Whether you have visited the website www.zillow.com or not if you are thinking of buying or selling a home it is worth at least a look. Is it reality? I am not so sure. This website is fueled by big time venture capital and more and more people exposed to it are using it as a gauge to their property’s value. The good people at Zillow use a proprietary formula to come up with an estimated value called a Zestimate (pronounced ZEST-ti-met rhymes with estimate). They compute this formula by taking data from public sources and recent transactions. They claim the more transactions and data they have the more accurate the Zestimate will be. One problem I see is the reverse could also be true. What if there are no recent similar transactions? How can you put a value on a home that has no similar recent sales especially if you have never been inside of it? What if the owner has owned the home for twenty plus years and has put $200,000 in improvements none of which required association approval or city permits. How do these show up in the Zestimates which rely on PUBLIC data?

The people at Zillow are quite clear that their Zestimate is not an appraisal and cannot be used in place of one. Thus Zillow cannot be used to obtain a federally guaranteed loan because a law called FIRREA (Federal Institutions Reform recovery Act) requires an appraisal from a certified professional appraiser.

On the Zillow beta site they state “that the majority of our Zestimate home valuations are within 10% of the selling price of the home.” Well being the figure filbert I am I have been testing this claim using my property on Vista Nobleza as the center of my study. Below are the Zestimates and ACTUAL selling prices of the nine homes that Zillow claims are comparative to mine:

    Zestimate           Actual Selling Price

1)  $915,486                 $725,000

2)  $985,740                 $785,000

3)  $944,584                 $760,000

4)  $1,089,969              $860,000

5)  $1,226,118              $1,130,000

6)  $1,109,759              $900,000

7)  $1,045,280              $960,000

8)  $1,035,859              $890,000

9)  $1,117,763              $975,000

Interestingly enough the Zestimate was high on all nine properties with only two being within $100,000 of the eventual selling price. Three of the nine properties were over Zestimated by more than $200,000. In fact below I have listed each property and what percentage of their Zestimate they actually got when they sold:

1. 79%
2. 80%
3. 80%
4. 79%
5. 92%
6. 81%
7. 92%
8. 86%
9. 87%

As you can see only properties #5 and #7 were sold within the 10% range of market value that Zillow claims and over half were closer to 20%. Is this a condemnation of Zillow? Absolutely not. I believe the website is worth monitoring but only as a starting point in determining your home’s value. There is simply no way that this site can keep up with market conditions all over the country and even more importantly have knowledge of how motivated the seller is. That’s what makes real estate so fascinating with all its’ variables and intangibles. I am excited to be part of it.

Thanks for taking the time to listen, Larry