I get asked about Zillow, Trulia, and other home search sites a lot. Even more I get asked "can I trust the zestimate?". I'm going to answer this question but first a little history!
The internet has changed the real estate industry drastically. There was a time (a long time ago), when a prospective home buyer would contact a real estate agent and go to her office to flip through books of listings. I remember this process, not from being a real estate agent, but from when I was a kid. My mom used to bundle me up in the cold Wisconsin winters and drive across town to visit her Coldwell Banker agent. I remember thinking that looking for houses was a blast - huge binders full of pictures of homes - ah the inefficiency of this - the info was no sooner printed and put into the binders as it was outdated by a price decrease, pending, or sold status change! But if you wanted to look for homes this was your only choice - you had to enlist a real estate agent to help you search for and view homes and you had binders of data to accomplish the task.
Fast forward a few decades and now much of the searching is done by buyers long before they select an agent to show them the homes. Consumers search for their next home with the stroke of a key and the click of a mouse, still in pjs, coffee mug in hand! Times have changed and buyers have changed. Buyers now contact real estate agents when they've found the 3-5 homes they'd like to see. They are savvy, well researched, and ready to transact based on what they've learned online.
If you are one such savvy buyer who has looked online for property for sale, you've likely used Zillow to search for and review homes. Zillow, and other listing farm search sites, can be a great tool; however, they tend to have out-dated information and inaccurate price valuations. So removing the agent from the search process (and her binders of data) has caused an accuracy issue for buyers and sellers.
It can be very disappointing when buyers find out from their real estate agent that the 4 homes they'd like to see are now in pending or sold. Unfortunately, this happens often as the listing farms tend to lag behind MLS systems, resulting in the information a consumer sees being out of date.
Alright, now that we've had a history lesson and talked briefly about the current internet savvy home buyer, let's get back to the original question "can I trust the zestimate?".
The first issue I ran into with the Zestimate actually came from a seller, not a buyer. We had just listed a beautiful waterfront home for nearly $1.8 million, only to find out a few days later from the homeowner, that Zillow had Zestimated his home to be worth $1.2 million. This drastic discrepancy had our seller extremely worried. We decided to unearth the Zestimate, it's formula/algorithm, and if we could possibly change the value it had assigned our seller.
The long of the short of it is that Zillow's Zestimate supposedly pulls in nearby comparable properties but does not place any value on upgrades and special features unless the listing agent has edited the Zillow listing. So in this particular scenario, the waterfront premium this home commanded had been completely ignored along with several other special features.
Luckily, we were able to edit the listing and get the Zestimate up to nearly $1.7 million which was much more indicative of the home's value. It is unrealistic to think that most agents update their listings on some or all of the listing farm sites so the majority of listings will show a much lower valuation than list price.
As a savvy internet home searcher, you're doing your research and picking the homes you want to see based on the Zestimate. Here is where I say, don't trust the Zestimate - it's likely you will be disappointed when you actually make an offer. Listing prices are usually the result of several hours of effort from a qualified real estate agent who knows how to evaluate comparable homes and add and deduct dollars based on the special features of the home they are listing.
If you're viewing listings and the valuations are much lower than the list price, contact your agent to ask her opinion. It's likely that the zestimate is not accurate and the list price is much more indicative of fair market value. Try not to get sucked into believing the farm site valuations, instead, lean on a professional in your area who you feel is competent and capable of valuing the homes you may want to see and purchase.
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