Zillow now says my property is worth double!?

Question

Nick C. · Answer

Zillow makes money by selling ads to real estate agents and tricking the general public into thinking their website is anything more than a lead generation machine. Their business is marketing and selling. Accurate data is not a priority. Zillow is not a starting point, it's more like a wild guess.

Benjamin Clark · Answer

As an agent Zillow "Zestimates" have got to be one of the biggest challenges when dealing with the general public about values of their homes from either the selling or buying standpoint. The challenge with these "estimates" is that they can give a severely false sense of value and can be manipulated very easily. Just adjust your house to have an extra 2500 square ft and see what happens to your estimate! There is no replacing a certified appraisal, but a cheaper option could be to get a Broker's Opinion through a local real estate agent/Broker. Hope that gives some direction.

Sean Cole · Answer

Zillow's own CEO sold his house a couple of years ago for 40% less than the Zestimate at the time of sale:  http://www.inman.com/2016/05/18/zillow-ceo-spencer-rascoff-sold-home-for-much-less-than-zestimate/

Jason Hirko · Answer

@Collin Smith Unless Zillow is offering you $200k, I wouldn't put much value in their opinion.

Trey Kunkel · Answer

If you want to see how easy it is to manipulate Zillow figures just go in and "adjust" your own residence.  You can add bathrooms, finish your basement, and create bedrooms with a few simple clicks.  This will immediately adjust the value assigned to your house without any verification.

Chris Mason · Answer

Hi Collin,

In addition to what others have already said about Zillow, there's no way in the world that Zillow's algorithm is taking into consideration the unique 2 homes / 3 units configuration of that property and doing accurate comps.

Zillow is by no means a "starting point" unless your property is 100% vanilla for the neighborhood.

Thomas S. · Answer

You should probably get a more reliable estimate on the value of the property to determine if it is suitable as a rental in your market. If in fact it has 100K in equity it is costing you $833/month in lost income or to put it into real terms when you subtract the $833 equity payment from your $1000 after debt repayment the property is only earning you $167/month to cover all expenses and provide cash flow. In real terms you most likely have negative cash flow on the property and the only income from owning it is in the equity. The property itself is costing you money after equity opportunity compensation.

If you sold and put the cash in a mutual fund you could probably earn the same of better return with zero effort on your part and never have a repair or tenant issue.

Few investors actually understand the financial negative impact equity actually has on real cash flow. Regrettably they place zero value on cash and as such most of their potential income simply slips through their fingers.

The value increase in your property has a negative impact unless you free up that cash and put it to work. All it is doing now is killing any cash flow the property could be generating.

Crystal Smith · Answer

I can't speak for your market, but we don't even consider Zillow a starting point in our market.  Actually we don't consider it a starting point in any market.  If you have a good relationship w/ an agent ask them for some recently sold comparables.  If the data looks good then you should consider an appraisal but in regards to Zillow, ignore it.

David Dachtera · Answer

@Collin Smith,

You always want to verify the "Zestimate" against the recent sales. The good news is that Zillow will gladly pull those up for you. Then, you'll be able to make your own assessment of what the comparables should be, unless you're in one of those "non-disclosure" areas.

A recent sale of a not-necessarily-comparable in your area can skew the Zestimate wildly. You always want to verify the Zestimate yourself - "sanity check" it, if you will.

Even so, take the "estimate" portion of that name seriously. It could be close, it could be way off. You won't know until you check for yourself.

Zillow now says my property is worth double!?

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