I hope the headline caught your attention.  While I have never been a big supporter of Zillow, they do have some cool features on their website.  However, I must warn anyone interested in buying or selling real estate to take Zillow’s Zestimates with a grain of salt.  For Tampa or Hillsborough County home appraisals, there is a black and white difference.

Zillow has received criticism from real estate agents and many home buyers and sellers.  The concerns mostly stem from those who feel Zillow does not provide accurate data.  The National Community Reinvestment Coalition (NCRC) in a complaint to the Federal Trade Commission, that NCRC Filed against Zillow.com stated that Zillow is “intentionally misleading consumers and real-estate professionals to rely upon the accuracy of its valuation services despite the full knowledge of the company officials that their valuation Automated Valuation Model (AVM) mechanism is highly inaccurate and misleading.”

Zillow creates a Zestimatehome value by using publicly available information.  They use recent sale prices for the home and surrounding neighborhood.  That’s a great place to start, but that is pretty much where the Zestimate (value of homes) ends. There is a lot more to it than that.

Homeowners using Zillow or any other Automated Valuation Model (AVM) or ”free online home values” to determine the value of a property need to know what those results aren’t telling them.

1. Whether unique features of a property might add to or detract from market value. So a computer returns an estimated value of $150,000.  Did it account for the sewage treatment plant next door?   The railroad tracks nearby with trains that blow their whistles every night?  The school district?  The desirability of its tree-lined street versus the next street over?
2. How long ago the property was assessed. Many AVMs and free online services rely on public assessment records.  In many states, for example, assessments may only be required every three years – the value may be nearly three years old in that case.  Some states mandate that an assessed value not increase beyond a certain percentage, even if sales activity indicates the property has appreciated far more.  When you use an AVM or free online service, you risk a lower or higher value than reality.
3. What makes the comparables comparable? A computer might compare your subject property to another property with similar square footage sold three months ago a quarter of a mile away.  Even if that “comparable” property is in a different, less desirable school district, fronts a four-lane, 55 M.P.H. street, and is flood-prone.  Or even if the property was sold under duress, such as in a divorce or bankruptcy, which are not arm’s length, such as to a family member.  A computer simply does not know all the adjustments that might need to be made to a “comparable” property’s sales price.
4. Whether a market is declining. Automated valuations use data from recent, nearby sales.  If those sales were completed at the peak of a local housing market, the computer will think the trend is going up.  Even if a local professional knows that the overall neighborhood is beginning to experience a downturn.  As a lender, don’t get stuck with a property that’s been overvalued by a computer.
5. Whether there is a conflict of interest. Free online home values are often farmed out to real estate agents in your area, who use the service to get your listing when you decide to sell.  The best way to do that is to impress you with their confidence that they can get a higher price for your property.  If they tell you your property is “worth” the high end of what they believe they can sell it for, the theory goes; you’re more likely to sign a listing agreement.  With most things, it’s best to “under promise and over deliver”, but the opposite is true when you use a free online home value service.
6. What qualifications, designations, experience and education the preparer of the value has. When you work with an appraiser or a Real Estate Broker, you can be confident we’re qualified, ethical and prepared to complete your assignment professionally and with good judgment.  Most of the time, you don’t know the qualifications of whoever is behind those free online values, and they couldn’t compare to a trained professional if you did.  And if you’re relying on an automated valuation, you’re cheating yourself out of a real estate professionals education, experience, expertise and local knowledge.

Jon Tipton, Realtor/Certified Appraiser

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