There were a few very interesting articles in the Washington Post this week. Unlike industry commentary about the Zestimate, this one took place in public. The Washington Post stirred the pot a bit, as only the politically divided would do so naturally. The battle was epic.
At 5:30 AM, David Howell of McNearney Associates published a piece titled “How Accurate is Zillow’s Zestimate? Not very, says one Washington-area agent. http://www.washingtonpost.com/blogs/where-we-live/wp/2014/06/10/how-accurate-is-zillows-zestimate-not-very-says-one-washington-area-agent/
At 5:31, Stan Humphries, Zillow Chief Economist responded in his article titles “How Accurate is the Zestimate? Zillow says the tool is helpful when used the right way.” http://www.washingtonpost.com/blogs/where-we-live/wp/2014/06/10/how-accurate-is-the-zestimate-zillow-says-the-tool-is-helpful-when-used-the-right-way/
You really do not need to read the articles unless you are new in real estate. Real estate agents know the Zestimate is not accurate. It is just the best that math can produce. The frustration that real estate agents have is that the consumer is not keenly aware of the accuracy of the Zestimate. Because consumers typically check with Zillow before talking to an agent, real estate professionals are constantly starting conversations of home value around the Zestimate. Real estate agents hate that, and REALTORS® hate it even more. So what do you do about it?
About David Howell
David Howell is a REALTOR®. In fact, he is the past President of one of America’s great REALTOR Associations – the Northern Virginia Association of REALTORS. He was also the Chairman of NVAR’s Professionals Standards Committee. He was also a founding member of the Board of Directors of the Metropolitan Regional Information System or MRIS. He is licensed in Washington DC, Virginia, and Maryland. He currently serves McEarney Associates Inc REALTORS® as the Executive Vice President & CIO. He has been a real estate broker since 1984.
The Media Play
I do not have the inside skinny on this public seeding of articles, but the fact that one landed exactly one minute after the other landed tells me that this was planned. I know that MRIS has a great relationship with the Washington Post. Clearly Zillow does also, or the Washington Post has learned from politics that if you are going to allow one side to bash the other, let the other side have a chance to respond. A good ol’ fashioned debate.
Stan Humphries of Zillow held his ground nicely, and reminded folks that the Zestimate is not for making housing decisions. The Zestimate tells this story in its name – Zillow + Extimate = Zestimate. It is not an appraisal, etc. Moreover, Mr. Humphries reminds everyone that you can look up the accuracy of the Zestimate down to the county level on this page. http://www.zillow.com/zestimate/#acc.
If you are in real estate, you should memorize this URL. You will use it a lot. Moreover, it is a good idea to print out the Zestimate accuracy for your county before a listing presentation. It tells you a number of things.
- Zestimate Accuracy by Star Rating – 4 stars is good, 1 star is bad
- Number of Homes on Zillow – they show how much property that they have to draw numbers from in the county. If the number of homes on Zillow is low compared to the total number of households in the county, the Zestimate is normally low.
- Homes with Zestimates – if the home has never had a transaction, there may be a chance that it does not have a Zestimate – I have never asked a Zillow insider about why some homes do not have Zestimates.
- % of homes within 5% of sale price
- % of homes within 10% of sale price
- % of homes within 20% of sale price
- Median Error
Humphries points out another interesting point. If you look at the original list price to sale price – real estate agents are not any more accurate than the Zestimate when it comes to pricing homes. We all know the story there – original list price is related to a pricing strategy rather than the price a listing agent believes that home will transact at. Regardless – the fact is true that the original list to sale price is no more or less accurate than Zillow’s average accuracy rate of 6.9%.
Humphries did an excellent job of pointing out that the Zestimate is a great place to start but clearly states that “great agents provide services far beyond just pricing a home…..and priceless peace of mind. A Computer will never replace that.” And concludes with “The reality is we don’t live in a black and white world in which agent’s price opinions are infallible, and a computer-generated data is inherently untrustworthy. There is ample room for both, and both help the consumer in search of an honest deal.”
What we observed
MRIS is more than just an MLS and NVAR is more than just an Association of REALTORS. I do not know which or if either was responsible for seeding this discussion, but I would not be surprised if that was the case. What we see here is a great metropolitan newspaper educating consumers about issues in real estate to reset their understanding of the value of their most precious asset – their home. David Howell was eloquent in stating his case about the Zestimate and Stan Humphries supported Howell as much as he defended his product and his company.
Most importantly, consumers have been invited into the discussion and this has great value. WAV Group published research that the Washington Post also picked up about the accuracy of listing content on Zillow and other third party websites for precisely the same reason. The consumer needs to know third party websites are a great place to get a start on understanding real estate, but when it comes time to transact, you get the best information from a professional, especially when that professional is a REALTOR®.
More MLSs and Associations should seed articles in their local newspapers like this one. And, it is a good idea to invite Mr. Humphries to respond. Make it a conversation that educates the consumer and everyone wins. Zillow is not going away. They are getting bigger and better.
Incidentally, McNearney Associates sends a direct feed of their listings to Zillow, but does not enhance their listings on Zillow.