What’s being heralded as the latest thing in real estate technology since MLS? Zillow. That’s right, Zillow - some months their total number of hits is higher than Realtor.com. For those who have never heard of such a site, let me fill you in. Zillow is a website developed and financed by Richard Barton, the same gentleman who brought Expedia.com to the public in an effort to allow the public to act as their own travel agents. Presumably, he hopes to do the same with real estate. Zillow is one of the first publicly touted Automated Valuation Model (AVM). It allows the consumer to go to a specific neighborhood and receive valuations on what the homes are worth. Presumably consumers can determine values of a home, either for purposes of buying or selling, without needing to employ a Realtor or an appraiser.
Sounds great, right? Not quite. Real estate brokers around the country are tracking prices in Zillow's new site – and finding housing valuations as much as 40 percent off the mark. Even Zillow admitted to BusinessWeek that it’s "estimates are typically on target, falling within 10 percent of the actual home-sale prices 62 percent of the time."
Let’s examine Zillow’s own PR “falling within 10 percent of the actual home sale prices 62 percent of the time”. That means they may be off by 10 % either high or low (for a total range of 20%). So a home with an actual value of $400,000 – may be valued by Zillow in a range of anywhere from $360,000 - $440,000, an $80,000 differential. Is that a range you would be comfortable with if given to you by a professional? Remember, that is their best case scenario, the statistics aren’t that good for the remaining 38% of the time.
Here are the latest stats from Zillow regarding accuracy.
The concern I have for consumers, is the same one shared by The Appraisal Institute - that free home-value estimates may cause consumers to "misinterpret or rely on the information too heavily."
Whether buying or selling, the best determination of value remains a fully viewed, with judgment, evaluation of the marketplace. Zillow is a fun toy, and nothing more. But in all fairness – it is a very fun toy and looks cool too!
You can see for yourself – here is a direct link to the Zillow page Zillow.com.
- Russell