How sites like Zillow and Trulia are effecting the market

My first real entry is about real estate sites such as Zillow, Trulia etc. & the impact they are having on todays’ buyers and sellers.  I recently wrote an offer for a buyer who seemed to fall in love with a particular house.  They had been looking in that neighborhood for a while and this seemed to be a good fit for them.  So I wrote it up and it was presented to the seller. Within 24 hrs it was verbally accepted but when the time came for the buyers to sign the final agreement they backed out!  I was totally surprised of course and the reason was they had found a "home report" that showed the house was highly overpriced. So where did this "home report" come from? Zillow. 

This is not the first time this has happened and in truth it’s happened to most of the agents I know.  We as agents tend to cringe when we hear "Well Zillow has it at ..." or "Trulia showed it ..."  Not that I have a problem with sites like those in fact they have done a lot of good for our industry. But with the good comes the bad.  And it comes down to people not truly understanding how those sites work or their place in the market.  So here is how those of us on this side of the proverbial fence see it.

Those are sites syndicated sites or as I call them "trickle down sites".  That means they pull their info from public data such as court house records and MLS data.  But there is a time delay. I often get calls on a listing that was sold as much as 3 months ago!  And when it comes to home values or "zestimates" on Zillow where do I begin??

Let me be as clear as possible - those sites use basic data and plug it into a formula! There is no real true comparison to other homes for sale - it is based on a "complicated algorithm" with data that is at best incomplete or at worst plain wrong.  So they are coming up with a "value" based on missing or completely wrong information.  Here is what Zillow says about their “zestimates” http://www.zillow.com/zestimate/#faq-6.  They also tell you they are within 80% of the final sales price. Sounds pretty good right?  Well on a $200,000 listing that means they would put it at either $160,000 or $240,000 – that’s a pretty big difference. And they don’t take into consideration things like inventory shortage, upgrades or buyer demand.  Only an experienced agent or appraiser can address those things.  Would you like your home to be compared based on “numbers” alone with the foreclosure or short sale down the street even if you had spent thousands of dollars upgrading and improving? 

Pricing is an art and a science. The science part is seems pretty straight forward – it is the “numbers” But the art comes in the interpretation of that science how it applies to current market conditions. And that means you have to know the market and the buyers in that market. As an agent I am in constant contact with buyers and sellers, I hear them talk & have a good idea how they think. I also see a lot of homes, a lot.  I have a pretty good idea of what your dollar will buy you and where. Those are things a “complicated algorithm” can’t do.

So how do you know what is a “fair market value”?  It’s really pretty simple, whether you are a buyer or seller. You compare house to house and dollar for dollar.  If you are looking at a home listed at $200,000 then see what else you could get for $200,000 or within a $10,000 range.  It will be pretty clear whether the list price is within range.  Use these sites as place to begin but not as the final authority. That would be like a site like WebMD for diagnosing and treating your disease or illness.

Til next time,  Peace out J