Zillow Living in Interesting Times

“May you live in interesting times.”

The origin of the phrase is much disputed but there is wide agreement on its meaning. Disguised as a blessing, it’s actually a curse and roughly equivalent to “May you have lots of drama, disorder and trouble in your life.”

In any sense of the phrase, the mega real estate website company Zillow is living in interesting times.

First off, they are the defendant in a lawsuit brought by News Corp. News Corp owns Move, Inc. and Move owns Realtor.com, Zillow’s chief rival. Lawsuits are a fact of life in big business but this one is a whopper. News Corp wants a couple billion bucks from Zillow for allegedly stealing trade secrets.

Then there are the ad wars. Zillow is spending up to $100 million annually to become the preferred site consumers consult for residential real estate info and Realtor.com is fighting back with massive ad budgets of its own.

Finally, there is the Zillow CEO’s experience in selling his own house in Seattle. Seems it went for $1.05 million even though the Zillow Zestimate on his property projected its value at $1.75 million.

Oops!

In case you are not familiar with it, a Zestimate is an educated guess at the value of a particular home. Zillow uses public data and a proprietary algorithm to “zestimate” the value of about 100 million residential properties in the U. S.

To be fair, Zillow explains the limitations of their Zestimate:

• • They explain that a Zestimate is only a starting point for estimating a property’s value.

• • They explain that any given Zestimate can be wildly inaccurate.

• • They publish data on the range of accuracy for Zestimates.

• • They advise consumers to get a Comparative Market Analysis from a real estate agent when buying or selling.

On the accuracy front, the nationwide range of accuracy of a Zestimate is 7.9%. This means that the true value of a property will be within 7.9% of the Zestimate … but only half the time. The other 50% of the time, the error actually exceeds 7.9%. For an average metro Denver home, there is a 50% chance that the error on the Zestimate is $30,000 or more!

The average consumer may not drill down enough on the Zillow site to discover these qualifications. We have certainly heard horror stories of buyers and sellers actually doing deals based on the value of the Zestimate. In those transactions, it is highly likely that someone is significantly overpaying or letting a property go at a significant discount.

As agents, we use selected features on the Zillow site (and the Realtor.com website) when helping sellers and buyers. However, we never use the Zestimate for estimating a home’s value. It simply does not have the degree of accuracy we need to ensure that you get top dollar when you sell or to ensure that you are not overpaying when you buy.