According to an article by Kenneth R. Harney in the Washington Post on May 10, 2017, a homeowner in Illinois is suing real estate website Zillow.
The homeowner claims Zillow's "Zestimate", their trademark named home value estimate, undervalued her house, and helped impede selling her home at market value.
This lawsuit, which may turn into a class action suit that would include homeowners all across the country, comes a little more than year after the CEO of Zillow sold his house for 40% LESS than his own Zestimate.
As real estate agents, many of us have always taken issue with Zillow.
One of the big challenges on the buyer side is that we are constantly getting asked about properties that aren't actually on the market, haven't been on the market in quite some time, and/or have already been sold because Zillow pulls data from records that aren't always up to date.
*Side note, our website, right here, is linked to the Multiple Listing Services, and has accurate information that is constantly updated.
And, then of course, there are the Zestimates. Real estate agents have held to the notion that the Zestimates can be as much as 20-30% off, high or low.
According to a spokesperson for Zillow in the Post article, nationwide, the Zestimate has a median error rate of 5 percent. They say they are within 5 percent of the sale price 53.9 percent of the time, within 10 percent 75.6 percent of the time and within 20 percent 89.7 percent of the time.
Now here are some unofficial industry stats.
If a property is listed 5% over market value, there will be very little activity, if any, and experts say the price needs to be adjusted down inside of the first 30 days of the listing.
If it's listed at 5% under market value, your best hope is that enough people think it's a deal that you have a bidding war, and get market value or a little above.
If a property is 10% overpriced, there will typically be no traffic and the property will typically not sell. If it does sell, it's because it fell prey to investors and the seller was happy to take any offer...which is usually way lower than market value.
If a property is listed 10% under market value, well, that's pretty much a fire sale. Buyers would love it, but what seller wants that?
As far as 20% over or under value, it's pretty safe to assume you get the picture as to what that means.
So, going back to Zillow's own statistical data, by their own admission, 10.3 percent of the time their estimate is going to be more than 20% off market value, higher or lower.
Furthermore, they're telling you to expect that their estimate will be 5% off, on average.
The point is, there is no substitute for working with a qualified real estate agent who shows you the up to the minute data from the Multiple Listing Service.
We provide this service for our buyers and sellers.
We like our buyers to know what similar houses have sold for, and how the market is behaving so they can make an informed offer.
And, it's absolutely essential for our sellers to know how the market is trending, and about the recent comparative sales. It's also important for them to understand the difference between a sold property, where the price has been determined by a buyer and appraiser, and a listed property, where it's only what the seller is hoping to get for the property.
So, if you haven't already created an account on our site, please do so.
As a buyer, you can set up and save searches that will notify you about all the homes on the market that fit your criteria.
And, as a seller, you can get an ongoing market overview that includes sold properties, so you know how the market around you is behaving.
Or, you could use Zillow, and wonder how far off the value the estimate of a property is, and if it's actually available for sale.