Who Are You?

2013-10-19 Alpaca - 350Just an FYI to those who give fake information to the real estate websites – when you actually request more information there is no way for the agent (me) to get it to you. I understand not wanting to give out your deets, but you have to realize that there are consequences.

The other day I got an inquiry via the Hartford Courant HomeFinder site about one of our listings. Brandon was interested in learning more about the property, and potentially setting up a tour of the home. Great! We love to answer questions, and as the listing agent for the home we are the best source of information.

Unfortunately, the email address that Brandon provided didn’t work – Yahoo bounced my message back immediately saying that the account did not exist. There was a phone number in the HomeFinder inquiry too, so I called, hoping to connect with Brandon that way. No luck, the voicemail at the other end of the line “had not been set up.” There is no way to know if the number is actually Brandon’s or just 10 random digits he selected to satisfy the site’s registration requirements.

This sort of thing happens all the time. People express interest in properties but don’t provide any way for us to actually get in touch with them. Sad times all around, since on their end they’re probably thinking that we’re unresponsive idiots for not reaching out to them…

Brandon, if you’re out there, please feel free to call Kyle at 860-655-2922 for more info on that property!

Zeflections on Zillow

Earlier this week we put up a story about Zillow’s view on the value of our home. It wasn’t the first time we’ve mentioned Zillow, and I’m sure it won’t be the last. Historically we’ve only brought up the site when we we’re frustrated or amused. This mention had an interesting result – Zillow found our article and weighed in directly, and helpfully (see the comments at the bottom). It caused some debate and reflection within the Bergquist household.

City Hall SculptureThere are aspects of Zillow that I genuinely like, despite the periodic venting. For example, they do a better job than most at aggregating information about a property onto a single page. They also present the information in a reasonably clean layout that is accessible to users. I even like the idea of creating a valuation algorithm, though it’s obviously difficult get it right and can produce some weird results. Most impressively, they have done a fantastic job of building a consumer real estate website with a large user base, and we give them our ultimate vote of support by paying to advertise on the site.

As you have previously read, we have mixed feelings about the Zestimates. The main concern is that there is a conflict in how the Zestimate is used by Zillow.

My interpretation of Jay’s point in the comments of the previous post is that Zillow considers Zestimates to be infotainment. Here’s their official explanation of what a Zestimate is. They are not appraisals. They are a starting point. Buyers and homeowners should get additional information from local professionals.

This position reflects reality since the values in our area have a median error of 7.0% and are considered their highest quality estimates. It’s also the smart legal thing to do since it should protect them if a user ever tried to sue after relying exclusively on the Zestimate for a real estate deal.

Despite the company’s effort to disclose the accuracy of their Zestimates, and downplay their role in valuing a property, home buyers we have worked with have not received that message. Buyers LOVE the fact that they can pull up the site and find out how much a home is worth.

The Zestimate was the site’s original hook – it’s how Zillow drew in users and built itself into the empire that it is today. They have since added many excellent features, but the Zestimate continues to be front and center. Disclaimers are there if you look for them, but honestly, how many consumers click through to see behind the curtain?

When navigating via the map, the Zestimate is the user’s first impression of a home. You see the house icon with the color showing its status and the value underneath. Clicking through to the detail page, the Zestimate point estimate (versus the estimated value range) is right at the top, and directly under the asking price for homes that are for sale. People believe what they read on the internet and what they see is the Zestimate.

Because the Zestimate is so central to the Zillow brand, it has to be presented as reliable. Why would anyone use the site (versus a competitor’s real estate portal) if they believe the prominently featured value splashed all over the place was inaccurate?

At the same time they also have to present it as essentially “for entertainment purposes only” for both legal protection and since the algorithm isn’t all that accurate according to the published stats or the real life experience of real estate professionals working in the market every day.

It’s a catch-22 for Zillow. Yet their success shows that they have found a good balance. The site thrives despite questionable accuracy – the consumer has spoken, and they want to be entertained. It’s up to real estate agents to educate the subset of Zillow users who are tying to buy a home and believe Zestimates to be infallible truth.

 

Related Posts
Why Does Zillow Hate my House?
The Appraiser is Coming
Using Assessor Data to Bid
Just Plain Zilly
The Right Offer Price

Why Does Zillow Hate My House?

Zillow is a fairly popular website among buyers. They have an algorithm they use to provide a Zestimate for any house, whether it’s actively for sale or not. The Zestimate is Zillow’s estimate of what they think the house is worth. This Zestimate is derived from recent comparable sales and a little fairy dust, I think.

I spend a lot of time debunking Zillow Zestimates. I will admit, it kind of pisses me off. I have to provide a buyer with comparable sales for any house they’re interested in, which is perfectly fine and expected as part of my job. But then I also have to go through an additional analysis of why Zillow is wrong with their Zestimate and why the buyer shouldn’t put much stock in that value. It’s hard to do this because Zillow doesn’t really tell you how they get their numbers, and who knows how much fairy dust is worth and figures into the calculation.

My own house is a perfect example of just how wrong Zestimates can be. Zillow started hating on my house in August 2012 and hasn’t given me a break since. In the real world, my house is probably worth around $350,000 given the condition it’s in and updates that have been done. Let’s take a look at Zillow’s data and see what they say, shall we?


ZillowJuly2012

In July 2012, Zillow said my house was worth $314,000. Today it is worth $209,738. Well, they really give a range, so Zillow says it’s worth somewhere between $145,000 and $294,000.

Is this some kind of joke? They’re saying my house is worth less than what foreclosures sell for in my neighborhood. And how exactly do they even come up with the value they’re stating if it’s lower than the lowest of sales in my neighborhood? This makes no sense at all. When I look at the Nearby Similar Sales they tout, they are all within 200 square feet of the size of my house and the lowest sale price is $314,900.

So what exactly have we done to warrant a Zestimate of more than $100,000 less than the lowest comparable sale? I do not know.

Zillow also hates many other houses in my neighborhood, including a house I have listed right now for $395,000. Zillow thinks it’s worth $268,389. The house went under contract in a week and I can tell you that it’s not selling anywhere near $268,389. If it’s any consolation, Zillow does feel that the value of this house increased by $41,971 in the last 30 days. Maybe we should have had the owners list it even higher? How does a house value increase by 18% in just 30 days? The other bizarre thing about this house is that it is very similar to my home, but Zillow uses completely different Nearby Similar Sales for my house and this one, even though it is located only .35 miles (4 city blocks) from my house.

Do you see why I’m confused? Where do these garbage Zestimates come from? And why do I have to keep debunking them?

What has been your experience with Zillow? Do you think it grossly underprices or overprices your home in their Zestimate?

Using Assessor Data to Bid

Buyers in search of a bargain can be resourceful in finding support for a low bid. Zillow is the most common “proof” offered as justification for a lowball offer since Zestimates almost always err on the low side (which makes sense considering their business model). But every now and then someone tries to argue that a property’s taxable value is an important data point.

Towns in Greater Hartford set taxable values once every five years during a revaluation. They do their best to put a current market value on each property, but they use a statistical process that has an element of randomness and is not as accurate as actually putting the home on the market and collecting offers.

SquirrelWhile talking to a local Assessor about the revaluation process, I also learned that in his town he tries to assign “market values” somewhere between 5% and 10% below what a property would actually sell for. We didn’t get into the specific reasons why, but from a practical point of view this seems important so that everyone in town doesn’t challenge their tax assessments. I also got the sense that this was a standard practice that was taught in assessor school.

What I’m trying to say is that the value of a property found in the Assessor’s database is almost never relevant to a purchase negotiation. That number is usually out of date, and was never super-accurate in the first place.

Forcing your agent to use that as justification for your opening bid (after they try to convince you otherwise) is not a winning negotiation strategy because it signals that you are irrational. You’re better off portraying yourself as inflexible by supporting your bid with a statement like “25% below the asking price is all I’m willing to pay because that’s all I feel the home is worth.” You probably won’t get the house using that strategy either, but at least the seller and their agent will respect your honesty.

Just so you know, sellers prefer not to deal with irrational buyers. You never know what they’re going to do, and whether they are going to follow the local conventions of a deal. So if you are prone to bursts of irrationality, then it will be in your best interest to keep it hidden until after the deal is signed.

One more point on the Assessor’s market value data. The town in which you’re looking for a home may have done a revaluation recently, and may have made the new “market values” publicly available on their website. For example, both Hartford and West Hartford updated their values in November of last year. Even though those numbers are fresh, and one could argue that it would be rational to use them in a negotiation, I would still advise against it. They are still systematically low, and they still contain an element of randomness. Most importantly, listing agents are likely to respond poorly to the argument that the town’s value is relevant, even if it’s not completely crazy.

Are Real Estate Websites Your Friend?

Real estate websites came up in yesterday’s post. The basic question was, “Can buyers rely on public real estate websites during a home search?” I think we can all agree that they’re fun to look at, and they do a very nice job at presenting and consolidating data. But do they have a buyer’s (or seller’s) best interests in mind?

Downtown Hartford from Bushnell ParkI don’t think they do. Their goal is to make money. Basically all the sites make money by selling advertising to realtors, mortgage lenders, and credit people. They want to generate as many page views and clicks as possible, since that’s what translates into revenue. Buyers are heavy users during their search, but once they get a home under contract they no longer need to keep their preferred site open in the browser tab all day at work.

It comes down to an alignment of incentives. The public websites need to be engaging enough to capture a buyer’s interest, but not so helpful that they find a home immediately and are no longer a user (potential source of revenue). They benefit from extended home searches.

There are a few different ways that sites disrupt the search process, whether it’s intentional or unintentional:

Data Lag: Listing information is updated on different schedules for different sites. In all honesty, this could be related to how the different MLS systems (realtors) around the country make their data available. All I know is that some sites are faster than others.

Not Clearly Marking Homes Under Contract: We get a lot of calls about listings people see online that are already sold. They’re not closed yet, but the seller has already accepted a bid from a buyer. Getting distracted, or even emotionally hijacked, by a property that’s not really available causes buyers to miss out on legitimate opportunities.

Suspect Valuation Estimates: One site in particular touts their ability to value any property in the Country. Our experience is that buyers who take these valuations too seriously are unable to make realistic bids and have trouble buying a home. The estimates are inevitably too low, and the buyer isn’t going to “overpay,” so they keep lowballing sellers and never get a home.

Distressed Properties: Introducing distressed properties into the mix makes buyers more uncertain. Some try to use foreclosure pricing to support bids on non-distressed properties, which is generally not effective in this area. Others decide they want to pursue a foreclosure, not realizing that the process can be very different and it may take months to get a response.

Despite these concerns about the public real estate sites, I think they’re entertaining and provide a valuable service. They each have their own angle, and generally do a nice job presenting their data. As long as home buyers recognize the motivations and potential weaknesses of each site, they should definitely feel comfortable using the one they like best.

In the comments of yesterday’s post, Michael suggested that the realtors offer the general public the opportunity to subscribe to the actual MLS. It’s an interesting idea, and could be a way to reduce the (modest) annual fees that agents pay to support the existing system. I wonder if the local board has considered that possibility? Anyone from GHAR reading today? In some ways the realtor.com site is just that … the data is updated very frequently and comes directly from the MLS. However, it’s also like all the other sites in that there are ads and attempts to collect contact information.

Even this site has an agenda, though our incentives are much more aligned with our clients. We only benefit when someone successfully completes their transaction … so hopefully the GHREB can still be your friend.