Zillow is getting a lot of press lately; some of it good, some of it not so good. In the real estate industry reactions run the full gamut among agents & brokers from Chicken Little ( “the sky is falling” ) to Apollo 13 ( “One small step for man…” ). Now, I enjoy a good film as much as the next person… but just for fun, lets take the “drama” out of Zillow for a moment and look at this objectively.
So what is Zillow anyway? That’s the first and best question. And Rich Barton, founder of the travel reservation giant Expedia and ( in my humble opinion ) a pretty talented guy… isn’t really saying ( at least not in front of folks without a “zillion” dollars to invest ). What he is saying, however, is that unlike his ( arguably ) “job killing” entry into the travel industry, he isn’t out to displace Realtors®. There’s lot’s to be said ( and learned ) about Zillow and I’ll post much more on this as time goes by… but let’s stick with this train of thought for a moment…
Why do you, Buyer or Seller, care?
The one offering available at Zillow right now is a service which they claim allows you to “Value Any Home” with the fun word called a “Zestimate” ( cute, huh *grin* ). Their marketing pitch?
- Compare home values to avoid overpaying
- Use home valuation tools to arrive at the right selling price
- Track the value of your most important asset
Sounds wonderful, right!? Who needs an agent anymore, or an appraiser, or a tax assessor? On first glance its hard to find fault with that, but then who ever heard a marketing pitch that you could argue with? The whole point of marketing is to make something appealing to you. We could chat about the technical problems in making this work ( and they are many ), but right now lets just chat about the “effects”.
Most folks who are actively involved in real estate ( buying, selling, or even just curious ) have a reasonable idea of the value of their own home or of homes in their immediate vicinity. While they may be off by a bit, their likely to find that Zillow’s Zestimate is pretty far off ( unless there has been a recent market sale of that particular property ). In my own neighborhood, for example, projected values are typically about 10-15% low ( although a home that one of our clients purchased a few months ago at $325K shows a value of $450K ).
So who does this serve? What were those marketing messages again?
- Compare home values to avoid overpaying
Any home buyer relying on a “Zestimate” to help determine an appropriate offering price on any given property is in for a big shock, serious disappointment and probably not just a little twinge of bitterness. Leveraging the trust value that we should be able to have in names like Expedia… Zillow will lull unsuspecting first time home buyers and other inexperienced real estate customers into a false sense of “preparedness” which could cause them actual harm. Not good.
In fact, in some industries ( including real estate ) advice this poor could be considered grounds for cause. The Law of Real Estate Agency as outlined by the Revised Code of Washington holds agents to a much higher standard and duties which includes little things like…
- To exercise reasonable skill and care;
- To deal honestly and in good faith;
Does a Zestimate represent reasonable skill & care? Given the widely known discrepancies in its results, does its promotion constitute honest dealing and good faith? Good question.
- Use home valuation tools to arrive at the right selling price
Right for whom? In my neighborhood alone, relying on a “Zestimate” could either make your home an absolute fire sale… or overprice it by $125K… ensuring the longest, stalest listing since mud huts populated the Pacific Northwest. Also not good.
Valuing a home depends upon much more than the "science" of counting bedrooms, bathrooms & parking spaces. If you doubt that... you're not paying enough attention to what your significant others are telling you! But even consider your own experience in car buying. Have you ever located two of the same used car, virtually identical on paper... but clearly of different value? Of course you have. Because its impossible to value an asset properly without inspecting it.
- Track the value of your most important asset
Now I suppose that if you’re a math wiz… and you know the actual value of your home at a given point in time… you could plot the changes in parallel with the ones that Zillow tracked and wind up with a reasonably close estimate ( hypothetically ). Then again, you could get a free market analysis from virtually any Realtor in your area or simply ask your insurance agent for a referral. In either case, improperly valuing “your most important asset” isn’t really a big deal right? Well... ask the guy whose “most important asset” burned down…maybe it matters a little bit.
So is Zillow the evil empire? No. Is Zillow a bad thing? No. In fact, I find it to be pretty cool and I have to admit that I use it! I consider all sources of information to have value ( some more than others, and sometimes just to know what misinformation is out there ). An important risk with Zillow is simply that it’s financial backing and clout ( albeit sourced from the wrong industry, travel ) will give it more legitimacy than it is currently ready to wield. Is it possible that Zillow could actually affect values in the housing industry? Or tax assessments on County, State or National levels? It may be. It certainly has a lot of attention, and if that kind of information is available from a "legitimate" source for free… its easy to see some smaller government bodies leveraging it to save a few bucks in personnel costs. Which doesn't sound like a problem until you start to add that up all the way across the country... and understanding what would happen to average tax valuations as a result. Remember that 10-15% discrepancy in my neighborhood? How much is it in yours?
Anyway. Online maps are fun… and checking prices is fun too. Its called shopping! But when you’re ready to get serious about buying or selling? Leave your “Zestimate” in the folder with your other research and seek out the advice of a Zeal Estate Professional… er, Realtor ®. You'll be glad that you did.
*grin*
More on Zillow later!