Just Plain Dumb
A group called the National Community Reinvestment Coalition (NCRC) has filed a complaint with the FTC against Seattle-based Zillow over the accuracy of Zillow’s zestimates. The NCRC infers that the zestimates are dangerous information that mislead the public.
David Berenbaum, of the NCRC mentioned that “many in the appraisal industry have said to us that it is almost an open joke the information on this Web site.” The NCRC is aligned with a group of appraisers & lenders, perhaps threatened by AVMs. Interestingly, lender appraisals are almost always the same or very close to the selling price of a property.
Granted, Zillow isn’t the most accurate, but that’s not a secret. Zillow even admits only 73% of Seattle area valuations are within 10% of selling price. But unlike other agents who would have Zillow’s head on a platter, I say, so what? Ask 5 real estate agents to for a home valuation report, you’ll get 5 different pricing opinions. Though, an agent may have an opportunity to view the property and consider intangibles that an automated valuation model (AVM) is not able to do. The fact is, Zillow just provides another opinion. And, there’s nothing wrong with that.
Read more:
John Cook’s PI article & blog post
Sellsius’ Zillow Zapped with FTC
Columbus Best Blog’s Complaint to FTC consumers Zillowed?
Real Estate 2.X’s Trouble for Zillow
Roberta Murphy’s Zillow gets Zinged
Three Oceans A modest proposal … amen!
Yes, there IS something wroung with it.
People are under the MISTAKEN impression that anyone can offer an opinion. NOT TRUE. Anyone CAN proffer a PREFERENCE, but OPINIONS must be backsed by a reconciliation of factual data, which Zillow does NOT use. Proof of this are libel laws, which clearly state that a person or entity may NOT make a public statement that is not based on fact. Zillow and similar companies do this EVERY DAY, and it is dangerous.
Zillow’s estimate of only 73% being within 10% is exceptionally high and, again, misleading. In reality, the numbers should probably be reversed based on my experience (a true, professional real estate aprpaiser). I don’t know how often I have to respond to idiot borrowers and lenders why my opinion of value is more than 40% diffferent from what they received from Zillow. My own home, according to Zillow, was “worth” TWICE as much I paid for it at the time, and three times that now, even though recent sales show it is worth little more than 15% more than what I purchased it for. Zillow takes average GROSS sale prices (not removing sales concessions), and applies them evenly across the board for an area, not taking into account tat a small quarter mile seciton may have 20 different markets, or that renovation status is significantly different, placing a home with its original 1970’s kitchen flooring, and everything else on par with a home of equal size that is fully modernized or even NEW.
HouseValues.com is no better. Of the last 5 of these Realtor (not qualified in ANY state following USPAP and FIRREA to offfer an opinion of value)-provided estimates of value (illegal in Arizona and 38 other states, they were so far off it was amazing. For example, the last one showed three sales f similar sized homes with sale prices between $120k and $130k, and two listings on the market for more than 180 days at $165k and estimated the value of the subject proeprty at $165k.
Even TRUE AVMs, like one provided by Countrywide, lack all the analytical tools required for an accurate conclusion of value, evidencd by the fact thatthe last 100 or so of these that I have seen with a “confidence score” or more than 85% were more than 50% off from ACTUAL DATA FOLLOWING PROPER RECONCILIATION. RAw sales data and GLA are NOT the basis for an opinion.
Estimates of value are an Appraisal by very definition and should only be performed by QUALIFIED APPRAISERS who have the skills and tools to take the raw data and turn it into something meaningful and develope a properly formed opinion of value.
JD, thanks for your thoughtful comments. I agree the only valuations worth the paper they’re printed on are those from qualified appraisers. My point, though, was Zillow is no better or no worse than any real estate agent providing a pricing opinion (without viewing the property in person).