Should You Trust the Zestimate?

As a licensed Realtor (and a tech head), I like to keep up with new gadgets, websites, and technologies (especially new tech that will help me and my clients).

 

Now, first let me say, I’m not a huge fan of all these different website that provide a list of homes for sale. Often, I find completely out of date information (homes currently for sale than in fact were sold months ago), wrong pricing, etc….
 
A few days ago I was surfing different websites that provide a list of homes for sale (listing farms): Realtor.com, Zillow, Trulia, etc…. I was shocked at what I discovered on Zillow.com!
 
Before I get to why I wasn’t pleased (for my client), I will say that in the past I’ve had to deal with people who received bad information obtained from these “listing farms”. It’s no fun when you have to break the news to folks. For instance, I had a buyer who was moving to Waco from out of state. He was a very nice guy, but sadly was fed wrong information. The first day I met with him he had this HUGE smile on his face! He thought he would be able to buy a $350K house for $250K. I asked my buyer why he thought he would be able to buy a house at such a low price. He then pulled out these sheets of paper he had printed off from some website of “recently sold properties” (in our area). Wow! It showed that a $500,000 house sold for $300K and a $350K house that sold for $230K!
 
WRONG, WRONG, WRONG!!!
 
I can’t remember the name of the site now, but, WOW! How on Earth did this website come up with these “sold” figures? You see, Texas is a “non-disclosure” state; meaning that when a property is sold, the actual sold price is not made available for public record. If you want to know what a house actually sold for, you need to call a Realtor. As a Realtor, I can look up that information for you in our MLS system. When we input a home into the MLS and that house sells, we’re REQUIRED to report accurate sold information.
 
Anyway, back to my happy buyer (who wasn’t so happy by now). I asked him to give me the printouts so we could look and see what those houses sold for. Case number 1) The $350K house the website said sold for $230K, actually sold for $335K. Case number 2) The $500K house sold for full asking price (it was only the market for a week before going under contract). Actually, that $500K was a great price for that particular home. Fortunately, my buyer was a smart guy and he immediately “got it”. I didn’t have to spend to much time convincing him that a lot of the “home listing farm” sites don’t have accurate information.
 
Now back to Zillow.com; I pulled a list of homes for sale in a zip code and when I looked at the search results, I was surprised (and disappointed) by what I saw! Here’s a screenshot:
 
You’ll notice that RIGHT Below the asking price, Zillow.com has something called “Zestimate”. In most of these cases, the Zestimate appears to be considerably lower than the asking price! When I saw this, I immediately looked at comps for those areas and noted that the “Zestimate” was considerably lower than what actual comps showed. With Texas being a non-disclosure state, I don’t know how Zillow came up with these numbers. I don’t know the algorithms they use to arrive at an estimated property value, but I can tell you those values they have “estimated” are on the (very) low side.
 
So I went to one of my listings that I had supplied to Zillow.com (via syndication) and found this:

 

Once again, there’s the “Zestimate” with a far lower estimate of property value with respect to the asking price. Is this property that much over-priced? NO! When I met with the seller to list this home, we went over the comps to arrive at an asking price. I pulled up all the sold homes in the past year (for his area), current active properties, houses that were under contract, etc… I ran statistics for the school district, current market conditions ( I tend to be a numbers freak), and more. Also, I need to mention that this house has other amenities not found in comparable homes in this neighborhood – HUGE yard, water softener system, extra large driveway, located at the end of a cul-de-sac, etc…
 
I feel that the “Zestimate” gives the wrong impression of my listing – the impression of being over-priced. I know from experience that buyers tend not to look at properties they feel are grossly over-priced. Why would I want to give a potential buyer the impression that my seller is asking WAY too much for his house? I wouldn’t want to do that! That’s why I’ve decided NOT to provide Zillow with any of my listings, anymore.
 
Do I feel that I’m losing that much extra exposure for my listings (for my clients)? No, not really. My experience tells me that when buyers (especially first time home buyers) are in the market to buy a home, they typically don’t visit just one website to see what’s for sale. A typical home buyer will surf many websites looking for homes that are on the market. They want to see EVERYTHING! Heck, before I got into real estate almost 9 years ago, I surfed EVERY available website that had home listings. I wanted to see pictures, listings, prices… When I ran out of websites, I got in my car and drove around neighborhoods looking for houses! Buying a house can be exciting, it’s hard not to surf every website on the internet looking at house to call home! If they go to Zillow.com, I bet those home buyers also going to Realtor.com, Trulia.com, Frontdoor.com, Texasrealestate.com, etc…
 
It’s sad that I’m forced to “boycott” a listing resource, but I don’t want to run the risk of a buyer seeing this listing on Zillow.com and then seeing it again on Realtor.com and think… “Oh yeah, this is only worth $253,200. They’re way over-priced.” Part of my job, as a Realtor, is to market my client’s home in an honest and positive way. I just don’t see how potentially giving a buyer the wrong impression that this home is worth a lot less, is a plus for my client.
 
Now, in Zillow’s defense, they don’t claim that this is the actual property value (based on recently sold properties). Zillow does say it’s an ESTIMATED value, but I tend to think if someone saw this “low value” they would have a hard time getting that (low) value out of their head.
 
My duty is to my client. It’s not my duty to just generate leads for myself. Is it possible that I may lose buyer leads from Zillow.com? Sure, but I’d rather look after my client’s interests than my just my own. If I do have a seller that insists on having their home displayed on Zillow.com, then I’ll point them to this article. If after reading it they still want to be on Zillow.com, then so be it. At least I’d feel better knowing I explained why I’m not such a fan.
 
If you’re looking for a home to buy and come across these listing farms, just beware that some of the information may be wrong, out of date, etc… If you want up to date and accurate info, your best bet is to call a Realtor!