How Bad are online home valuation websites?

Every few months someone asks about Zillow or another home valuation web site.

If its a seller, it goes something like this…
“I looked my place up on line and the website said its worth $1,000,000! We want to list it at $1,000,1000 so we have some room to come down.”

Or if its a buyer…
“I know you have the hose listed at $100 but Ive done my research and its only worth $10… that my best offer.”

After some probing I usually hear the Z word- “Zillow” They were big news a few years back. In the heady days of the bubble it was easy to slap a number on a property and put it up for sale. Real Estate Web portals thought- why not get into the business of valuing homes. They scraped Property appraiser websites and MLS feeds, Created an algorithm and Bam! Zestimates were born. Who needs an appraiser or a real estate agent when you can just go on line and get a number. Well the problem is online valuations are not accurate. They only take proximity, sale price and size into account. So two neighbors homes are looked at as equals. This sounds alright until you find out House One is on the golf course and House Two backs up to a Jiffy Mart. Or House One has a pool and House Two has an above ground pool 😉 The list goes on and on- there is no way for a website to discover differences in condition, features or location. They just make assumptions about value based on other sales.
It cant see the age of the roof, granite counter tops, worn out carpet, highway noise, paint colors, construction quality, or even the style of the home… there are some houses out there that are just UGLY!

Now in a very homogeneous neighborhood like Southwood or SummerBrooke these services get a little closer to the real number. But how good are the estimates?
Zillow publishes statistics that tell us: http://www.zillow.com/howto/DataCoverageZestimateAccuracy.htmLets use Leon county as an example… their Zestimate is on average within 11.2%% of the purchase price.
That means if your house is worth $100K they will reflect a value of $88,800 to $111,200- A range of $22,400!
Lets step up to a $300K home. The range is $67,200. So your house is worth $266K or $333K.

Thats not even close to a reliable number.
And they say Leon County is one of their “FOUR STAR” Best rated areas!

They are so bad that one blogger created a new phrase- UnZillowable.
http://blog.sellsiusrealestate.com/zillow/unzillowable-to-coin-a-phrase/2006/08/14/

And another group, the National Community Reinvestment Coalition, in 2006 filed a complaint with the Federal Trade Commission saying Zillow knowingly deceives the public by presenting its property estimates as accurate, whereas they are frequently far off the mark. Zillow can be a fun thing to look at. It may be a useful tool in some areas but its not a realistic picture of value.

Barry Bevis, Broker/Realtor
C-850-491-3600
F-877-870-9066
www.BevisRealty.com

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