Market Value = Zestimate. Keep Dreaming.

kris_berg.jpg 

Pay attention to your dreams – God’s angels often speak directly to our hearts when we are asleep.  Quoted in The Angels’ Little Instruction Book by Eileen Elias Freeman, 1994

So it was that God’s angels decided it was time to have a chat with me about Zestimates last night. It could be argued that dreaming about Zillow is rather warped, a silent cry for help, yet if Google had been crawling my REM state for any period of time, let me assure you that I would not rank high for keywords beginning with a “Z.” Overflowing laundry hamper, mean clowns, and George Clooney – well, that’s another story. For those, I am dominating Page 1 of the dream search results.

Somewhere around 2:00 am, my angels stopped by to remind me how many times in the past month we have found ourselves sitting at an otherwise sane family’s kitchen table staring down the barrel of their Zestimate. The modern day listing appointment is not nearly as much fun, or as predictable, as the listing appointment of yore (“yore” being 2003). Let’s compare and contrast.

Yore

Seller: I want to sell my house.
Agent: Let me tell you why I am the best choice! (Agent proceeds to share awards, letters of reference, a picture taken with the Real Estate Company President at this year’s office Christmas party held in the Ritz Grand Ballroom and another taken with Leonard Nimoy at the 1997 Comic-Con, and a marketing plan consisting of a promise to keep the flyer box mostly stocked. Seller listens intently.)
Seller: How much is my home worth?
Agent: Whatever you want or need it to be worth!
Seller: My cousin Louis just got his license and will list my house for free. Will you do it for $1.95?
Agent: Fees are negotiable!

Yore Plus Five Years

Seller: I want to sell my house.
Agent: Let me tell you why I am the best choice! (Agent proceeds to share awards, letters of reference, a picture taken with the Real Estate Company President at this year’s office Christmas party held in the parking lot of Dunkin’ Donuts and another taken with Craig Newmark at the Inman Connect conference, and a marketing plan consisting of a promise to completely empty their own Roth IRA during the duration of the 12-month listing. Seller, meanwhile, busies himself with more interesting and pressing activities, such as sewing the button back on his peacoat and basting his turkey. When agent’s lips stop moving, Seller puts down his People magazine and proceeds.)
Seller: My home is worth this much (waving Zestimate high over head with the same authority as did Moses when showing off his Commandments).
Agent: No, it’s not.
Seller: Yes, it is.
Agent: No, it’s not.
Seller: We will use Louis.

It would be funny if it wasn’t so unfunny – and true. We try to explain that Zestimates are impersonal and often flawed, and we try to explain that they are sorta, kinda, ballpark numbers which, while entertaining, are not science or gospel. Blah, blah, blah.

So, my dream sequence inspired me to take a quick comparative look at the Zestimates versus sale prices of homes sold in Scripps Ranch since the February 1, 2008. First, keep in mind that out of a detached housing inventory of approximately 8,000 homes in the San Diego 92131 zip code, only twelve recordings are reported by our Sandicor Multiple Listing Service for this period. Of these twelve homes, three were new construction with no Zestimate available. Here is what I found:

zestimates_scripps_ranch.jpg

Granted, this is a very small sample, but I think we can safely make a couple of observations. First, in every case, the Zestimate was higher than the actual sale price. Second, in many cases the Zestimate wasn’t just a little higher, but a whole bunch optimistic. On average, Zillow blew their estimate of value by approximately 9%.

In Zillow’s defense, buried in the site is the admission that Zestimates are accurate on average within 7.2% in the San Diego metro area. They also admit to the Zestimate’s limitations:

It is not an appraisal. It is a starting point in determining a home’s value. The Zestimate is pulled from data; your real estate agent or appraiser physically inspects the home and takes special features, location, and market conditions into account. Variations in price also occur because of negotiating factors, closing costs, and timing of closing.

But, this language is anything but front and center on their site. The reality, I suppose, is that even if they placed this disclaimer on their landing page in 72-point font, many sellers would miss the message. Why listen to all that talk about averages when my home is anything but average?

It is fun to look up your own Zestimate. Changes to this number over time can indeed provide insight into your local market trends. But when it comes time to price your home for sale and set realistic expectations of value, it is imperative that you study the data provided by your agent and reach an unemotional, reasoned conclusion. Even your cousin Louis knows this.

Or you can dare to dream.

Get your Instant Home Value…