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Zillow knows what they’re doing, right??
Last week, Jos and I were showing properties to one of our clients and we came across one that she was very interested in. It checked all the boxes. Nice neighborhood, plenty of space, HOA to take care of lawn and snow and most importantly at a price she could afford. Ultimately, she decided she wanted to write up an offer. After we gave her our estimated home value & offer amount she was a bit perplexed… She said, “But the Zestimate on this is only 171,000”.
As Realtors, we know that Zillow’s “Zestimate” is generally speaking somewhere in the ballpark, but not the end all be all of home values. If I’m speaking Mandarin to you, let me break it down. Zillow is probably the premier website for home searches that the general public is aware of. They have what’s called a “Zestimate” for most homes. This is their proprietary algorithm that they use to derive an “estimated home value” of a given property.
For the record, our CMA or “Comparative Market Analysis” on this particular property came in right around the $205,000 mark. It’s not like this property was in some super unique neighborhood. We didn’t have to make a ton of adjustments to derive a value. This home was a townhome located in a neighborhood with 40 or so identical townhomes with recent sales to support value. As far as CMA’s go, this one was a “lay up”!
The Plot Thickens…
Too add some fuel to the fire of the “Zestimate” inaccuracies, I want to give you a brief history lesson. Back in April of 2018, Zillow launched a program called “Zillow offers” where Zillow would offer to buy your home. This program was launched in 24 markets around the country. Mostly larger metropolitan areas like Los Angeles, Cincinnati, Orlando, Phoenix and places like that. They would use their “Zestimate” as the basis for what kind of price to pay for these homes that they purchased.
Their end goal was to buy properties quickly for a discount, do an HGTV style remodel on them then turn around and sell them back to the general public. Just in case you haven’t been paying attention to home values going back to 2018 you should know that home values nationally have increased quite a bit since that time. I’ll explain why that’s important in just a minute.
The Plot Thickens… but more this time….
Fast forward to 2021 and Zillow’s home purchasing program has run aground. Their total 2021 losses in Zillow’s home flipping venture amounted to $881,000,000.00. That’s nearly a billion dollars, with a “B”. Meanwhile, if you were a home owner during the late 2020 to late 2021-time frame you probably saw a home value increase of around 17.5%. These are national figures, so each market is going to be a bit different. I don’t want to make the same mistake that Zillow did lol… Long story short, Zillow managed to lose money flipping homes in a rising market utilizing their “Zestimate” as the basis for purchasing these homes.
Adding insult to injury, Zillow decided to terminate their “Zillow Offers” program. They still had a bunch of houses in inventory. 8800 homes as of February 2022. What’s worse is they intend to sell those homes to big Hedge funds and Wall Street types. Likely removing those properties from the market for the long term as corporately held rental properties. To read more on why I think that’s not good for the general public, click here.
You’re telling me the internet can’t solve all my problems?!?
If your telling yourself “I thought Zillow had their poop in a group, how will I ever determine the value of my home now?!?!” don’t you worry. I’ve got a very simple and cost-effective solution for you.
Talk to your friendly neighborhood Realtor.
As Realtors, we are actively involved in the market on a daily basis. We see all kinds of homes in varying conditions, locations and price points. This gives us a back log of knowledge to fall back on when determining any particular homes value.
Time to unplug and talk to a human
Some of the things we’re looking at are location, condition, amenities, upgrades, bedroom count, bathroom count, square footage and most importantly, comparable sales data. The more recent that sales data the better. We’re currently in an up-trending market. Meaning if a home sold a year ago for 200k then it should sell for more today. This is assuming all the other variables are the same. The tricky part is when the variables change, which I will admit is more often than not. That’s why it’s important to work with someone that has experience in this arena.
We can’t speak for all Realtors, but this is a service we provide for free. If you’re simply trying to determine a home’s value we’re happy to determine that value for you. We’re just hopeful that when the time comes to sell you remember who helped you out (hint hint, nudge nudge).
I hope that this article has armed you with a little bit of knowledge on why your “Zestimate” might be a bit off or WAY off. I will admit that they do sometimes get it pretty close. More often than not though, they usually need some adjustment.
If you’re curious to know what your home’s value is or how far off your “Zestimate” is, feel free to reach out to either of us. We’d love the opportunity to assist you.
-Cody & Jos-
