When clients returned to California after considering relocating to Vienna, they sent me an email with a few questions. What caught my eye was an observation about pricing: “…but whose price tag is $990,000 – way out of step with the $801,000 estimate that Zillow puts on it.”
By coincidence, I recently listened to industry journalist Brad Inman address an audience in San Francisco #ICSF where he included an example about consumers trusting Zillow’s data over their own local agent’s first-hand knowledge. In his example, the home buyers insisted a home had hardwood floors because “Zillow says there are hardwood floors!” (but there weren’t hardwood floors in the house)
Washington DC (click to enlarge)
If you are a home buyer or home seller, then it is important to know that Zillow isn’t always spot-on accurate. Luckily for the Washington D.C. region, the median error rate is only 5.3% which is the lowest on their table. In my opinion, since the Washington, D.C. area has a higher than average turnover rate, the quality of the regional data is richer than in other areas across the country where Zillow is relying only on tax records.
You can read all about Zillow ‘s proprietory formula for determining a homes value.
Garbage in, garbage out.
Back in the early days of the computer age, skeptics who distrusted computers relied on handy slide-rules and would dismiss computer tabulations with an offhand comment like garbage in, garbage out!
There is a great scene in Apollo 13 where the engineers in Mission Control use their slide rules to determine the burn and slope needed to get the astronauts safely home.
Okay, so the team at Zillow isn’t exactly like the team at Mission Control (although they may dream about it) but they are relying on public county tax records from around the country.
These days people would never consider using a slide rule to verify a calculation. But in fact, some of the data that generates automatic valuations may be underestimating square footage or recent additions. And you may miss the target.
How to approach these valuations:
- Sellers must understand that home buyers are trusting this information
- Buyers must understand that some data may be missing like a new kitchen, bathrooms or an addition
- Inaccurate data can be updated by contacting Zillow
When I responded to the client’s email who asked about the “weird pricing in Vienna”, I responded:
Values in the Vienna real estate market can appear bizarre, and I feel that each property requires interpretation. That may sound vague but there are nuances that I have learned to factor in when determining the potential market value of homes. Too many factors are involved, in my opinion, that Zillow algorithms cannot accurately factor in.
And that is why I consider part of my job is conducting market research ~ physically getting into homes to inspect updates that may not of been included in the marketing material. Floors, appliances, physical condition, siting and light, and another two handfuls of things factor into my valuations.
Real estate values can also vary depending on current demand for a location, and change from one month to another.
So, it is especially important to consider Zillow’s estimates, but understand that it may over or under value a home. Virginia is a caveat emptor state, meaning that home buyers are responsible for researching and verifying information that they may rely on to make a buying decision.
Although there are required seller disclosure forms and most buyer’s use a local real estate agent, Zillow data does not provide protection for misstating a material fact.
