Within 5% of the sales price: 22.9%
· Within 10% of the sales price: 48.2%
· Within 20% of the sales price: 82%
· Median error: 10.4%
In other words, for a $400,000.00 home, there is a 78.1% chance they will be off by MORE than $20,000 up or down - a differential of $40,000.00. 78.1% chance. 51.8% chance they’ll be off by more than $40,000 either direction. That’s a lot of chances. And the last time I checked, $20,000.00 - $40,000 is a LOT of money.
In contrast, REALTORS have the data and the tools at their fingertips and can perform an accurate CMA quite quickly. Accuracy or a guess? Which has more value at the end of the day?
In my opinion, a Comparative Market Analysis trumps a Guess any day.