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Should Zillow Suspend the Zestimate for an Active Listing?

ADDED ON March 31, 2012 8 COMMENTS

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.

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8 Responses to “Should Zillow Suspend the Zestimate for an Active Listing?”

  1. March 31, 2012 at 6:05 pm, Jane Peters said:

    Excellent post, Philip. I cannot think of one reason why Zillow continues to do this, other than to try and assert themselves as some kind of authority, It just makes no sense.

    Reply

  2. March 31, 2012 at 6:06 pm, Carla Muss-Jacobs said:

    Great article and points to ponder. Here’s one: properties have SOLD for over a hundred years without the likes of Zillow. IMHO I’m sure the property would sell w/o the “exposure” on Zillow. The real exposure in on the MLS (also IMHO). I think this is a good, serious debate . . . and if I were a listing agent this would be an “ah ha” moment. Why would I want my client’s listing, which was placed on the market using local comps, undermined in this manner??

    Answer: I wouldn’t

    I don’t follow Zillow and I don’t take listings, so I was unaware they did this to listings. Are they negotiating price, giving legal advise, performing a comp, giving an appraisal, interfering with a listing contract??

    If consumers/public/customers/clients are seeing this, then I would think that they might think the listing agent was full of crap and didn’t know how to price a listing. After all, the Mighty Oz, err, I mean Zillow has spoken.

    Reply

  3. March 31, 2012 at 6:20 pm, Debe Maxwell said:

    Excellent points, Phil. My sellers are always so disheartened by this and often ask me if removing their listing from Zillow would be better. It’s very frustrating and even though people read that the stats are ‘estimates’ and can be ’35% off’ (as in our area), we also still have to rationalize with Buyers that Zillow is NOT accurate. I love your idea of removing that option from active listings. I, for one, could fine 10,000 other real estate agents who would agree with you too! Let the voting begin!!

    Reply

  4. March 31, 2012 at 6:22 pm, Susan Mangigian said:

    We have our sellers opt out of zestimates but they still show up on Zillow, which makes you wonder why we have the opt out feature in the first place.

    Reply

    • March 31, 2012 at 9:14 pm, J. Philip Faranda said:

      Susan- I had no idea people could opt out. If I don’t know, how would a consumer?

      Reply

  5. April 01, 2012 at 2:52 am, Carla Muss-Jacobs said:

    Who allowed this type of thing to happen with MLS list price data? The Final Judgment of the DOJ vs. NAR is clear on the type of information that can be displayed in the IDX / VOW’s. But who reads this anyway?!? Surely not Zillow’s legal dept. Because if they had read this, then they might think that taking the MLS data list price and putting in a Zestimate isn’t really kosher and takes a very board interpretation of the final ruling. Who does this crap?? Oh, yeah, Zillow. Call me Alice in Wonderland but how exactly does this help the seller? The listing agent? The information to the consumer? Zillow is the Queen of Hearts and we all know what whacky and zany stuff she came up with. I didn’t realize they were doing this, but I don’t believe there’s anything that allows this type of thing in the DOJ Final Judgment on all things IDX / VOW. Zillow is doing this on their own. Sellers’ list prices are from MLS data. Period. The Final Judgment on what information is permitted to be displayed using MLS boards’ data is kinda spelled out. What Zillow is doing with the MLS boards’ data of list prices isn’t covered because who would have thunk it . . . oh, yeah, that whacky Queen of Hearts. This is the Final Jugment http://t.co/RskzBgBO. I believe it’s page 23 which allows for the seller to opt out of the Internet. There’s nothing that says anything about opting out of Zestimates . . . which is probably why Susan is wondering — she’s another Alice in Wonderland too ;-) You can’t opt out of something that doesn’t really exist. Once again, MLS data is being used incorrectly IMHO. Didn’t we go through something similar with RedSpin and their whacky “ScOUTING Reports”? Who is giving permission for Zillow to tag their Zestimates under freaking list prices that is MLS board data?!? Oh my gosh . . . off with our heads shouted the Queen.

    Reply

  6. April 02, 2012 at 12:59 am, Susan Mangigian said:

    We were told it was the compromise reached between our NAR and Zillow to have the seller opt out in writing. It is now in our listing contracts.

    Reply

  7. April 06, 2012 at 2:33 pm, Ross K said:

    I ask why are REALTORS foolish enough to ever have Clients home on zillow. There is not a single provable, logical or ethical reason to post a product that will only be searched by a specifc local demographic to an international audience. This is like the local pizza shop advertising to ship a pizza to china.
    Just insane!

    A cohesive marketing strategy means ensuring your listing is marketed to the target demographic in the best way to promote the best features of that home. I would argue that if you post a clients listing on a site that could negatively impact it’s precieved value you have failed due diligence and could easily be sued for damages by your client.

    Reply

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