Zillow promotes Zestimates and so many consumers think this is good information to receive what their property is worth. Zillow is appearing as the authority on pricing homes. How accurate and misleading is the site?
Well, if you go on their website
The wording from their own company states the following”
The Zestimate® home valuation is Zillow's estimated market value computed using a proprietary formula. It is not an appraisal. It is a starting point in determining a home's value." What is the formula used to calculate these numbers? They go on to say that the data is collected from public or user submitted data, real estate agents, appraiser physical inspect of the home.
Now when has an appraiser ever been to your home? The appraisal cannot be done from the outside of the home only to receive a true value. Appraisers charge for their services, it's not FREE. In order to get a true value on a home, you need to conduct an appraisal.
Again, this is from their website -
We encourage buyers, sellers, and homeowners to supplement Zillow's information by doing other research such as:
- Getting a comparative market analysis (CMA) from a real estate agent
- Getting an appraisal from a professional appraiser
- Visiting the house (whenever possible)
Why would they mislead consumers by promoting the site as the Real Estate source to count on. They know most people will not look at the data within their own site; this is why they spend so much money advertising on TV. The commercial paints a pretty picture that you can count on them.
Trulia doesn't even tell the consumer how the values are calculated. They keep their information secret and again, no appraisal is done which gives the true value of the home.
Also view the
"Data Coverage and Zestimate Accuracy" section.
As a consumer using these sites, you need think about why "Banks" do not use this sites if their accurate. Because when loaning money, the assessment has to be accurate, so they do not loan more money than a property is worth or they will never make the profits projected.
Now before I became a Real Estate Agent, I worked years in the IT field. All of the website are funded and built on an advertising platform. They make the site FREE to use and generate money from first popularity of people using, then they get the corporations and business owners to purchase ads. Last they'll start to offer services. Both Zillow and Trulia offer agents advertising on their site because it's another means to the Real Estate business. It's a tool at best, but you still need to contact a professional for the real numbers.
Now if you want to get a true assessment of your property contact the Professional Real Estate Agent, it's free. You will first be given an actual price from data that's more than what's pulled for the websites. When you decide to list the home for sale, the home is appraised before going onto the market.
I wrote this to make the consumer aware of how to use this site because I hear from clients, and see people in forums quoting numbers from these sites.
Amen! Preach it! :) I actually came across a FSBO ad on Craigslist where the guy seriously thought his house was worth $79k because that's what the Zestimate was. It really wasn't worth $20k in the shape it was in and wouldn't have sold for more than $45-50k in the neighborhood in which it was located. He wouldn't even listen when I pointed him to that exact same information on the Zillow site. Ugh.
I was working on a new estimate for my home owner's insurance policy. The agent informed me that I had a swimming pool, which I do not have. I let her know this was inaccurate, but she told me she got the info on Zillow.
Exactly and people are relying on this information for various aspects of their lives. I just want to educate people. The information that I have is accurate and I see how some investors do not value what I do for a living. Even some investors are trusting this information and I'm trying to get the point that savvy investor receive reliable information. They use experts that have a vested interest in their well being.
This information is misinforming consumers and we have to educate everyone because now they think their the expert because this is what the website says. I'm sorry you had to experience that. Did the insurance agent get a reliable source to assess your property?
A single sentence would have sufficed:
"Free valuation sites such as Zillow and Trulia are no substitute for doing your own valuation research and ought never be used alone to make investment decisions"
Most people don't trust Zillow anyway.
Welcome to BP.
Zillow or Trulia's valuations are NOT accurate by any means. In fact, Zillow ask the seller to tell them what their property value is.
You need one of the following in order to determine the fair market value.
3. CMA by a qualified local real estate broker.
All others online sources including Trulia and Zillow are wild guesses.
Hope it helps.
James Syed wow that's deep that Zillow asks sellers what the value is. This lets you know those estimates are skewed. Great topic!
I agree with all the above , but if you can don't have MLS access and want a quick idea of what the comps on whatever property may be you can use the sold prices on Zillow to give you a ball park figure on what the numbers may be. Also can use findcompsnow.com, I believe this site goes of Zillow software. (seems to have the same estimates) the site gives you prices bought for cash bought properties and prices for retail. Again its not MLS access but its something to do a quick check.
There are many threads on this here. The answer is simple Zillow and the other sites are not helpful at all to value properties, not one tiny bit.
What they ARE useful for is looking at a trend in a specific area. I use the interactive map at the bottom of a zillow house and can at least see graphically what has sold recently and for how much and what is for rent and how much.
So I can see if the area feels like a 50K area or a 70K area.
But for values there is no online tool of any value. Get to know your area well so you know what houses are worth. This is the ONLY way to appraise IMHO
Dean Letfus, Memphisinvestment.com | 901 264 8674 | http://memphisinvestment.com/
I have completed over 10,000 BPOs over the last four years. Every now and then, I will get a bank that questions a valuation and will insist on quoting a value range from Zillow. It amazes me how often Zillow isn't even in the same ball park. In certain neighborhoods in Chicago, you will see significant price groupings. An example would be 15 houses priced from 10,000 to 65,000 and a second grouping of rehabbed houses from 125,000 to 175,000. When you get a Zestimate from Zillow, they come in at 75,000 to 90,000 for the range. Nothing has sold in this range. Zillow is one of the worst tools on the internet as younger tech savvy people tend to think it is accurate. It is at best a statistical guess.
We live in an environment where advertising is used to paint a picture. Normally it's opposite of the picture being painted.
I love the BiggerPockets forum because information is shared. I share my expertise to try an assist investors and others. Investors share their world. I learn a lot from other investors on how some think and what kind of properties are key in advancing their goals.
My favorite topic is Real Estate.
We use an AMC for Appraisals, Broker Price Opinions, and AVMs.
It is so much more helpful for us than Zillow - which is actually harmful.
AppraisalPro is now partnered with LendLogix - to offer more BPOs, AVMs, etc while maintaining compliance than before. Its pretty helpful.
Updated over 3 years ago
Update: Zillow is not harmful - a not thorough enough valuation of a property is harmful when a more thorough valuation is needed.
Jay T. from Zillow here. The Zestimate isn't designed nor intended to be a substitute for a professional property valuation, as is stated numerous times on the site. It's a starting point, and is good for noticing trends. But it shouldn't be used in place of an appraiser or real estate professional.
@Barbara E. - are you affiliated with AppraisalPro? They are located in Kernersville, NC -- where you are also from. Just curious if you are with them.
@ Jay T
I technically am. LendLogix is our mutual umbrella company. LendLogix receives quite a few people that come to us from Credit Unions, etc, that need a more accurate way of determining value - without the cost of a full appraisal.
Edit: Harmful may be the wrong word.
BPOs, AVMs etc just give a more thorough analysis of the value - Zillow does give accurate depictions and provides relevant information to its customers and does give disclaimers on the site that it may not be 100% accurate.
I don't really know how they come up with the prices and expect rent. For the most part they price more on the high side in my area.
I always like to look on the PVA web site for the County I live in. This will give me the sell record of the property most of the time. Then try and find some comps on the local listings. It helps some but I guess experience is the best asset finding prices
For the average investor, Zillow provides some details you can't find other places.
In the areas that I'm looking to invest in, they seem very accurate. Their "zestimates" have been close, but you need to do your own research to validate the home details regardless.
I guess I just had to point out that they aren't all way-off. Some areas they hit really close I feel.
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Zillow is extremely useful and very accurate when looking at long term trends in a market. I know if I'm buying in an up market, or in a trough. Has been very valuable to me!
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