WASHINGTON — Zillow’s popular automated property value estimates are coming under fire after a new report by the Los Angeles Times found homes with overinflated prices.
House hunters can enter the address or general location in a database of millions of homes and likely pull up key information — square footage, number of bedrooms and baths, photos, taxes — plus a “Zestimate.”
Shoppers, sellers and buyers routinely quote Zestimates to realty agents and to each other as gauges of market value. But if there is inaccuracy then there can be conflicts when looking for a home locally and regionally.
Recently, Robert Earl, a real agent in the Charlottesville, Virginia, area questioned the selling prices and Zestimates of 21 homes sold in the month of July in the Lake Monticello community. On 17 sales, Zillow overestimated values including on two houses that sold for 61 percent below the Zestimate in this area.
Zestimate questions have been raised regionally. For example, in Manhattan, the median valuation error rate is 19.9 percent. In Brooklyn, it’s 12.9 percent. But in Somerset County, Maryland, the rate jumps to 42 percent. And in some rural California counties, error rates range as high as 26 percent. In San Francisco it’s 11.6 percent. With a median home value of $1,000,800 in San Francisco, according to Zillow estimates as of December, a median error rate at this level can translate into a price disparity of $116,093.
The issue at stake is if a house for sale has a Zestimate of $350,000, a buyer might challenge the sellers’ list price of $425,000. Or a seller might demand to know from potential listing brokers why they say a property should sell for just $595,000 when Zillow has it at $685,000.
What should prospective homeowners do if they sense a Zestimate accuracy?
With the accuracy of Zestimates being questioned, Zillow CEO Spencer Rascoff has said that they’re “a good starting point” but that nationwide Zestimates have a “median error rate” of about 8 percent. So it never hurts to look to the true authorities on local real estate values — experienced agents and appraisers – in pricing discussions.
