Zillow has certainly become as synonymous with Real Estate as Xerox has to Copying. Its wide and devout audience of users certainly proves its value in the market, in particular, the Zillow Zestimate. Buyers and sellers have stuck to the Zestimate amount when it suits them, to their detriment. In truth, actual on the ground market knowledge is proving to my clients that they should take the Zestimate with a glacier sized grain of salt.
One can see for themselves, at any given time, the price a property recently sold for and Zillow’s Zestimate for the same property. The discrepancy between the two are considerable. Recently on Inverness in Linda Vista an extraordinary remodel sold for $2,475,000. The Zillow’s Zestimate was $2,377,495. Under valuing the property by almost $100k could’ve had horrible consequences for the seller. How could Zillow have gotten this so wrong? The answer is simple, Zillow derives its Zestimate from a bird’s eye view of the market. No house is unique when you’re Zillow, nor could your house be. Zillow can’t take into account the upgrades, repairs, functionality, charm, and quality of life your house offers. Here’s a story from NBC on Zestimates.
Another recent example in Linda Vista had a Zillow Zestimate that over valued a sold property by $184,683. I have also seen this have bad consequences for sellers. Consumers shop for what we like and what we can afford. If a buyer can afford the list price of a property but sees Zillow has valued the property much higher, the buyer might think the list price was bait to court multiple offers and a bidding war until the bidders themselves drive up the price to the inflated Zestimate value. No matter how much this buyer loves your house, they won’t actively pursue what they don’t think they can afford. Coincidentally, the buyer who can comfortably afford the house can also see other property that looks much better to value. Just look at this story on the Zestimate.
An undervalued property can leave money on the table for the seller, and an overvalued property can sit on the market longer, thus lose value in the publics eyes. Zillow, and its Zestimate has caused more engagement in the market from more people. As a REALTOR, I like that. I don’t mind educating clients that though your offer, or a seller’s counter offer, is based off of the Zillow Zestimate, that doesn’t mean you are giving the buyer or seller “an offer they can’t refuse,” not in theory, not in practice.
Zillow’s Zestimate algorithm has narrowed the value of homes in the Linda Vista neighborhood of Pasadena to a $300,000 window. A good Realtor has the understanding of the market and trends, the tools (like a CMA, or Comparative Market Analysis), the system and programs in place to effectively market your house, and pricing strategies to leverage the most value the market will bear.
Agents use a Comparative Market Analysis that takes in sold and public data to shed light on what the market will bear. A CMA can also be modified to include specific data on what has been done to the house or it’s overall condition.
