Zillow.com has become the 800 pound gorilla of the online real estate sites – especially since it acquired Trulia.com early this year. Log on and there’s lots of useful information about all kinds of real estate topics, from enhancing the curb value of your property to decoration and cleaning tips to how to choose a real estate agent and much more.
But the site has a glaring weakness: Its so-called “Zestimates” of home values are just about worthless.
That’s not just me saying that. These dubious estimations of home values have derailed a lot of negotiations simply because they create unrealistic expectations on the part of the public. In my view, based on hundreds of actual sales, these computer-generated estimates aren’t just frequently way off, but are routinely off, by multiple tens of thousands and often by hundreds of thousands of dollars!
They do somewhat better in slow-moving markets that don’t have a lot of variation or diversity. If you’re in a sleepy little town and all the homes are ranch styles on the same kind of lot and they were all built in the 1960s and there hasn’t been much construction of new homes in the area, then the computers can do a reasonable job of getting within about 10 percent of the likely real-world value.
That’s not Dallas. And it’s certainly not Frisco, Plano, Allen or any of the other areas I focus on.
That’s why you need a real estate professional on your team. Real estate, at the end of the day, is local… down to the city block. So much rides on inside information known to locals that is invisible to computer programmers hundreds of miles away.
Any database like Zillow’s, or anybody else’s, has to be backward-looking, almost by definition. Valuation estimates can only be arrived at by plugging information into their computer on sales that have already occurred. But that creates a tracking error: The faster the market is moving, the more irrelevant the methodology, and the higher the error that creeps into the system. And the Northern Dallas real estate market is moving very fast, indeed. In fact, it’s one of the fastest-moving markets in the whole country. Our market is likely one of the areas in the United States where computer-generated valuation estimates for houses that have not yet been sold are at their weakest.
Real estate agents know what offers are getting accepted and what offers are getting rejected. We know what concessions are being made on the side to get a deal through that don’t necessarily show up in the national databases.
The reality is that there is no substitute for a proper real estate appraisal, that takes a detailed look at your specific property, and then allowing a professional Realtor® to market it appropriately.
- Zillow doesn’t know how the sun enters the east-facing window in the morning in the winter and creates the most beautiful golden light.
- Zillow doesn’t know about your recent kitchen remodel that turns an ordinary house into a dream home.
- Zillow doesn’t know about the redistricting that’s set to occur next year that will put all the kids on the street into a different school district.
- Zillow’s database doesn’t know about the thousands of Toyota employees that are shortly to relocate to the area when they complete the relocation of their California headquarters. Their database only includes people who have already bought homes in the area. It doesn’t include people who have yet to arrive.
Zillow can only tell you what people paid for the average house in your area paid yesterday. They cannot tell you what people will pay for your house, tomorrow!
The Luxury Home Market
Large databases have an even more difficult time valuing higher-end homes and especially in the luxury market. It’s simply the nature of the business: There are relatively few homes in the $1,000,000 plus market in Texas. That creates a smaller sample size and a greater margin of error to begin with.
Furthermore, when you get into custom homes, there is simply much more variation between them than there is in middle-income markets, and especially prefab and large developments. Databases can do ok where all the homes are similar. But where you have custom homes, they’re all vastly different. (That’s the point of building a custom home, right!?).
Where you have a huge variance between homes in the same neighborhood, and you have a relatively small sample size, computer-generated estimates are, quite frankly, garbage. Any statistician will tell you this: The entire estimate can move substantially on the sale of one house down the block that’s completely different from the home you are buying or selling.
When it comes to the luxury and high-end market in fast-growing markets like this one, there’s only one way to get a good valuation: You take properties one at a time.
That’s how we do it. Beware of Realtors who’s understanding of home valuations is only website-deep. If you’re looking for a realtor in the North Dallas area who can see through the online estimates and help you with a realistic, nuts-and-bolts understanding of the real estate market as it really is, I want to work with you. Please call me today at 214-435-9551 if you are considering buying or selling a home in Plano, Frisco, Allen or anywhere nearby.
Or peruse my listings right now at www.sophiapolk.com. Want to see one of the homes in person? You can write me right on the website and we’ll work out the details.
As always, I look forward to serving you.