Zillow has a Bridge it Wants to Sell You
In February the CEO of Zillow, Spencer Rascoff sold his home for 40% less than its “Zestimate” of $1.75M. Ultimately the selling price for a house is not determined by an algorithm but by what a buyer will pay for it… In Spencer Rascoff’s case, the market decided it was worth $700,000 less than Zillow.
In the words of Zillow, the Zestimate home valuation is Zillow's estimated market value, computed using a proprietary formula. It is not an appraisal. The Zestimate is calculated from public and user-submitted data, taking into account special features, location, and market conditions. 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)
So what data is driving your Zestimate? Zillow takes deed recordings from the geographic area. It cannot account for any upgrades or the condition of the home. Per Zillow’s senior managing economist, Skylar Olsen “If there are more transactions in this area, good data in this area, if the homes are more similar to each other, if the homes are in a similar place and similar quality, then the Zestimate is pretty close.” Does this type of uniformity describe most of the housing stock in Marin? Hell no! Marin is quirky and eclectic. A Mediterranean villas sits next to ramshackle cabins a modern farmhouse or a tidy shingled Cape Cod. National averages and algorithms are driven by the cookie cutter, planned developments found in many parts of the country.
Olsen goes on to say, “quality is very hard to capture, which is why we’re pursuing major machine learning techniques to elicit new signals.” So until the singularity, the most accurate estimate of value of your home in Marin will continue to come from the human real estate professionals who work in your market day in and day out.
In order to accurately value a property, it should be visited and examined thoroughly inside and out. Any updates should be taken into consideration. Size and shape of the lot and rooms, location of the home in the neighborhood, views, layout, ceiling heights, natural light, feng shui etc., all of these items will affect the value of the home and cannot be gleaned from assessor’s data which also can be inaccurate if the homeowner has not updated their home information.
There is no perfect science to pricing a home. It’s based on years of experience working in the market and using comps that most accurately compare to the house adding and subtracting value for intangibles and changing market tastes. Automated Valuation Models (AVMs) which is what Zillow relies on for its Zestimates do not allow for the nuances it’s purely the properties physical attributes, tax assessments and prior and current transactions.
So go ahead, enjoy the Zestimate, but don’t mistake it for an accurate estimate of the worth of your house. Remember the business model for Zillow relies on you refreshing the page, not on your sale. Inflating the value of a home, and showing any fluctuation makes you a more engaged user. Assume that only an appraisal and a comparative market analysis will give you an accurate estimate value