I was working on some comparative market analyses (CMAs from now on) for some clients and was struck by a random thought. Most buyers start their searches on the Internet. And many sellers use the Internet to determine their home's value. So maybe it would be worth a moment of my time to check out Zillow and see what the so-called competition has to say.
There was considerable hand-wringing a few months back when Zillow started. By offering these free market analyses, there would be no need for agents, da, da, da, dee, dee, dee. Not true. At the start, Zillow's numbers usually were wildly incorrect because the data being pulled - tax records - was both out of date and in many cases erroneous. (It's amazing and/or frightening to behold the number of typos in the county tax records.)
Anyway, my Zillow experience started with my own home. Not too far off. And then I tried a couple of the clients for whom I was preparing CMAs. And again, the numbers didn't exactly match mine but they were ballpark. (And to my everlasting joy, they were wrong low ... better to think low in this market than high.)
Clearly, the methodology has improved. But are Zillow's zestimates really better than a professionally-completed CMA? Not really ...
Zillow relies on the tax data. Tax data doesn't take into account upgrades. It doesn't take into account the difference between a 3-bedroom and 4-bedroom model of the same home (and there usually is a price difference.) And lastly, it doesn't take into account the fact there's a difference between market value and sales value.
Think of it this way -- if you have a home that appraises for $250,000 but there are six active listings for homes identical to yours at $230,000, what is the likelihood of you receiving $250,000? Not good. And so goes the zestimates, which are great for ballparks but don't always tell you for what amount you can sell your home.
Also, since it's based on the tax records and an algorithm with set parameters, the data's only as good as the sales in the neighborhood. Anomalies - sales well below market by extremely motivated sellers, for example - are given the same weight as every other sale. A real-estate professional or an appraiser would see the unusual difference and adjust accordingly.
There's a townhouse complex two blocks from me. I've sold two townhouses in there (with a third now active) and there have been a couple of other sales. But none of these sales have been since the first of the year. A computer looking at the situation would spit out its data based on the January sales. But a real-estate professional who knows the market well can look a few miles away and find a second townhouse complex where the age, build quality and amenities are roughly equivalent.
So, the moral of the story? If you're watching Good Morning America and they suggest you call your local agent to find out your home's value before going FSBO, try Zillow first. Zillow doesn't have a family to feed and will get you a ballpark figure. Might work, might not.
But if you're serious about selling - if listing isn't sufficient - take the Zestimate for what it's worth and then talk to your local real-estate professional for the real scoop and what it will take to sell your home.
(c) Jonathan Dalton, 2006 / Jonathan Dalton's Arizona Homes | 
