Friday, February 16, 2007

Zillow—Valuable Tool or Inaccurate Values?

When Zillow first hit the web last year, I was intrigued. Wells Fargo Bank had previously offered a similar tool on their website but it was no longer available. When I checked out Zillow, I wasn’t surprised to find that similar to the bank tool, the numbers were only accurate in areas where homes were similar in age, design and lot size. If you live in an eclectic neighborhood with radically differing styles of homes, near a lake or in the country, the value could be off by thousands. So when I checked it out, I took the information with a grain of salt. After all, the value of my own home since it is located in the country was based on its sale price from 10 years ago and its current tax value.

Evidently the Wall Street Journal Real Estate Journal had some of the same observations as I had with Zillow. Recently they looked at 1000 recent home sales transactions in seven different states and compared them to their “Zillow Zestimates”. According to the article, “Zillow came within 5% of the price in a third of the transactions studied by The Journal. It was more than 25% off target on 11% of them. In 34 of the 1,000 transactions, Zillow was off by more than 50%.” There was an overall median difference between the actual sales price and the Zillow estimate of 7.8% which is very close to the margin of error Zillow estimates at 7.2%. Read the entire article at
http://www.realestatejournal.com/buysell/tactics/20070215-hagerty.html?refresh=on

For certain homes in certain areas, Zillow is a great tool. I recently visited the site and was surprised at how their service had expanded during the past year. Not only could someone find an estimate of value for a home but there is a listing search as well. Buyers can search homes that are currently listed, both FSBO and with Realtors. There are color photos, aerial views, street maps as well as values. As an agent, I will only be listing homes on Zillow that fit the criteria where an accurate “Zestimate” will come up. But it is a tool I will use. My clients were impressed as it was another avenue to bring in buyers.

Zillow will not replace the knowledge and expertise of an experienced real estate agent. But for quick values for homes with similar styles built in many city developments, it is surprisingly accurate. With all of the added features and information, Zillow can be a useful tool in the right hands.