How To Explain the Accuracy of Zestimates® To Consumers

I remember a couple of years ago when Zillow first hit the real estate scene.  Consumers embraced the web site almost immediately because of the web site’s cool, on-line tools.  One tool in particular caught their fancy:  the Zestimate.  This single, funny-sounding word would grow to strike fear in the heart’s of REALTORS® everywhere.

But what is a Zestimate?  A Zestimate is an estimated market value of a home based on Zillow’s proprietary, mathematical formula.  The home data they compile to generate a Zestimate home valuation varies by location.  Some geographic areas provide all the data Zillow could hope for, but others are lacking such key things as the number of bedrooms and bathrooms, or, in some cases, the square footage of the home.  The theory says that the more data Zillow has, the more accurate the Zestimate.  They even made it easy for users of the site to help them improve accuracy by incorporating edited home facts into their Zestimate calculations.  In some areas, Zillow can’t produce a Zestimate at all, but they do have some basic information on the homes.

Why did REALTORS® dispise Zillow?  Because they claimed that the tool that produced Zestimates oversimplified the valuation process and gave inaccurate results.  Regardless, Zillow shot up the popularity charts and in no time at all it was firmly entrenched as one of the top ten real estate web sites in the world.  REALTORS® looked at the new kid on the block as a threat to their own personal fiefdom as experts on property valuation.  They exclaimed, “How dare they hand out FREE property estimates!  They’re misleading consumers.  Why can’t consumers see that the accuracy of  Zestimates is atrocious?”

What this group of REALTORS® failed to see was that getting a Zestimate was quick, easy, convenient and best of all, non-invasive.  The homeowner got up in the morning, accessed the internet, answered a few questions on line, and PRESTO – - – a Zestimate was born.  The homeowner could do this decked out in their pajamas while drinking their morning cup of java.  They didn’t have to clean the house for two days and invest an evening or two meeting with a REALTOR® to get the same thing (at least in their eyes); the value of their home. 

REALTORS® also started being hit with the following statement at listing appointments: “But Zillow said my home was worth . . . “  Inevitably, the Zestimate produced by Zillow was always higher (in some cases, significantly higher) than what the REALTORS’® market analysis indicated.  Because no one actually knew how the Zestimate was produced, it was difficult for the REALTOR® to explain to the homeowner why their value was more accurate.

Enter stage right – - – Sara Bonert, Director of Broker Relations for Zillow.  She appears in a short video that explains how Zestimates are calculated in simple language that is easy to understand.  She also clearly states numerous times during the video that consumers should always seek the valuation advice of a real estate professional when contemplating listing their home.

Want some additional ammunition when talking with consumers?  I produced a screenshot of the “Data Coverage and Zestimate Accuracy Table” for the Lancaster area off of Zillow’s website.  Take a look at the yellow highlighted line for Lancaster.

It indicates that Zestimates in this area are within 10% of actual selling prices only 56% of the time.  Is your selling price to listing price ratio better than this?  I hope so.  You say you’re new in the business and don’t have an extensive track record yet – then get this ratio for your company.  Do you think you may want to have a slide or page in your listing presentation that shows this ratio?

So the next time you hear, “But Zillow told me my home was worth . . . “, pull out the chart shown above and share with them what your (or your company’s) selling price to listing price ratio is.  Learn to welcome this objection because it will give you an opportunity to share with the potential seller just how good you are at reading the market versus Zillow.  Happy listing! 

Related articles of interest:

• Zillow real estate services come to iPhone (macworld.com)
• Why isn’t Zillow dead? (news.cnet.com)