Should Zillow Suspend the Zestimate for an Active Listing?
Imagine that you can put a home for sale on a really stupendous, popular medium that would give it incredible exposure. In putting the home on the medium (and it could be a website, TV program or print publication- it doesn't matter), you are told that in addition to your content on the home, the publisher will add something extra: their own opinion of the price.
SO...on your $850,000 listing, they'll say its estimated value is actually $780,000. And that $400,000 starter? They say it is worth $440,000. Would we have tolerated that for a hot minute back when the New York Times was the ad platform of choice for Westchester homes for sale? What about paying through the nose to get your home on one of those Sunday morning TV shows with all the homes for sale. What if, after you home were shown, the channel posted their own estimate right under your list price and it didn't match? This is exactly what happens with homes listed for sale on Zillow.
Earlier this week, I was signing papers with some nice homeowners to put their home on the market. Good, educated people. And they asked me to not list their home on Zillow.
I was flummoxed. But their point was that when they were looking for homes, they were skeptical of homes where the Zillow Zestimate (Zillow's value estimate) was less than the list price. They didn't want people doing that to them. When I told them that would undermine their exposure, they continued that even if they missed eyeballs on their house, they didn't want people being encouraged to offer less based on a faulty value estimate.
Now, I love offers, and even low ones are better than no offers because they are a start. But I can tell you that agents in the field have absolutely no love for the Zillow Zestimate. It can help in a general sense in some cases but overall it muddies the waters terribly. Sellers can feel they under-priced their home. Buyers get freaked that they overbid. Even after showing clients the actual comparable sales and explaining how a professional, local broker is not a zestimate, but actually a ZACTIMATE, Zillow injects doubt where we are trying to foster trust. I didn't make that term up- I got it from Brad Andersohn, industry outreach guy at Zillow and a respected colleague.
According to their own statistics, Zillow's average margin of error for Westchester Zestimates is 8.3%. Only a third of their zestimates are withing 5% of actual value. You have to drill fairly deeply on their website to find this caveat, but they do publish it. Spencer Rascoff, CEO of Zillow, is pretty clear that his company is the business of selling real estate advertising. If so, why put a zestimate on a home listed for sale? If brokers are the zactimate, why not just defer to our list price, since Zillow never saw the house or executed a market analysis? We are, after all, the customers. And as my couple demonstrates, value to the consumer is dubious.
Back to my couple: They weren't comfortable having a zestimate undermining their asking price. I showed them how an owner could claim a listing and influence the Zestimate by inputting improvements they made to the property and so forth. It isn't exactly an exact science, but it was something they could do. They agreed to proceed with syndicating their home to Zillow for the exposure, but their reservations about the Zestimate speak to the growing doubt among consumers about Zillow' methodologies. It isn't just agents that have issues. And I hope the issues can be worked out. I think that offering Zestimates just for homes off the market and having only list prices for active homes for sale would be a good start.
Full disclosure: I am a paying Zillow customer and find many of their tools to be of value. I also know plenty of Zillow employees and they have been gracious and decent people. And I hope they'll consider my thoughts here as worthy of serious consideration.