Zillow.com, a real estate valuation Web site, is genuine in it's attempt to provide any homeowner the instant approximated value of their home by simply typing in their address and zip code information. While great in theory, in it's infant stage the website has been slammed by advocate groups, appraisal associations and recently a Federal Trade Commission Lawsuit*  with claims that it's valuation site has generated a large number of inaccurate Zillow estimates (affectionately nicknamed "Zestimates").  These "Zestimate" figures appear to be solely based upon public tax assessment records and not the actual comparables of like homes in the area. The potential use of old and outdated tax record information, along with the ommission of actual comps can indirectly increase the woes of sellers and their agents in an already slowing market. 

Since the site's startup, there have been many a debate between sellers, their agents and appraisers regarding the estimated value of a home as some homeowners have used the "Zestimate" as the bible of determining their home's value, in some instances choosing to forsake the advice of their agents who may have estimated a more accurate figure using CMA (Comparative Market Analysis) information. I've had a number of people tell me what the value of their homes were based solely on the Zillow figures without them having any critical information about similar homes being sold in the immediate area. 

For the most part, Zillow's method of obtaining home values excludes the many other necessary factors used in determining the listing price of a home i.e. the home's overall condition, style and build of the house, individual home upgrades, upgrade features of nearby listed homes, location of nearby undesirable businesses or a home's proximity to busy streets or highways just to name a few.  To get a better understanding of how only using local assessment records could create a misrepresented value of a home, let me give you a basic example.

Homes A and Home B are both on the same block and contain approximately the same square footage, equal number of bedrooms and baths. If Home B has had a more recent tax assessment filed than Home A, when pricing using the Zillow method, the chances of Home B's value being greater than Home A's increases. What the "Zestimate" fails to include, is although Home B has a more recent tax assessment, it's interior looks like like a snapshot out of "That 70's Show" with older vinyl flooring, worn carpet, outdated fixtures and cabinetry. Meanwhile, Home A has had a recent remodel featuring hardwood floors throughout, a new kitchen containing new granite countertops, new cabinetry and name brand stainless steel kitchen appliances. It is no secret to the public or the real estate industry that an updated and remodeled kitchen usually increases the value of a home considerably. Using the above scenario, if both Homes A and B were to compete in the same market and a CMA determined Home A's listing price and Home B's home price was based upon a Zillow value, which home would most likely be priced competively?  Homes that also contain features such as a newer roof, copper plumbing, deck additions, city or water views and other key items that often determine pricing, often fail to be included in the "Zestimate" figures.  Saavy buyers in a buyer's market have plenty of inventory in which to choose from and will need to see a justified asking price by a seller.

In Zillow's defense, the site is diligently trying to figure out a way to update their information. In the fall of 2006, the company added a feature in which sellers could update and input remodel and square footage addition information. Unfortunately, this still doesn't quite resolve the issue.  If there were 6 homes in the area up for sale and only 2 of the home sellers actually logged on to Zillow and updated their information, the value estimation would still lack the critical information needed from the remaining 4 properties for sale in order to determine a more accurate asking price. Until Zillow can find a way to finely tune the method of obtaining their home value information for the nearly 60 million homes on their database, sellers who solely use the service in determining the value of their home will continue to lack the important components of information needed in pricing their home competively in the current buyer's market. ~~Andi

*see Articles section titled "Zillow.com 

**Be sure to check out Articles section of this site to read the Washington Post, CNN Money, RealtyTimes and Business Week Online articles regarding Zillow.com.

If you've had an experience good or bad with using the Zillow site that you would like to see posted, please send me an e-mail at andi@prudential24hours.com