Have you been "Zillowed" Lately?

For today's post, here is a great article from Realty Times on the dangers of using Zillow.com to determine a sales price for your home. Buyer's will use it - so we must be ready with accurate sales comparables to overcome the Zillow "zestimate".

Seller Gets "Zillowed" by Blanche Evans

A home seller tells Realty Times he is contemplating contacting an attorney over losing a sale he blames on Zillow's estimate of his home.

Dear Blanche:

I read your article about Zillow.com and would like see your advice on my situation. We started selling our house but potential buyers showed us a Zillow.com price estimation for our house and told us that our selling price was not realistic. As a result of this we had to take our house from the market.

The estimation by Zillow.com is $500,000.00 less than assessed value. Home facts are incorrect and estimated value is $600,000 lower than the value of the similar house next door built by the same builder a year earlier than ours.

Even Zillow's own data shows that comparable nearby houses were sold for $521.00 per sq. foot on average, when their estimation for our house is only $364.00 per sq. foot. I tried to contact Zillow.com, but their automatic response stated that they are not staffed to address individual issues.

They have enough staff to cause great damage, but not enough staff to fix it!
Grossly inaccurate and very damaging information from Zillow.com put our family in a very difficult financial position.

I am sure that there are other people in similar situation. I seek your advise on what can I do. --

Alex

Realty Times responds:

Congratulations, Alex, you've been zillowed! Zillowed is a playful term which means buyers can find out what your home is worth without talking to a professional Realtor or appraiser. To sellers, of course, being zillowed means you are likely getting screwed.

Sellers like you are being swept up in a maelstrom where you no longer have control over the marketing of your home to the public. Like the credit reporting bureaus can ruin your credit with inaccurate data, new companies posting public housing data have immunity from the responsibility of potentially harming individuals.

Get ready -- it's only going to get worse before it gets better. Companies like ZipRealty are gleefully announcing that they will post reviews of your home for all to see. Great for buyers, bad for you. Pretty soon there will be no reason to list your home at all because sellers don't have any rights anymore. You might as well light a match to it when you're ready to move house.

Funny, companies like Experian, ZipRealty and Zillow just don't think about the people as individuals; they only want to empower the "other side," whatever that side is. Consequently, as you found, Zillow didn't bother including some sort of help for individuals who wish to contest their zestimates. Neither did Experian until it was forced to by the government.
So your only choice is to fight back.

Let's start with some little known facts. Realtors (agents who are members of the National Association of Realtors) list and sell homes within 99 percent accuracy, according to a recent report by the NAR. While that may seem a self-serving statistic, it's easy enough to check in your local MLS. Even if homes sell within 95 percent of listing price, that's still pretty good compared to Zillow's zestimates. Zillow.com admitted to BusinessWeek in February 2006 during its much-publicized launch that its "estimates are typically on target, falling within 10 percent of the actual home-sale prices 62 percent of the time."

I'm sorry, but a dismal accuracy rate like that should come with a stern warning: "Use of this zestimate in a real negotiation could prevent you from buying or selling the home you want."
You say that Zillow's own data shows that comparable nearby houses sold for much higher than your home -- is there any reason why you can't show that data to buyers? You could also point out to buyers that even Zillow calls its product a "zestimate," and that unless buyers have a bona fide appraisal performed with sensible comparables, they could be overpaying or underpaying for any home.

I assume that you have your home listed with a real estate agent. If not, you got what you paid for. You wanted to save money on the commission and you did -- by not selling your house.
If you do have an agent, she/he should have been smart enough to know what to do -- namely show the buyer the real and current comparables for your home. As your listing agent, she/he should not put a property on the market without being able to defend the price. She should have sat down at a computer with the buyer or the buyer's agent if the buyer were represented by an agent, and shown the disparity between the Zillow valuation and what the latest comparables suggest.

That said, I'll bet that the buyer wasn't represented by an agent, but was using Zillow valuations to negotiate his/her own deals. That's exactly what Zillow wanted, because the company's business plan is to wean buyers and sellers off of real estate agents and onto its site, where it sells advertising to desperate real estate agents. To do that, Zillow has to pound the table with its shoe that real estate commissions are too high and get consumers to trust in its valuations, which your buyer clearly did.

But guess what, folks? It's not working. Zillow is already changing horses in mid-stream. Its new business plan embraces real estate agents by providing zestimates for them to put on their websites. This is an idea founders might have gotten here on Realty Times when we announced a similar plan underway by Fidelity, which happens to have twice the raw data Zillow has. Zillow has already contracted with Prudential California Realty into putting zestimates on their agents' websites, so this trend isn't going away anytime soon.

It gets worse. The Federal Trade Commission and Department of Justice aren't pro-seller either. If you want to market your home without these zestimates or "reviews" you're out of luck because sellers don't have rights anymore. Only fledgling business models have rights.
The DOJ is suing the National Association of Realtors for the trade organization's attempts to protect sellers wishes and their contracts with their listing brokers. NAR wants to allow brokers to restrict advertising on other members' websites where they see fit -- the DOJ/FTC call that restraint of trade, even if that's what the seller wants. So, by insisting that any member of the MLS should be able to put the seller's listing on their website, regardless of whether or not that's a good thing for the seller, it's a new ballgame. Homesellers don't have as many rights when it comes to privacy or marketing their homes anymore.

So, what can you do? You can contact an attorney, your local congressman, consumers' groups and anyone else you think might listen to see if anyone cares about homeowner/sellers' rights anymore and what can be done. The fight may start with you, but somebody has to stand up sometime.

Published: August 31, 2006