Take Zillow & Trulia With a Grain of Salt
I have a current client that I am currently negotiating a deal with and the contacted me all up in arms about the property with the belief that the house wasn’t coming with the standard kitchen appliances, or HVAC in the sale. So I asked them where did you get that information from?
Almost knowing what they were going to say without having to ask, their answer Trulia. As if Trulia and Zillow are the “Gods” of All knowing real estate?! People, those two companies are NOT real estate companies, they are ONLY tech companies with web developers writing code that pumps out information they can scrap and dig up from other sources, and HOPE that it is accurate in which most of the time it is not. Furthermore, since they themselves are just scraping, and pulling in data from other 3rd party sources who’s to say that the source of their data is even accurate. I wrote an article about this very topic “Realtor Will Always Be Best Place For Information“, because of this exact problem. In the case of my clients they were looking at what was the OLD original listing from 2010, and here we are in June of 2015. So because of Trulia I had to calm down my buyers and let them know that the house we were working on getting them did indeed come with the normal conveyed personal property for most transactions in our area of Charleston SC.
Zillow is the most popular online real estate information site, with 73 million unique visitors in December. Along with active listings of properties for sale, it also provides information on houses that are not on the market. These two sites are called aggregators, meaning they compile as much data from wherever they can get it, then archive (save it) so who knows what you’re going to get.
Most prospective sellers are familiar with Zillow’s “Zestimate”, and use it often where they will quote that number to their agent as a gauge of market value. The LA TIMES questioned the chief executive at Zillow: If a house for sale has a Zestimate of $350,000, a buyer might challenge the sellers’ list price of $425,000. Or a seller might demand to know from potential listing brokers why they say a property should sell for just $595,000 when Zillow has it at $685,000? This is a nightmare of the industry.
When CBS questioned Zillow’s exec about this problem here is what he said; “Back to the question posed by O’Donnell: Are Zestimates accurate? And if they’re off the mark, how far off? Zillow CEO Spencer Rascoff answered that they’re “a good starting point” but that nationwide Zestimates have a “median error rate” of about 8%.
Eight percent!! In real estate that’s a huge difference! On a $500,000 house, that would be a $40,000 disparity. That’s just the median error rate, many times it’s off be much larger; and so much so that at the bottom of Zillow’s home page in small type is the word “Zestimates.” This section provides helpful background information along with valuation error rates by state and county. In the LA TIMES article: For example, in New York County — Manhattan — the median valuation error rate is 19.9%. In Brooklyn, it’s 12.9%. In Somerset County, Md., the rate is an astounding 42%. In some rural counties in California, error rates range as high as 26%. In San Francisco it’s 11.6%. With a median home value of $1,000,800 in San Francisco, according to Zillow estimates as of December, a median error rate at this level translates into a price disparity of $116,093.
One agent went to their own efforts to do research on this pervasive problem, and found on 17 sales Zillow overestimated values, including two houses that sold for 61% below the Zestimate. In 25% of the sales, Zestimates were higher than the contract price. In 95% of the cases, he said, “Zestimates were wrong. That does not inspire a lot of confidence, at least not for me.” In a second ZIP Code, Dowler found that 100% of Zestimates were inaccurate and that disparities were as large as $190,000.
In summary.. Take the value you get from Zillow’s estimate exactly like their CEO states: a starting point only, do not take it as bond. Only your local agent will have the most accurate data.