If you own a home or plan on purchasing one in the future, you likely are well versed with the online home-valuation tool on Zillow called Zestimate.
If you own a home or plan on purchasing one in the future, you likely are well versed with the online home-valuation tool on Zillow called Zestimate. Recently, Zillow and its estimates of value have come under fire by way of a lawsuit alleging the site’s evaluation of a particular property was inaccurate and damaging the prospects of selling at fair value.
Barbara Anderson was the homeowner in question and also a real-estate attorney. Anderson initially filed suit claiming the Zestimate was not legal in Illinois (where she resides) and further stated it was damaging her chances of getting market value. Since then, she has withdrawn her suit and started fresh as one of two attorneys leading a class-action suit representing all homeowners whose homes are on Zillow, according to The Glenview Patch, a local publication where Anderson currently lives.
The current lawsuit addressing the Zestimate and whether it is legal or even close to accurate isn’t the first time consumers or real-estate professionals have bemoaned Zestimates and other online valuation tools. After all, how can a computer algorithm possibly know all the ins and outs of a single property without ever having sent anyone to physically view the home in person, inside and out?
The answer given on the website itself is clear: A Zestimate is not an appraisal. To quote: “The Zestimate home valuation is Zillow’s estimated market value, computed using a proprietary formula. It is not an appraisal. It is a starting point in determining a home’s value.”
Again, the verbiage on the website itself couldn’t be more precise, but you have to scroll to the bottom of the page and click on the Zestimate hyperlink to find to this information.
When buyers view a home on the website, they are shown the listing price and then immediately the Zestimate, which in many cases varies from the asking price. Additionally, Zillow provides a prediction of sorts of the future value of the home with its Zestimate forecast. I spoke with someone at Zillow group. He was quick to state Zestimates are in fact estimates of values and not “Zappraisals.”
Certainly, Zillow is not subjected to the licensing laws that appraisers are, and Zillow maintains the law provides room for online estimates of value such as the tool they provide. However, the fact remains that many homeowners do rely on Zillow and similar sites to determine the value of a home they are considering buying or selling, at least in part.
Zestimates can be most problematic in areas of historic or unique homes. I’ve seen Zestimates come in tens of thousands of dollars below recent appraisals, and ultimately, the work falls to the homeowners and their Realtor to explain to the buyers why the Zestimate is off. Consumers who make it to the sellers and their agent can easily obtain a copy of an appraisal justifying a listing price, but who of those would-be buyers take the Zestimate as fact and never bother to set that appointment? The concern for a potential homeowner in this case can be real.
So what is a seller to do when a Zestimate is lacking accuracy? One of the best ways to put low online valuations to rest is to obtain a professional appraisal and make it known and available to potential buyers. Add an up-to-date CMA completed by a Realtor to the mix, and sellers can create a more accurate online narrative alongside blog posts, photography and even custom websites.
The average buyer and seller understands the Zestimate and tools just like it aren’t appraisals and have significant margins for errors. Although I have seen offers come in that are not in line with a homes value and then realized the Zestimate for the subject property matches the low-ball offer price, this is something that can be remedied with the facts and figures mentioned above.
The best defense is a strong offense. Have the data at hand and hire a professional Realtor to help educate buyers and navigate the potential woes of the web. Overall, there is more benefit to a seller to have their home on these websites than drawbacks — at least for now.
Christina Rordam is a local Realtor with 12 years experience and a member of ORRAs Top Producer Club. For more, visit christinasellsorlando.com.