Real Estate Report presented by Beth Robertson

Do Zillow ‘Zestimates’ mislead home buyers? Lawsuit claims yes.

Suburban Chicago home builders filed legal action last week against the real estate marketing company Zillow, whose at-your-fingertips property-value approximations are misleading home buyers with lowball figures that roil sellers, the suit claims.

The so-called Zestimates that the Seattle-based Zillow app has calculated since 2006 pose as accurate appraisals in violation of the legal description in Illinois of an appraisal, which needs to be conducted by a licensed appraiser, according to the class-action complaint.

Zillow, for its part, maintains that its approximations are not actual appraisals, nor do they claim to be.

“We believe the claims in this case are without merit. We always say that the Zestimate is a starting point to determine a home’s value, and isn’t an official appraisal. It’s a computer-automated estimate of your home’s value,” Emily Heffter, a Zillow spokeswoman, told MarketWatch.

Zillow says its value estimates are based on public records and other data using “a proprietary formula.” Public records such as those posted on property-tax assessment sites can also be far off prevailing sales prices. Zillow also provides a disclaimer about the accuracy of its approximations.

In Chicago, a Zestimate comes within 5.9% of the eventual sale price just over 44% of the time. Nationwide, Zillow Zestimates are within 5% of the actual sale price 53.9% of the time, within 10% of the sale price 75.6% of the time and within 20% of the closing price 89.7% of the time, according to the company.

Wow, that’s not even good enough for government work!

As we wrote in this space last August, there is no way a computer program can give an accurate price for homes.

The problem begins with the fact that each home is different. Homes aren’t like stock shares. Each share of Apple stock, for instance, is exactly the same as every other share of Apple stock.

Homes, on the other hand, are each completely different, regardless of whether they were built by the same builder and have the same plan.

The major problem with all automated home estimate sites is they are limited to the data on hand. Typically, that includes only square footage, number of beds and baths, recent sales prices and assessor tax values.

What is not included are location nuances such as is the property on a quiet street or next to a main thoroughfare. Did the owners remove that cheap carpeting and replace it with hardwood floors? Were the appliances replaced with high-end hardware? Granite countertops or tile? Dual-pane windows to replace single-pane windows.

The list goes on.

There are three ways to get an accurate estimate of your home’s worth.

Hire an appraiser. That costs money and they will be conservative.

Have a local REALTOR® come by to look at your property. A local REALTOR® will be familiar with your community, what’s sold, the condition of the property, what’s for sale and how desirable the property is in today’s market.

The third way is to do it yourself. You’ve probably lived in the neighborhood for years and visited with your neighbors so you know what has been done to their homes. Plus, with our Recent Sales & Listings module, available on our on-line Market Trends Report, you can keep track of the activity going on in your neighborhood.

Remember, in the final analysis, your home is worth what you and a ready, willing and able buyer decide it’s worth.

If you are thinking of selling your home and would like a proper estimate of what it will sell for in today’s market, call me, please.