I don't get it.
Zillow.com provides an "AVM" (Automated Valuation Method). Punch in an address, and it will spit out a "Zestimate" — an ESTIMATED home value.
A plethora of posts have been penned all across the blogiverse about Zillow. It's been analyzed and vilified ad nausem.
I posted here last week that the Arizona Board of Appraisal (AZBoA) had issued two cease and desist letters to Zillow, basically telling them they can't do what they do in the state of Arizona. My response could be summarized as, "This is just plain idiotic and asinine." In fact, you can quote me on that — BusinessWeek did.
I've said several times on this blog and commented on others that I have no fear of Zillow. And I don't. In fact, I love it when a client whips out a printout of a Zestimate. It's a golden opportunity to display my expertise. If I can't provide a better estimate of a home's market value than a bunch of code, then I'm in the wrong business.
Why then, do so many agents fear Zillow? I just don't get it. Someone please explain! How do I know other agents fear Zillow? Look at these comments left over the last few days on an industry community blog about the AZBoA attempt to stop Zillow. I'm not going to link to it because the intent isn't to single out specific agents. It's this overall fear of Zillow that I've always struggled to grasp. Fear of Zillow is rampant across the real estate world. The comments on this post just provided a handy place to gather a few examples:
“I’m all for sticking it to that Z site”
“Good news as far as I’m concerned.”
“This is a fantastic response in Arizona”
“I hope this does catch on with other state”
“I think this is great news for the folks in Arizona.”
“No more random guesstamits on homes!!!”:
“Thats great news for Arizona realtors.”
“It’s about time something was done about Zillow’s off-base “zestimates.”
And my favorite: “Zillow needs to be state supervised!”
If that's not fear, it is at best a complete lack of understanding of two things: 1) how Zillow calculates its Zestimates and; 2) just how many other AVMs are out there. Whatever you chose to label it — fear or misunderstanding — it is past time for agents to get over it, accept it, and learn to use it as a tool to help you.
Zillow and other AVM's are not going away. AVM's, and the sites that provide them, aren't going to disintermediate real estate agents — unless you let them.
Other recent posts across the blogiverse with a Zillow / AZBoA connection.
Interesting to note that the real estate bloggers general (though certainly not unanimous) consensus aligns roughly with mine, though maybe they weren't quite as blunt in expressing their opinion. Yet read deeper, particularly into some of the comments, and you'll see many out there that feel the AZBoA is a savior to all.
I don't get it.
Technorati Tags: Zillow, Zestimate, Arizona Board of Apprasial, AZBoA, disintermediation
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Heck I make Zillow part of my listing presentation. How can sellers come up with some “bullish” price when any buyer can still Zillow the house. If the seller wants to list at $300,000 and the zestimate is $225,000 you just hand it too then and say any buyer will likely look at this number. Yeah you remodeled the bathroom, but that ain’t covering the extra $75,000 value now is it.
Whether the zestimate is good or bad is unimportant - its a great segway into a meanful discussion of price. It’s a “starting point” as Zillow says. Really, just use Zillows own words and you’ll be fine.
Plus I say I’ll advertise their house on Zillow. Wow its cheap.
Jay, your most excellent statement, “Zillow and other AVM’s are not going away. AVM’s, and the sites that provide them, aren’t going to disintermediate real estate agents — unless you let them.” sums up the future of real estate. We’re in a changing industry and living in changing times, the agents that embrace the future and add value to the transaction need not fear disintermediation, but perhaps some agents should be disintermediated. Zillow is now number 5 in real estate search page views, they aren’t going away.
I whole heartedly agree. Zillow receives some ten million page views per day. I have one house listed at their site and I will most likely add the rest of my listings. Free exposure? I don’t see the problem. Like you said, it opens the door for discusion. Using it to your advantage is what makes you a great agent.
Sure, there are many agents who fear zillow, just as there are many agents who fear all the other changes going on in the real estate industry, so be it. But for some of us there’s more to it than fear of Zillow stealing our thunder, on the one hand, and more to it than embracing Zillow because it provides us with an opportunity to show off our superior knowledge, on the other.
Call them foolish, uninformed or unsophisticated if you like, but many people are being misled by zestimates of the estimated value of their home. They are being led to believe that their home is worth substantially more or less than it actually is. And they are using that misinformation as the basis for making big financial decisions. That’s the problem that many people have with zillow. And when criticized for providing that misinformation, zillow persists in defending zestimates as a starting point, when in fact, everything but the fine print leads one to believe that you now have a legitimate ‘estimated value’ for your home, or your neighbors home. Just like an appraisal, which is ‘an opinion of value’.
I don’t really know why Zillow has been singled out as the bad boy of AVM’s. There are so many to choose from. The Zestimate is a great way to educate the consumer on what “market” value is opposed to tax value, appraised value, etc. At first, it was easy to feel on the defensive but when one is prepared with information relating to AVM’s, it actually can become a sales tool.
In helping a client recieve the highest and best value for their home, it is vitily important to examine the comparables you use in your CMA.
Just like the supermarket. When you are picking out fruit or corn for your own consumption.
You are carefully looking at each piece to insure that you are getting value and quality for your money. The longer the banana
sits there, the less value is has.
This can not be achieved electronicly! You can not compare apples with oranges.
Respectfully,
Michael A. Jones, GRI, NRBA
Member of the National REO Brokers Association
by Steve Keohane, USN (Ret)
Massachusetts Appraiser
The BIG AVM Lie
Automated Valuation Models (AVMs)
Many lenders, including Fannie Mae, Freddie Mac, Wells Fargo, Countrywide and Washington Mutual made very risky decisions several years back to utilize computer generated appraisals (known as AVMs) instead of licensed real estate appraisers.
This extraordinary “Risk taking” by lenders in the name of greed nationwide is now beginning to cause problems in the bond markets because of the extraordinary risk of backing mortgages when nobody ever even looked at the property (homes and property) being financed. The subprime market meltdown due mostly to their Liar! Liar! loans (no income verification) is yet another clear indication of Lender irresponsibility and greed.
Lenders nationwide were warned in the spring of 2004, that when they use anything less than a full, traditional appraisal in housing markets where values are soft, they could be penalized on Wall Street.
Fitch Ratings, one of the major risk-assessment firms for the global bond market, believes that anything less than what it calls “the full monty” — an on-site, exterior and interior professional appraisal — is likely to overstate the true worth of the property if it’s located in any of dozens of slowly appreciating markets around the country.
Fitch plans to impose a 10 to 15 percent “haircut,” or devaluation, of the homes backing mortgages in bond pools if they are in soft real estate markets and did not get traditional full appraisals. That rules out all the quicker and less costly valuation alternatives in wide use, including online database “automated valuation models” (AVMs), broker price opinions, desk reviews, tax assessments and drive-bys.
Bond investors — those who buy into the giant mortgage pools that fund much of the U.S. home loan market — care deeply about accurate property valuations. That’s because when borrowers default and go into foreclosure, investors lose more when the appraisal used by the lender inflated the property’s true value.
These AVMs are similar to those you pay $10-$20 for on YaHoo or at some other company sites. They were known as neural logic or “fuzzy logic” when they were used on the stock market in the mid 90’s. They failed there miserably.
Like neural logic programs of the past, AVMs which the banks are now using are also failing miserably. These computer programs begin their “appraisal” by blindly generating an appraised value for a home with very faulty data. This computer “analysis” is based on multiple regression analysis with a large amount of the most pertinent variables, including your homes actual condition, its actual verified size, and your location removed from their equation. Only after AVMs find the appraised value do they begin searching to find what they consider likely comparables.
The reason the banks are doing this is not to save you money–but to increase their own bottom line (they collect the fee). This also allows the lender to “fudge” these computer generated home valuations, because no 3rd party (like an appraiser) is now watching them. When a mortgage company is involved, our experience as state licensed appraisers is that a large percentage (not all) of loan officers will do anything it takes to “push a loan” just to collect their own commission. This is not always in your best interest! Suppose you owe much more than your home is worth, and the real estate market takes a down turn; you may soon find yourself filing bankruptcy if you had to sell your home. Relying on these AVMs to give you a value prior to selling your home could very well cost you $10,000-$100,000 in lost equity. It has happened to many people.
Read more about AVMs here: http://appraisercentral.com/AVM.htm
Zillow (and AVMs in general) does not understand the guidelines that appraisers must follow when selecting comparables. Most of the time the sales are dated, non-arms length transactions,etc… At least that is my experience with it (I am an appraiser).
M-
I agree. But then again Zillow isn’t claiming that they are doing appraisals. Granted, people may perceive that it’s an appraisal, but the reality is, it’s a rough *estimate* based on public data.
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