My New Blog

Here’s an outstanding article written by Tallahassee area appraiser, Greg Lane concerning Zillow and its “estimates” of home values. Good stuff. (posted with permission from Greg Lane, June 6, 2011)

ONLINE APPRAISAL SITES MAY MISS ASPECTS OF HOME’S VALUE

For the last several years, my Realtor friends have been complaining to me about the “Zillow Buyer”. Zillow is one of several free websites where you can find a variety of information about homes in your neighborhood. This cool website features list prices, sale prices, school zone information, population statistics, etc. Some buyers equate it to the “blue book” for home buying. Here’s the problem, there are too many variables to consider when we talk about homes, such as; quality, condition, floor plan, lot size or view, just to name a few. Most people go to this site to get the free “Zestimate”, a computer generated value of a home. This website, and the few others like it on the internet, does not take any food out of my mouth, it is not my competition. I have no axe to grind with Zillow, in fact, it is part of my appraiser toolbox. Believe it or not, I have actually gained work from Zillow as it is lately causing friction between some buyers and sellers, resulting in the need for human “real estate intervention”. Everyone knows it is a buyers market, but buyers from other Florida cities, or other states, may have a perspective on our market that is not accurate. Take this typical scenario, you make an offer on a home that is well below asking price, waving your Zestimate in the air while handing over the offer to your Realtor. Yet the seller has already listed the home competitively and the home attracts several buyers in a short period of time. Your offer is too low and is not accepted, you lose the house to a higher bid and have to start all over. So how accurate is Zillow, and how can we check it’s validity in our market? I wanted to know, so I started my own chart, choosing mostly homes that I have appraised for sellers who wanted to know where to price their home. This way, we can see who gets closer to the final contract price, the computer or the human appraiser. In our sample of 16 Leon County homes, the “human” appraised values were within 1-5% of what the home eventually sold for. The “computer model”, Zillow, is averaging 10% below the actual pending contract price or recent sale price for these homes. We have found many Zestimates to be low by as much as 20%, but, to be fair, there are rare occasions where I have found Zestimates to be right on the money. For example, a home we appraised last week in Killearn Lakes is under contract for $176,000, and Zillow says……$179,000. In contrast, the home I am appraising right now has one full price contract at $200,000, with two back up offers in place. The Zestimate says the home is worth $138,000, over 30% less than current market value. Some things to consider that a computer cannot take into account are functional issues, external factors, and of course, condition. In my recent case, the home has been completely renovated, and the new seller increased the functional utility by adding a full bathroom. Both of these factors have a huge impact on the home's marketability and current market value. Finally, the computer cannot distinguish between distress sales and arms length sales, the latter of which still dominate most of our market segments. In summary, I welcome the use of free websites as tools to collect general data and statistical information. But “tool” is the operative word, so be cautious, because if you really want to know what a home is worth, consult a human expert like a Realtor or a State Certified Real estate appraiser.

6-5-2011

Robert G. Lane

St.Cert.Res.REA #2252

Timberlane Appraisal Assoc.