Better Use a Pro in South Lake Tahoe: Zillow’s estimates average more than 20% off… in both directions!

We remember first hearing about Zillow a few years before it was launched.  Back then Zillow existed on the web as a blank white page with one button in the center of it. Clicking on that button was for recruiting people to work for them while they were in their infancy. We had no thought at that time as to what Zillow might mean, or not to the South Lake Tahoe real estate market.

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Technorati Tags: South Lake Tahoe Real Estate, Stateline, NV, Real Estate Seminar, Zillow Zestimates Accuracy

I remember the day Zillow launched rather clearly. We were at a real estate convention in San Antonio for Certified Residential Specialists (CRS), the highest and most professional real estate certification in our industry. As is normal for a CRS convention, the top minds and producers in residential real estate sales from all across the country were there. They always are. And we know a lot of them.

There was much talk about Zillow’s launch throughout the 3 days that we were there. Central to that discussion was the accuracy of Zillow’s “Zestimates,” their built-in estimator of home values that was the principal attraction of their website then, and now.

I remember it so well. The official word from Zillow was they were 80% accurate 60% of the time. We are sure Zillow has gotten better since then, but the reason I remember it so clearly was it was such a goof to figure out what 60% of 80% is. It certainly is a creative way of saying 48%, we all agreed. It was the insider talk of the convention.

We don’t use Zillow ever for home estimates. And thankfully most all of the buyers and sellers we have represented since then do not either. While in some parts of the country, we know Zillow is accurate, it is not here in our South Lake Tahoe real estate market. Not by a long shot.

But then again we don’t expect it to be accurate up here in the mountains. Home values vary greatly throughout every one of our neighborhoods. There is nothing cookie cutter about any of them, and as such home values can not be accurately estimated by bots, formulas, square foot averages or any other mechanical or technical apparatus.

It takes an experienced, hands-on pro to help people with home values here in South Lake Tahoe. Even then there are more than just a few homes that are so unique that evaluating them is nearly impossible. Often putting up a home for sale is the only determinant of value, after the fact… if it sells.  (We suspect that Zillow is may also be off in most vacation resort ares in the country for similar reasons as well. )

We’ve got one of those difficult-to-evaluate homes on the market right now. It has no comparable guide to be found anywhere. It was originally listed for $1.89M, and the truth is that was nothing more than an educated guess by the Seller. And one that the market did not accept, even closely. Frequently appraisers call us for our take for value problems they are trying to solve.

We just had a question from one of the people who attended our real estate seminar yesterday, and it’s one that involves Zillow. So we thought we’d check  Zillow to see how accurate they are in South Lake Tahoe These Days.

Rather than select anything at random for comparison, we thought we’d compare Zillow with everything in escrow in South Lake Tahoe right now. That way, we’ll span numerous price ranges and neighborhoods for the exercise. And we can’t be accused of selecting anything we know that might, or might not produce predictable results.

Please remember this: homes in escrow right now will be lower than their current price when they close. On average about 5 to 10 percent lower. So this means that when these homes close, Zillow will be even more inaccurate than their Zestimates are now.

Here’s what we found out:

There are 48 homes in escrow:

• Zillow had estimates for 24 of them. (or Zillow did not recognize that 24 of them are for sale)
• Zillow found that 24 of them were for sale.

Of the Zillow Zestimates (24 of them): (remember, all will be more when these escrows close)

• 8 were estimated lower.
• 15 were estimated higher.
• 1 was close (.7%).
• 2 were 50% off or more.

• The estimates ranged from 53.2% lower to 45% higher than the current price.

• Zillow’s low estimates were off 23.1%. on average.
• Zillow’s high estimates were off 20.9% on average.

• Zillow was within 10% of the current price on 6 homes, or 25% of the time.
• Zillow was more than 20% off the current price on 12 homes, or 50% of the time.
• Zillow was more than 40% off on 3 homes, or 8% of the time.

Of the Homes Zillow found were for sale (hence no “Zestimates):

• Zillow only found that 50% of the homes were for sale (or they missed half of them)
• Zillow cited the accurate sales price on 14 of them, or 58%.
• Zillow had an incorrect sale price on 10  of them, or 42%.
• The prices that were off were off an average of $22,000.

Here’s the chart of the 24 homes in escrow that Zillow estimated:

Posted by Richard Bolen on Sunday, February 24th, 2008 at 10:48 pm.