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Why zillow can get your home value wrong.
While I personally believe that Zillow is an awesome product and enjoy the
creative thinking that has surrounded it, there are a few things that you need to
know when using their estimates of home value, or what they call "zestimates"
- They use public records instead of multiple listing service data.
Depending on the town or city your home is located in, the public records
are notoriously inaccurate, especially when it comes to finished area and
living area. Multiple listing service data is entered by realtors who are
responsible for the accuracy and while it can also be imperfect, the MLS
data is much more likely to be correct.
Because the algorithms in Zillow are heavily
reliant on living area and cost per square foot, these public record
inaccuracies can introduce a statistically significant degree of error into
their estimate of home value.
- They use a radial distance from the house location to select comparable
home sales in the vicinity. For example, they might select all houses within
a half-mile radius of the subject property that have been sold within the
last 6 months.
While this makes absolute sense, mathematically, it
doesn't make sense real-estatically (I just made up that word). The reason
is, that if a property is on the edge of two different zip codes of highly
differing socioeconomic strata, and thus, real estate values, the results
will again introduce a statistically
significant degree of error into their estimate of home value.
- They are very good at analyzing quantitative factors (facts) but don't
yet have the capacity to include qualitative (feelings) factors, what we
realtors call the full 360 degrees. There are a number of highly subjective
factors that help to determine a home's value, and these factors are
constantly changing with trends and popularity of ... colors, materials,
lifestyles and family makeup, just to name a few.
Just as you can check-out a car on great websites,
commercials, movies and in pictures, you don't really know how you'd like it
until you drive it. So imagine yourself test-driving dozens of cars and
someone else who's only looked at them on websites, who's opinion would be
more accurate?
So in summary, I believe that Zillow is a great website and I think it is
very good at coming up with a blazingly fast widely-sweeping generality of a
home's value. But in its present form, it will not replace the complete market
analysis of an experienced, full-time professional realtor.
For a complete
market analysis of your home click here.
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