Matthew Ferrara, Philosopher
 

Podcast: If Zillow Zestimates are Zilly, why is REALTOR.COM doing them too?

Been having a great discussion with the fellow over at 4REALZ.NET over the new REALTOR.COM Home Estimator tool just released – and quite quietly, we might add, since even we techhies missed the press release (so we suspect the public did too…. and about half the REALTORS who don’t even know REALTOR.COM exists…)

Here’s his initial post and my comment summarized:

4realz Exclusive: Realtor.com unleashes the Zillow killer…
Apparently, Realtor.com launched their answer to Zillow recently without much fanfare!

The first thing to note is that the new tool mixes estimates for home values along side listings from the Realtor.com database. This would have been unthinkable just a few years ago, but even with an announcement from NAR, the blog world has been silent. (And I’m told by someone-in-the-know that it has been live with a link from Realtor.com for a few weeks already!)

The part that seems to be missing is accuracy of the listings.

And how right he is: Now we have TWO groups offering consumers basically FLAWED MARKET ESTIMATES of their home’s values.

Now, Zillow might have started this fight, but rather than fight back, the REALTORS have once again been coopted into losing a battle on the other guys’ terms!

My initial reaction was this: Instead of just copying everyone else, maybe REALTOR.COM (and by extension, NAR) could make some decisions based upon market realities. And the reality is that Zillow (and other similar tools) are really inaccurate because the “conditions” on the ground are always so fluid that “estimates” based upon “market data” which is always stale because of “time” are really bad education for consumers. REALTORS should know better. Many consumers buy homes “regardless” of their estimated market comparable – and many sellers are able to sell for higher (or can’t sell nearly the same as a computerized estimate) because of all sorts of NON estimated items – like poorly performing schools, local tax changes, crime, etc – NONE of which can be accurately reflected by a computer. Only by REALTORS who keep up with “the full marketplace” of issues that impact homes.

And Dustin rightly replied that, well, if Zillow has already captured the public’s imagination and attention with their estimating offer, why shouldn’t REALTORS get on the bandwagon, too? He notes that if REALTORS don’t provide the public with online estimates, they’ll go somewhere else to get them.

And he’s right. To some extent.

Zillow has changed the public’s expectations and caught the industry with its pants down.

In fact, that’s what most of these “so called” industry changing companies do: They just go around the slow-moving, stay-in-the-same-lane REALTORS and go direct to the public. REALTORS really do a very poor job of even RESEARCHING the public – I ask in EVERY CLASS whether ANY of the attendees has purchased NAR’s Profile of Home Buyers and Sellers – and NONE OF THEM EVEN KNOW IT EXISTS! So how are they going to invent anything – a pricing tool, a marketing tool, a new service – if they don’t know a thing about the consumer themselves.

For two decades, while internet and technology companies have wreaked havoc on the industry, the COMMON theme amongst REALTORS was “hunker down” and close the shutters! Notice the San Diego this week’s “latest technology” was to create another security barrier against – GASP! – customers getting into the !

So copying the “estimator tool” is still silly – because it means that REALTORS won’t actually stand up and say that the “zestimates” are wrong; Instead, they’ll say, “Hey! If you want wrong estimates of your house values, we’ll give them to you TOO!”

The last part is what I’d suggest we focus on: If everyone “knows” that most online home value estimates are WRONG, then shouldn’t we assume the PUBLIC knows they are wrong, too? Or are we just going along with Zillow’s real estimation: the consumer is an idiot? The price of a home is RARELY simply the averaging power plus/minus adjustments of MLS data, recent , or even tax assessments.

I’ve been in towns where the market value of property is SOARING even in THIS DAY AND AGE. For example, Des Moines. Why? Not because the REALTORS are doing anything right – or the Zestimator or MLS is either. But the local government is – and the local employers are – and the full employment numbers are pushing up wages, which are driving up home prices. NONE OF WHICH is accounted for in the estimating power of MLS, Zillow or REALTOR.COM.

Go the other way: Go to Detroit – ground zero for an utterly destroyed real estate and business marketplace. Look at this listing (click it to go to the REALTOR.COM page for it)

Now, go to REALTOR.COM’s VALUE ESTIMATOR and put in that address. Click on it and here’s what you get:

Now help me out: If I read this chart properly: The VALUE ESTIMATOR says that 3 bedroom homes in this zipcode have recently LISTED for under $50,000. That’s FIFTY THOUSAND. That’s THREE TIMES LOWER than the current listing price – although the TWO BEDROOM properties are apparently in MORE demand in this neighborhood – listing for $75,000 more (on average) than the subject property we’re looking at – and FIVE TIMES the average of significantly LARGER homes (like the 5 bedroom ones).

Now, even if it were TRUE that two bedroom homes are more “desirable” in this area, if there were FIVE bedroom homes available for ONE FIFTH THE PRICE, don’t you think there would be DOWNWARD PRESSURE on the 2-bedroom prices? Even a “little”?

This is why ALL ONLINE HOME VALUE ESTIMATORS ARE SIMPLY CRAP.

Oh, but unmercifully, I won’t stop there. Those were just the CURRENT listings. Let’s look at the RECENT SALES for the area: OOPS! There AREN’T any – either in the data or for real, we don’t know… So how can any of the information in the estimate have any meaning, if it’s not VALIDATED by sold data – which is the only true test – EVIDENCE – that any market data is correct or not….

Just do what everyone else does: Look up your own house. I live in a 1750 sq ft condo with 3 beds and 3 baths; it’s REALTOR.COM estimated at $580,000; just a condo, mind you… Three doors down on the SAME STREET is a FULL SINGLE FAMILY HOUSE with 4 bedrooms, 3 baths, 2300 sq feet and built a full hundred years after mine (1949 vs 1840) and it’s only estimated at $530,000. And he OWNS his whole yard. I just get a piece of mine on the deed… Right. And his neighbor’s house, on the corner, with the same beds, baths and lot size: $1.64 Million. That’s a mighty increase for the house next to the stop sign on the corner…

Zilly Computer! Estimates are for humans!

This is why all REALTORS should fiercely resist computerized online estimator tools. They are senseless most of the time. This tool clearly can’t reflect anything but some raw numbers we don’t really know from where… Somehow smaller homes are five times more valuable than larger ones (no, it’s not that buyers don’t want to heat larger homes because of fuel oil… they’d buy the bigger house, trust me, and put on a sweater!) It’s because these tools can’t reflect the realities on the ground – like the fact that Detroit has outrageous taxes, no local industry and people are fleeing the city for myriads other reasons.

The REALTORS might think it’s just easier to “go with the flow.” Yet the proof that even the public could care less about computer estimates is this: They STILL INSIST on pricing their property FAR ABOVE whatever the computer says – whether it’s MLS, Zillow or REALTOR.COM.

If they really believed the computer and trusted it so much, would we really have 2-bedroom homes priced five times higher than 5 bedroom homes on the market in Detroit?

LOL!

  • Thank you so much for the podcast! Love the posts and love to be able to hear it as well as read it. Call me lazy, but for us multi-taskers…it’s a God-send!

    Got a great story line for you Matt……

    “Local real estate agent wins his sellers $21,000 with award winning real estate marketing video….later that day they get an offer on the home!”

    http://www.youtube.com/watch?v=2WFV3S44Y6g

    Let’s grab lunch and discuss! I’ll give you a pass on the iPhone-hating post. : )

    -Mike Lefebvre
    TheUncommonAgent.com

  • Thank you so much for the podcast! Love the posts and love to be able to hear it as well as read it. Call me lazy, but for us multi-taskers…it’s a God-send!

    Got a great story line for you Matt……

    “Local real estate agent wins his sellers $21,000 with award winning real estate marketing video….later that day they get an offer on the home!”

    http://www.youtube.com/watch?v=2WFV3S44Y6g

    Let’s grab lunch and discuss! I’ll give you a pass on the iPhone-hating post. : )

    -Mike Lefebvre
    TheUncommonAgent.com

  • Great entry. More and more consumers are flocking to the internet and it’s not “Zilly” according to an Inman news article this month.

    http://www.inman.com/news/2008/08/19/zillow-mynewplace-climb-web-rankings

    “Real estate site Zillow.com climbed from sixth place in June to third place in July in the latest monthly ranking of real estate Web sites released by Web metrics company Hitwise….”

    Thanks Matt!

  • Great entry. More and more consumers are flocking to the internet and it’s not “Zilly” according to an Inman news article this month.

    http://www.inman.com/news/2008/08/19/zillow-mynewplace-climb-web-rankings

    “Real estate site Zillow.com climbed from sixth place in June to third place in July in the latest monthly ranking of real estate Web sites released by Web metrics company Hitwise….”

    Thanks Matt!

  • Neither Zillow nor Realtor, nor any other computer generated valuation, that does not visit or inspect the house, its environs, and the neighborhood, can detect and value the unzillowables. That’s where experienced pros are worth their salt.

    http://tinyurl.com/26vx5z

  • Neither Zillow nor Realtor, nor any other computer generated valuation, that does not visit or inspect the house, its environs, and the neighborhood, can detect and value the unzillowables. That’s where experienced pros are worth their salt.

    http://tinyurl.com/26vx5z

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