Get ready for it – “marketing” a home may be free, sooner than we might expect. The successful Realtor’s value will come from managing the transactions and representing the clients’ best interests. Zillow’s zestimates soon might very well be right “enough” for some. Zillow’s zestimates might be more right today than they were yesterday.
From TechCrunch –
Zillow is trying to create a database of all homes in the U.S., which is a different approach than other real-estate sites. “It is the database of all homes, not just homes on the market,” notes Frink. This is both a strength and a weakness.
Current and historical data about all real property is immediately and easily available directly from the Gateway …
Zillow, and other private entities striving to succeed, are more fluid, more adaptable and more driven to succeed in a timely fashion than is the National Association of Realtors. It is really that simple. For now, Realtor.com has the best data … but for how long?
I’ll stick by what I wrote in August of 2006:
… what if Zillow’s reach becomes so great, their data become so vast and inclusive, that their Zestimates significantly impact what is fair market value? What if the purchasing and selling population refer to Zillow as the end-all, be-all estimator for their homes’ valuations? What if “close enough” is “good enough”? What if they become the de facto standard for home valuations?
Perfection with regards to a property’s valuation is a fluid thing, a moving target dependent on the “right” buyer who is ready, willing and able.
Can their data aggregation ever mitigate and/or minimize sufficiently the potential impacts of those unzillowable features? Doubtful, but they may be able to minimize the impact of the data’s shortcoming, provided they are accurate elsewhere. Might Zillow become just another tool used by Realtors?
I didn’t get the press release and can’t find a full copy of it, but I didn’t see that Virginia was one of the 11 states where they are adding data. Charlottesville, Albemarle and Fluvanna are still “back woods” territory with accuracy levels of one star …Â but not so back woods as Greene, Nelson, Waynesboro and Augusta – they aren’t even listed on the zestimates page. A quick spot check of a few houses in Charlottesville, Virginia and Crozet, Virginia revealed that the zestimates are wildly inaccurate. From a “valuing-a-home” competitive stance, they aren’t yet a threat to competent Realtors in the Charlottesville market … yet. (Update 9 May 2014: All of Central Virginia (except Fluvanna?!) are still all rated – by Zillow – as having one-star accuracy.)
Realtors’ complacency and dependence on the MLS will be their downfall … Zillow, et. al. “get” that the data needs to be accurate; many Realtors don’t. Here’s a thought – what if Zillow starts charging Realtors for access?
Much, much more at Bloodhound, Kris and Jay.
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I think the MLS is such a powerful tool in marketing and buying a home that companies like Zillow seek to replicate it and out-perform it. Realtors and our asociations don’t realize it enough, my evidence being that not enough realtors use numbers, charts and trends to market homes and that getting and using data out of the MLS (at least in my area) is a total nightmare. We may wake up to the power of the MLS only when it’s gone…
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It really doesn’t matter what anyone or any thing says the value of property is when it comes to buying or selling it – the buyer determines market value, period. I can’t imagine property values ever being released from the law of supply and demand. Appraisals reflect the market, they don’t set it, and they are only as good as the data in and the ability to factor in market conditions. If you want a benchmark or a place to start, do a depreciated reproduction cost estimate specific to your area. And yes, property around here is so idiosycratic, and neighborhoods of similar homes, where they exist, are so small, and accurate data so hard to get, that we will never lend ourselves to this sort of “valuation.”
The threat posed by Zillow, et al, is not so much the power of the data per-se, as it is in the ability to replace the restricted access MLS as a Marketplace/Market-Maker.
RE is facing, on the large scale, what the NYSE floor traders faced with electronic/automatic trading: the loss of a protected rent-capture – the loss of the ability to skim a percentage on all transactions as the price for entry to the market. Studies of trades quickly revealed that the ‘best price for the customer’ was so much hot air – automated trading did nearly as well, although due to price discovery efficiencies, the automated market does not do a better job for sellers.
The Web in general will threaten the ‘automatic’ percentage of the MLS as a market maker, just as operations like eTrade and Schwab provide market access at a different price tier. RE professionals will see compensation more directly tied to service to their clients as time goes by. The MLS monopoly on market making and information is already seriously fading, nevermind the way that Realtors themselves game and distort the data in there, undermining the inherent data value. Frankly, online assessor’s records can get you pretty close, as will a quick peek at the land book. The omission of ‘distressed’ sales and foreclosures by itself should give an idea of the data distortion – this skews prices higher, which benefits both buyer and seller agents, and sellers, but not buyers.
The problem now is that the RE incentive structure is not set up to put the buyer or the seller’s interests first – doing deals as quickly as possible is the primary incentive, and while that’s good, it’s not the same thing as maximizing seller price, and minimizing buyer price. Right now Realtors enjoy an enormous information advantage – the MLS is a big part of that – but as that advantage decreases, they will experience tremendous price pressures.
Even if Zillow (or any other tool) tells me that my property is worth a certain amount (or a certain price range), I will still want to talk to a professional for validation, correction, guidance, and most of all trusted advice.
I think if Zillow gains enough ground in the minds of the public, that the zestimates will become a kind of self-fulfilling prophecy in terms of accuracy.
I.e. zestimate says house is worth $x, then public say “I don’t want to pay more than $x, and the seller will say “I won’t accept less than $x”. So $x becomes the sales price and zestimate is 100% accurate.
Pavel: give me a break on the below comment. I’m not agreeing or disagreeing, but you’re a real estate agent attempting to give a consumer’s perspective. Do you think you might be a little biased?
“Even if Zillow (or any other tool) tells me that my property is worth a certain amount (or a certain price range), I will still want to talk to a professional for validation, correction, guidance, and most of all trusted advice.”
Zillow might be the next Kelley Blue Book. If you’ve ever sold a car, you know the influence on KBB. As Athol says about the seller end of zestimate, a buyer might say “Zillow says this house is worth X. I’ll give you X-$10,000.” With KBB, everyone wants a discount off the book value.
Jim,
the full release is on my blog at http://www.mlbroadcast.com/blog
Mark, even though I’m a licensed real estate agent, I am also a consumer. I commend Jim for opening up his blog to anyone for comments.
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