Knowing This, Would you Trust Zillow?

It’s been a while since I’ve taken an in-depth look at Zillow; generally I tell my clients that it’s good for content but not actual good, conclusive, base-any-real-decisions-on-what-it-says.

Last week I noted that Zillow’s “zestimates” are admittedly wrong and inaccurate in Charlottesville. This week, Louis Gray notes that Zillow Rewrites Home Price History, Invalidates Old Data:**

Two weeks ago, the company recalibrated its systems, and has pretty much thrown all previous years’ data out the window, replacing it with new histories. So if you were using the site to get a good picture of your neighborhood, they’re hoping you’ll ignore what you already know and start fresh.

Hm. Zillow’s blog post is only slightly more enlightening.

If you’ve been using their zestimates and trends to understand the market, not only are you finding that you were misinformed, but now you really don’t know how misinformed you were (or are).

I spent some time on their “What is a Zestimate” page and I encourage you to do so as well; as with anything, don’t accept anything at face value. (bolding mine)

The Zestimate is our estimate of fair market value, a starting point for home buyers and sellers and anyone just plain interested in the value of houses. You can use it in negotiating, in judging market trends, and in calculating all sorts of things for your personal purposes.

Are they kidding? I’d question anyone’s sanity if they were to use a zestimate in Charlottesville as a negotiating point.

Take this house that is currently on the market in the City of Charlottesville.

It last sold for $470k in 2007, is now on the market for $449k, its “zestimate” is $368,300 (really? is the $300 necessary?) I won’t publicly discuss what this home’s fair market value may be as it’s not my listing, but suffice it to say, if I were the seller or agent of this home, I’d be pretty pissed if a website that purports to provide accurate home values was putting my home’s value at $229k in March of 2011.

As I wrote in 2006:

Yet I have been wondering – what if Zillow’s reach becomes so great, their data become so vast and inclusive, that their Zestimates significantly impact what is fair market value? What if the purchasing and selling population refer to Zillow as the end-all, be-all estimator for their homes’ valuations? What if “close enough” is “good enough”? What if they become the de facto standard for home valuations?

Zillow has a responsibility to their visitors/users and the public.

If Zillow wants to be seen as an unbiased source of information, why don’t they let their users analyze their algorithm? My clients see all of the data I use when I am advising them to make critical life-impacting decisions; it’s only right. If Zillow wants people to use their zestimates when negotiating, those users deserve to see how that analysis is put together.

Zillow should be as transparent as they want others to be.

If you’re searching for homes for sale in Charlottesville, please, to avoid frustration – yours and mine – use a search engine that uses a direct feed from the Charlottesville MLS (hint: search for homes here)

Example: the second house I pulled on Zillow, 2216 Greenbrier Drive, is listed as for sale at $274, 900. Its Zestimate is $216k, which has increased $43,200 in the past 30 days. The house has been under contract for a month.

If you want to know what your home may be worth, if you’re considering making an offer on a home, don’t trust an algorithm; work with a good, competent real estate agent. Yes, this is a self-serving statement, but it’s true.

(very) Related:

• Zillow might be Right(er)
• What is – Zillow is Right?
• Unzillowable, to coin a phrase
• as an aside, the AVM set by NAR’s RPR is $599k. Heh.

** Thank you to the reader who sent the Louis Gray story to me!

Update 30 June 2011: Matthew Strozier at the Wall Street Journal writes about Zillow’s “Mapping Home-Value Drops by Zip Code”; at the time of my noting this, there are 10 comments; 9 are questioning Zillow’s methodology & conclusions, including one saying that “Zillow’s new algorithm is very suspect.”

If you’re looking at homes in the Charlottesville area, looking at data by Zip Code is irrelevant at best and misleading if you’re using it to to draw any conclusions other than where to snail-mail a letter.

Update 6 July 2011: Robbie Whelan at the WSJ follows up on Zillow’s shifting zestimates:

Zillow ‘Zestimate’ Shifts, Prompting Howls

“These changes have already affected pending financial decisions, but it’s really hard to predict the effect of adjusting the net worth of millions of Americans, by billions of dollars!” he wrote in one letter. “Consider the family that used Zillow when deciding on a home purchase two years ago. After paying their mortgage for two years, thinking they were ahead of the game, today they discover that they paid $50,000 too much for the home and were underwater on day one.”

To which I ask: Really? You base financial decisions on Zillow?