Zestimate: $291,071 Actual Sales Price: $275,000
Originally created to help buyers and sellers get a sense of property values, Zillow, Trulia, and other listing farm websites really only succeed in providing misleading data, and creating false expectations. “Zestimates” for instance are just that: estimates generated from a mix of user-entered data, public records, and a Multiple Listing Service (MLS). The problem is, not everything is recorded at the county level, and MLS data is only available if the listing broker’s office opts in. This translates to gaps of information that decrease accuracy.
On Zillow, homeowners can claim their property, and then add their own estimate of value. But the fact is, most homeowners are not Realtors, and they have a tendency to overvalue. How do these sites weigh information and sources? Their values are skewed not only by incomplete data, but often old data, sometimes lagging 3-6 months behind real time transactions. If that weren’t enough, many of the comparable properties chosen by these consumer-oriented sites may not be the best matches.
Realtors take into account all elements of price valuation: location, lot, neighborhood, views, condition, upgrades, features, etc. Accurate property values are achieved by weighing the various components, either in a Comparative Market Analysis (CMA), Broker Price Opinion (BPO), or by a licensed appraiser. Banks and mortgage companies, for example, use professional appraisers to confirm the value of the homes they finance. Markets are complex and constantly changing, which is why it takes a professional to interpret. These farming websites are general in scope and often misinterpret the local market. They stay in business by linking themselves to the real estate industry via advertising.
The truth is, only licensed brokers and appraisers have 1) Access to the most accurate information, and 2) The expertise to interpret that information to buyers and sellers, so they can make the most informed decision.