Well, it finally happened. I had guessed that Zillow would eventually run into trouble with its estimates since the error rate is 5% or more on most homes. Given that the median sale price of a home in May 2016 was $230,000, Zillow costs people $11,500 or more per home.
5% may sound modest, but keep in mind that 25 percent of the time Zillow is off by 10%, and ten percent of the time they are off by 20% or more. That can represent an enormous amount of money.
Of course, Zillow claims that their estimates don’t cost anyone money, after all, it’s just an educated guess. But tell that to this seller, who alleges that the Zestimate for her home is inaccurate to the tune of $100,000 and as a result, she can’t sell her home for a fair price.
She is filing an injunction for Zillow to remove or amend the estimate for her home. She also wants Zestimates to be regulated as appraisals or removed. Currently, she’s not looking for financial damages.
An Appraisal by Any Other Name…
Realtors® have known for years how inaccurate Zillow’s estimates are. Unfortunately, consumers tend to take what they see at face value. That leaves sellers fighting an uphill battle if their homes are undervalued.
It can also cause headaches for Realtors® who are trying to sell a home at a fair price that happens to be below the Zestimate. Some sellers consider the Zestimate to be the price they should sell their home for and won’t take no for an answer.
It makes sense to me that something advertised as boldly as Zillow’s estimates cannot be protected by an asterisk. Both buyers and sellers are taking these numbers seriously, and I personally am glad someone is trying to hold Zillow accountable.
Protecting Yourself from Zestimates
In the meantime, Realtors® need to have a clear strategy for defending against Zillow’s faulty estimates. Both buyers and sellers can be fooled, and as a real estate agent, it’s important to be prepared for both.
Talking a Seller Out of a Zestimate
The first step is to point out Zillow’s own disclaimer that they are inaccurate on a regular basis. From there, you can educate a homeowner on the specific factors that affect home pricing.
After you’ve discussed general pricing influences, you can talk to them about their particular home and how those issues impact them specifically. You can wrap up with an honest opinion about how much they should price their home for, and let them know that the over-high Zestimate will help their home sell faster because buyers will think they are getting a bargain.
At the end of the day, if a seller won’t back down from an illogically high price, you don’t want the listing. There are plenty of other folks you can help that are ready to sell at a reasonable price.
Talking a Buyer Out of a Zillow Estimate
Buyers can be harder to reach because they may not even ask for a showing if they feel the price is too high. They also won’t believe you have their best interest at heart since you work for the seller.
The best thing to do with buyers is to point out the features that make the home worth the price, and mention how much nearby houses are selling for. You might also approach the buyer’s agent and explain the Zillow situation, and have them talk to the buyer directly about how Zestimates are often wrong.
The seller may be able to update their home’s facts, but that won’t necessarily improve the Zillow estimate, which is based on an undisclosed algorithm. If the home is dramatically wrong on Zillow, you may just need to take the bull by the horns and address directly in the marketing you do for the home.
Having a flyer that specifically says, “Why is Zillow so wrong about this home?” and talking about true pricing factors can be an excellent way to address this issue.
Will the Court Case Change Anything?
Given that Zillow discloses that estimates are 5% or more incorrect, they don’t expect to get in trouble for Zestimates. However, if a court finds that the estimates are causing material damage to homeowners, the situation could change quickly.
It’s certainly worth keeping an eye on this case and seeing what happens!
If you want to do consumer education about Zestimates, brochures are a great way to get the word out. We have several templates you can choose from – click here for more information!