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!
In light of this morningâ€™s Seattle Times front page article â€œ1/3 of Seattle homes worth less than mortgageâ€, I went to the Zillow blogsite to see what the follow-up commentary might be. This is the first post I saw, verbatim;
â€œYour system has grossly undervalued my home. I need to have this resolved or I will take LEGAL ACTIONâ€. This homeowner went on to say that â€œyou are not qualified to evaluate my property without looking at itâ€ and they would â€œaid in an awareness campaign to debunk your serviceâ€.
This frustrated homeownerâ€™s post is exactly why real estate professionals are also frustrated with these reportsâ€¦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 weâ€™ve become all-too-used-to from many local media outlets.
In this instance, Zillow â€˜attemptsâ€™ 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 areâ€¦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 contextâ€¦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.
Itâ€™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 doesnâ€™t actually sell real estate, is using itâ€™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, itâ€™s just guessing. Nothing wrong with guessingâ€¦as long as itâ€™s characterized as such.