If you have a great sense of humor when it comes to real estate, you can look beyond House Hunters for property depictions that are purely entertaining. With the latest Zillow lawsuit calling continued attention to the years-long debate sparked by their online Zestimates, the truth is that much like House Hunters, the popular housing resource documents both fact and fiction – but doesn’t tell the viewer which is which.
If you are one of the $110 million homeowners whose information appears on the hotly-marketed consumer website, you might at first think it’s a good thing to have some complimentary exposure. But as the series of errors continues to unfold, not all homeowners find Zillow’s free publicity to be a true benefit. One homeowner ascertains that the inaccuracy of the Zestimate - $90,000 below her asking price - actually prevented her home from being sold (and offers no way for her to resolve the discrepancy). A class-action lawsuit filed against Zillow claims that the pricing engine feature is in violation of consumer protection laws. The basis of the suit rests on the portrayal of the prices as illegal appraisals published without consumer consent. While Zillow asserts that the data is designed to serve as a starting point and not an official appraisal, that isn’t made transparent to visitors, whom are more often than not prospective home buyers relying on the veracity of the data.
If you are wondering about the accuracy of the home values depicted by Zillow, we encourage you to consider the following:
The Prize
Have you heard that Zillow is now offering a $1 million prize “to the individual or team that can most improve the Zestimate algorithm” (New York Times, May 24, 2017)? Sounds a lot like the Willy Wonka golden ticket game, but not the kind of concept you’d like buyers to use when evaluating the value of your home.
The Accuracy Charts
Zillow’s own accuracy charts are buried within the underbelly of the website – and even ranked on their own one to four-star system, ranging from ranking the prices as unable to compute to fair, good or best. A study conducted by Duvora points out that in most major areas, the Zestimate comes within 20% of the home’s sale price (Duvora, December 2016) – accounting for a $200,000 potential margin of error in an area where median home prices hover around a million (sound familiar?).
The Missing Pieces
The issues that arise in Zestimates are quite often a function of the process used, neglecting to properly assess the product. Zestimates assume that sales price and property tax records are 100% correct, do not account for upgrades or unique features and place a high value on area turnover – limiting accuracy in areas where few homes have been recently sold.
What does all of this mean to you? First of all, just like any online data, remember that the purpose is entertainment and not education. As a revenue-generating machine, Zillow’s function is to collect revenue from advertiser’s, not to guide homeowners. Even if they tried, they might find that accurately setting homeowner expectations just isn’t as monetarily rewarding as taking money from real estate agents and banks.
Second, the value of your largest investment is WAY too important to leave to chance, or in Zillow’s case, a questionable margin of error. Only a local, full-time, actively engaged agent can tell you what your home is truly worth to buyers in the current market. If you rely on anyone to help you price your home – we recommend selecting someone with a face, a first and last name, a reliable reputation… who genuinely cares about your future. No website can give you that – but we know two guys can!
Thanks for reading,
Mark & Jason