Matt's Blog August 4, 2008

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ZILLOW SCHMILLOW

The popular real estate web site Zillow.com touts itself as a reliable source for determining the value of your property, your neighbor's property, the houses on your street, around the corner and around the entire country. You go to the site, type in your address, and boom, the value of your home instantly appears. Not only that, it tells you how many bedrooms and baths you have, what you are assessed for, what the house sold for when you bought it and, most importantly, what it is now worth. Sure, there are caveats, in small print, that encourage you to seek further advice and counsel, but the intent is clear, they are attracting you to the site because they hope you believe in their data.

The statistical computer model that they are using is impressive, they have linked up to County databases for your assessment, square footage, and as other homes sell, they upload that information into their system as well. Through what I am sure is a complicated computer model, they then extrapolate sales trends and 'adjust" the value of your home.

What's missing in this equation? Well, for starters no one from Zillow has ever BEEN IN YOUR HOUSE. How the heck can they know about your granite/cherry/stainless steel kitchen (or for that matter your formica/Merrilat/avocado green kitchen!). The reliance on county records for square footage, which are known to be unreliable at best, is a significant flaw as well.

While they are usually not far off, they are capable of being off by hundreds of thousands of dollars sometimes. The whole idea is a gimmick to me. They have charts and graphs demonstrating how much your house has gone up or down in the last THIRTY DAYS, like it is actually possible with such precision, to declare such things.

I recently had a neighbor inquire as to whether his home had gone down $10,000 in the last thirty days, because Zillow said it had. Well, of course not, or yes, actually a lot more, who the heck knows? Again, the person who would know, or at least be in the best position to have an educated opinion, would be the real estate agent who has been in every house to sell within a mile or so of the house over the course of the last thirty days. Do you know anyone who fits this description?

I suppose what is terrifying is that the buying public could be forming an opinion about the value of a house based on what Zillow has to say. This web site could actually be harming the marketing of a property by stating that a home is worth quite a bit less than the stated price for a home currently on the market. Or, conversely, Zillow could be declaring the home to be worth more than the list price, which has failed to produce an offer, resulting in a seller saying, "but Zillow says my house is worth more!"

It's amazing how accurate Zillow gets when a home has gone to settlement; suddenly they are within $10,000 of the value because they have picked up the sale out of public records and adjusted their viewpoint to match the recent sale. It's almost hysterical to see what they put in when this happens. Recently, a home in our zip code sold for $840,000. Boom, all of a sudden Zillow adjusted their opinion to $846,000! I sold a home out on Newbold Rd. headed towards Montgomery Mall last month. It sold for $1,285,000, all of a sudden Zillow says it is worth $1,281,000. Hmmmm, it went down $4K this month, imagine that!

Searching for an easy way to discredit the entire idea, I decided to search MLS for the sale of recent settled properties that had not yet been 'adjusted" by Zillow. In other words, these homes just sold but Zillow still has their old evaluations posted. I sold a home that settled two weeks ago in Ashburton, Bethesda. It sold for $615,000, Zillow has it in as worth $644,500. Did we get a deal? Yes, we probably did, but Zillow didn't know the home was on a corner without much backyard, how could they?

I sold a home in Sumner which settled in July 2008 for $715,000. Zillow says it is worth $651,000. Ooops, I guess they missed on that one. The explanation for that low Zillow appraisal would be that the home was a jewel inside, but was light on square footage. Zillow couldn't possibly know about the finishing quality of the inside of the house.

I have a home listed in the zip code now which is valued by Zillow at $823,500, but we have been asking $25,000 less than that for months without an offer, so it goes in both directions. Finally, a brand new home I sold in Glen Mar Park about three months ago is valued on Zillow at $1,790,000, even though the house sold for $1,550,000 and Zillow knows this. This is a perfect example of square footage driving the computer model. The house, like most new homes, is very strong on square footage (close to 6000), but Zillow isn't tuned into the less expensive homes around this house or the tiny backyard. It was a great house and we got a very good deal, but the suggestion that it is now worth $200,000 just a few months later, is ridiculous.

Enjoy Zillow as you would any information source, with a grain of salt. If you want to narrow down what your home is worth, by all means, call a professional who can provide hard data to support the opinions. I would liken Zillow to what I do BEFORE I go to see a house. When I am called, I run public records, ascertain square footage, what the current tax assessment is (often wildly unreliable but a starting point), take note of what the sellers paid for the house and when, study recent comparable sales in the community and formulate a "ballpark" in my own mind. But often when I get inside a house, I realize that these prior speculations bare little association with reality. Sometimes the house is disappointing inside in terms of care and condition, other times, the owners have spent a fortune on improvements that just don't show up in any public records. It's seems obvious to state, but you have to actually SEE a house to know what it might be worth.

Finally, I would hate to think that any knowledgeable, intelligent buyer would draw conclusions about the value of a property based on Zillow's opinion, but I am sure it is happening everyday. Thus, there are ways to feed info into Zillow that may improve their opinion of your value. If you are going to be refinancing and want to drive that value up in Zillow or are thinking about selling in a few years, you can rummage through the web site and "add" data, which you certify as true, which will eventually goose up your value some. This manipulation also strikes me as funny, but such is technology today!

Zillow has what I consider a dangerous info section in which they declare that Bethesda is down in value 3.8% in the last thirty days and the 20816 zip code is down 2.4% in the last 30 days. However, Zillow claims that Montgomery County is down only 2.3% in the last 30 days, the state of Md. is down only 1.7% and the US down 1.0%. So they think we are doing WORSE than the rest of the country, which I seriously doubt.

Gotta go now, Zillow says my house is down in value and I am thinking about planting some flowers to pull my value up!

MM

 

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