San Gabriel Valley Home Values:
Zillow vs The True Value Of Your Home
In Many Cases, Zillow’s “Zestimates” Do More Harm Than Good
Here’s an interesting question: who would you trust more to estimate the value of your home in our San Gabriel Valley real estate market? Would you choose a non-biased, impartial, completely scientific computer program in possession of all the data necessary? Or would you choose a human, fallible, Realtor who possibly needs your listing so badly they might just sell you a pie in the sky evaluation to get your name on a contract, or conversely, maybe doesn’t like working in your neighborhood and will provide a low-ball value just to move the property quickly and get a fast commission check?
Well, it seems, on the face of it, that the first option… the computer program… might be the wise choice. Heck! We’re living in the computer age, right? Estimating the value of your home based on the data available about the market in the area seems like the perfect thing for our techy age. However, you might want to re-think that.
Zillow is the most popular real estate information site in the U.S. for the public. As part of its service, Zillow provides “Zestimates” of every home in the database based on good, and usually current, information. Anyone, buyers or sellers, can access the Zillow home prices on the value of any home. Sellers can look up their own and Buyers can look up a home they’re thinking of buying. The problem is that many, many times, these “Zestimates” can be grossly incorrect. The CEO of Zillow says that their “Zestimates” have “a median error rate of 8%”. However, many areas are showing errors of up to almost 30%. That can be HUGE!
When the public is led to trust information like this it can throw a monkey wrench into real estate transactions and relationships. Buyers can insist a property is listed too high when it’s exactly on the market. Sellers can tell a Realtor they KNOW their home is worth more than tthe Realtor’s analysis shows, because Zillow told them so. This type of problem can lead to problems all over the place, unless the public is made more fully aware of the problem.
Here’s a recent article from the real estate section of the Los Angeles Times. It’s written by Kenneth R. Harney and provides a lot of specifics anyone interested in San Gabriel Valley real estate should understand:
L.A. Times Feb. 8, 2015 5 AM
“In Carlsbad, Calif., Jeff Dowler, an agent with Solutions Real Estate, did a similar analysis on sales in two ZIP Codes. He found that Zestimates came in below the selling price 70% of the time, with disparities ranging as high as $70,000. In 25% of the sales, Zestimates were higher than the contract price. In 95% of the cases, he said, “Zestimates were wrong. That does not inspire a lot of confidence, at least not for me.” In a second ZIP Code, Dowler found that 100% of Zestimates were inaccurate and that disparities were as large as $190,000.” …
Zillow Zestimates Or Experienced Experts?
So who do you trust with evaluating a home? The answer here is obvious. We may be living in an incredible age of technology and computer advancements, but you still need a good old-fashioned human expert who knows what they’re talking about to come up with a good, reliable valuation on a home. Whether you’re a Buyer who wants to make sure you’re not paying too much, or a Seller who wants to get every possible dollar out of selling your home, experienced and reliable Realtors and Appraisers are by far your best bet. Zillow may be a good tool to use to find a “starting point” for the discussion, but it is definitely not to be used for a reliable conclusion.