Studies show Zestimates are Grossly Inaccurate
In this age of limitless information available at the click of a mouse, people increasingly attempt to act as their own realtor with market data they obtained from real estate sites. In fact, in December alone the online real estate behemoth Zillow, which recently acquired competing site Trulia, had about 73 million unique visitors. According to a survey by Discover Home Loans, a majority of participants who used online realty sites said it made them feel “smarter” and “more confident.” However, a Time.com report on the survey reported that only 22% of users said the listings were always accurate, which underscores how unreliable - and even sabotaging - third party real estate databases can be. We constantly have our Austin area home buyers and home sellers telling us that they have experienced this same issue, so being able to direct them to a more reliable Austin real estate website is critical.
Previous studies have also shown the inconsistency between third-party sites like Zillow and Multiple Listing Services (MLS) that real estate brokers use to list and find homes. Austin MLS sites such as www.cainrealtygroup.com update faster than the third-party sites, which gives them an advantage over third party services. In addition to being connected to the most recent data on the real estate market, brokers and their agents must provide accurate data or risk jeopardizing their careers. An Austin area Real Estate Agent who fails to provide accurate data even a few times will find that fewer clients come to them for their real estate needs. Austin area Realtors would not only face professional shame, but also possible litigation if they proved to be as inaccurate as their online competitors.
Kenneth R. Harney, a columnist for The Colombian Business Column, wrote that not only is Zillow generally inaccurate, but has proven to have astounding inaccuracy in local markets. Zillow CEO Spencer Rascoff himself admitted that Zestimates (home price estimates provided by Zillow) have a “median error rate” of about 8 percent. “On a $500,000 house, that would be a $40,000 disparity — a lot of money on the table — and could create problems.” In the local market of Somerset County, Maryland, the error rate is a jaw-dropping 42 percent. “In some rural counties in California, error rates range as high as 26 percent. In San Francisco it's 11.6 percent. With a median home value of $1,000,800 in San Francisco, according to Zillow estimates as of December, a median error rate at this level translates into a price disparity of $116,093.” In fact, the misery caused by inaccurate Zestimates has inspired the creation of memes condemning the problem valuations.
Skewed home values provided by Zillow aren’t taken lightly by buyers or sellers. Consumers often take Zestimates "as gospel," said Tim Freund, an agent with Dilbeck Real Estate in Westlake Village, Calif. The trouble arises when the consumer engages in a transaction with a knowledgeable agent and doesn’t understand why their woefully low-ball offers on homes are not being accepted. Or in the case of sellers, agents struggle with them not to overprice the home and dismay potential buyers from submitting an offer. One realty agent who posted on the industry blog ActiveRain, went so far as to call Zestimates "the bane of my existence."