When “CBS This Morning” co-host Norah O’Donnell asked the CEO of Zillow recently about the accuracy of the website’s automated property value estimates – known as Zestimates – she touched on one of the most sensitive perception gaps in American real estate.
Zillow is the most popular online real estate information site, with 73 million unique visitors in December. Along with active listings of properties for sale, it also provides information on houses that are not on the market. You can enter the address or general location in a database of millions of homes and likely pull up key information – square footage, lot size, number of bedrooms and baths, photos, taxes – plus a Zestimate.
Shoppers, sellers and buyers routinely quote Zestimates to realty agents – and to one another – as gauges of market value. 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.
Disparities like these are daily occurrences, and in the words of one realty agent who posted on the industry blog ActiveRain, they are “the bane of my existence.”
Are Zestimates accurate? And if they’re off the mark, how far off? Zillow CEO Spencer Rascoff said that nationwide Zestimates have a “median error rate” of about 8 percent.
Whoa. That sounds high. On a $500,000 house, that would be a $40,000 disparity. At the bottom of Zillow’s home page in small type is the word “Zestimates.” This section provides helpful background information along with valuation error rates by state and county – some of which are stunners.
For example, in Manhattan the median valuation error rate is 19.9 percent. In Somerset County Maryland, it’s 42 percent.
So what do you do now that you’ve got the scoop on Zestimate accuracy? Most important, take Rascoff’s advice: Look at them as no more than starting points in pricing discussions with the real authorities on local real estate values – experienced agents and appraisers.