Response to Seattle Times Article RE: Home Values

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The Original Real Estate Diva - Kim V. Colaprete

Many of you saw the Seattle Times article with the headline “1/3 of Seattle Homes Worth Less Than Mortgage” that came out this morning. The interesting thing about the Times article is that they based their findings from the comments of a Zillow executive. Team Diva Real Estate loves the value Zillow has in the community of Real Estate, but what we have personally found is that they are right only about 10% of the time. I believe we had one home last year that sold at Zillow value price. The rest sold for more than Zillow’s value. Just sayin’!

In a complex urban real estate market it is really tough to figure out the value of one’s home based purely on someone sitting back and developing an algorithm in an office chair. It takes people like Miz Diva Kim, who has been in the real estate business for over ten years, to bring their expertise to evaluating what your home is worth. Miz Diva Kim actually comes to your home and looks in person at the upgrades, calculates the market absorption rate of your specific neighborhood and is constantly touring the market to know which side of a hood has more value than others.

The Divas take on the Seattle Times story – take it for what it’s worth and move on!

Below is an excerpt by our Coldwell Banker Bain guru Ron Sparks on the Seattle Times story ->

In light of this morning’s Seattle Times front page article “1/3 of Seattle homes worth less than mortgage”, I went to the Zillow blogsite to see what the follow-up commentary might be. This is the first post I saw, verbatim;

“Your system has grossly undervalued my home. I need to have this resolved or I will take LEGAL ACTION”. This homeowner went on to say that “you are not qualified to evaluate my property without looking at it” and they would “aid in an awareness campaign to debunk your service”.

This frustrated homeowner’s post is exactly why real estate professionals are also frustrated with these reports…they are highly speculative and assumptive, not based on hard fact or the result of field experience and observation. Yet, they are certainly portrayed as fact in the sensational headlines we’ve become all-too-used-to from many local media outlets.

In this instance, Zillow ‘attempts’ to value all real estate, not just those homes that have recently sold. By their own admission, many times their Zestimates are substantially inaccurate. In my own experience of looking at the wholly inaccurate fluctuations Zillow assigns to my personal residence month by month, I have come to the conclusion that their valuations are…well, valueless.

If the algorithms that Zillow uses in their Zestimates are suspect, does it not follow that the methodologies used in this much more complex and ambitious valuation also be suspect too? It only stands to reason. Also, I have an issue with any blanket statement that has no real context…a home $1 underwater would look exactly the same as a home $1,000,000 underwater in this study. That too diminishes the value of the statement.

It’s been said that there is often a disconnect between academia and those that have their boots on the ground. In this instance, Zillow, a neophyte company that doesn’t actually sell real estate, is using it’s academics to make what appear to be definitive observations about the market. In fact, much like the Zestimate that frustrated the homeowner I mentioned earlier, it’s just guessing. Nothing wrong with guessing…as long as it’s characterized as such.

4 thoughts on “Response to Seattle Times Article RE: Home Values

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    Hey Sara from Zillow here. I too would like to quote a comment left on the Seattle piece you reference:
    “For all the people knocking Zillow, I’d say it is what it is. For most of us, it doesn’t make sense to appraise our homes every year, and Zillow uses decent enough formulas to extrapolate a home’s value based on the most recent purchase price (what a buyer was willing to pay then) and what comparables have done recently. Unlike a stock for which there are direct comparables purchased all the time, a home is always unique with different circumstances making up its value, and I think Zillow does a good job of attempting to valuate a house on a free basis.”

    This reader got it right, Zestimates are just starting points, a place to go when you are looking for some free information. But you’re right that there are so many custom aspects to valuing a house, that if one is serious about listing/buying a home – one should definitely work with a paid, real estate professional.

    Zillow is all about trying to provide transparency in the real estate marketplace, and we hold ourselves to this as well, by providing our median err rates on Zestimates. Here is a chart you can use to see exactly how accurate the Zestimates are in your area: http://www.zillow.com/howto/DataCoverageZestimateAccuracyWA.htm The median err rate means Zestimates are just as likely to be high, as they are to be low. This median err rate is then used when determining the Value Range that is next to the Zestimate on homes on the site (if the Zestimate were exact, there wouldn’t be a need for a range).

    Ultimately though, I can assure you that the Zestimates are something Zillow takes very seriously and has a lot of very smart engineers constantly working on, there isn’t any ‘guessing’. Will we ever compare to “feet on the street’ or to people like yourself who provide high quality, customized service – absolutely not. I think I good comparison is WebMd. When you get a stomach ache, you go to the site and try to self diagnose, who knows how close you’ll come to the answer. But if your stomach ache gets serious and you are ready to really do something about it, you go to professional. Zillow provides this starting point as well.


  3. chavi.hohm

    Hi Sara,
    Thank you for your response. Its great to great to hear directly from Zillow regarding this issue. Team Diva appreciates the starting point that Zillow provides to the community. However in the Seattle Times article no where does it state that Zillow thinks that an experienced broker with “feet on the street” is a better judge of actual home values. The direct quote from the Seattle time article states clearly that Zillow thinks that “The owners of one-third of the houses with mortgages in the Seattle metro area now owe more than their homes are worth, Zillow.com estimates.” This is a broad and overreaching statement and does not take into consideration other data points or what we are seeing specifically in the market.
    Chavi

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