Real estate brokers around the country are tracking prices in Zillow's new site, and like what they see -- housing valuations as much as 40 percent off the mark. Even Zillow doesn't shoot at a higher target, admitting to BusinessWeek that its "estimates are typically on target, falling within 10 percent of the actual home-sale prices 62 percent of the time."
The Appraisal Institute worries that free home-value estimates may cause consumers to "misinterpret or rely on the information too heavily."
Appraisal Institute President Richard D. Powers, MAI, SRA, of Keene, N.H., lives in an area that does not yet have listings on Zillow, but reported that other Appraisal Institute board members who referenced the site found some houses that were as much as 40 percent off, either high or low, and some found inaccuracies in their home's attributes.
While the average may be 7.2 percent, says Powers, it is the listing at the far end that have the makings of disaster if the homeowner doesn't follow-up with a qualified real estate appraiser to verify the data.
"What AVMs miss is that they don't have the opportunity to use judgment," says Powers, "the ability to go through the property to identify the attributes that constitute value for the consumer" such as recent upgrades, modernized appliances, floorplan utility, and the age and condition of areas such as a basement or detached garage."
In addition, Powers said an AVM doesn't search for other detriments to the property, such as potential easements, zoning issues, encroachments and problems associated with the neighborhood.
My own home in Dallas, built over a year and a half ago, can't be found on Zillow. There's an eerie overhead shot where my house should be that's a window to the past -- it's a photo of the building site before it was cleared over two years ago. Further, the homes right across the street that were standing then and standing now, are ignored.
Zillow's excuse for such out-of-date information is that Texas is a non-disclosure state. If consumers don't want the price they paid for housing made public, the tax rolls won't make it public record -- except to the taxing authorities.
(Maybe instead of infiltrating MLSs masquerading as brokers, Zillow ought to put straw employees into jobs at the county records buildings.)
"I scratched my head yesterday since I tried Zillow.com and found the results hilarious," said Ken Wood, president of Martin & Wood Appraisal Group, Ltd. "I am located in Toledo, Ohio, where the market is usually extremely stable with usually 1-3 percent appreciation. I sold a home 5 years ago for $190,000 and Zillow valued the property today at $125,000, which is less than what I originally purchased the property at.
"My current residence was recently appraised at $990,000 by a state certified appraiser and the auditor's (sic) have the property valued at $850,000. Zillow valued my property at $450,000. Based on these results, I think Zillow has increased the job security for real estate professionals."
Zillow is even starting to lose support from its intended target audience -- the Google-numbed press. In recent stories by the Washington Post and Newsday , writers found that Zillow's AVM is way off base on many home valuations, due to a glitch in underutilizing sales prices, a serious component of any valuation model.
Yet, Zillow has its defenders. "Zillow is just providing the first publicly touted Automated Valuation Model (AVM). Richard Barton happens to get a lot of attention because he did some interesting things at Expedia.com and they managed to keep things "under wraps" for about a year before they launched," says Bart Wilson, chief marketing officer, Voyager International. "Zillow isn't the first company you are going to hear about Automated Valuation Models (AVM)."
Wilson is convinced that Zillow will become more accurate with time. "I tested Zillow as did countless others ... and a lot of us wound up with inflated price valuations that were 200,000 or more over what the true market valuation of our homes should be," he admits. "But let's review some facts here: Zillow just launched. Their online AVM software will get better. It's just needs refinement. Tossing them under the bus because they managed to get access to an MLS data feed isn't the end of the world. I do not see Zillow pretending to be a broker."
"As for publishing MLS data into another server ... what's the big deal? Voyager launched Kayyah.com two months ago, and we are adding 200 plus MLS data feeds (legally) into Kayyah.com so consumers can search for homes in many states. By the close of summer 2006, Kayyah will probably have close to 400 plus MLS feeds."
Kayyah's twist is a bit different -- that the company is going to mix FSBO, commercial, time shares, residential, recreational, REO's, foreclosures and 1031 exchange into one server. "Right now, we have Realtor.com for residential listings and Loopnet for commercial. We've just gone one step further than anyone else has," says Wilson.
He explains that nothing is scraped from Realtor.com nor any other site, and since the listings belong to the Broker, "we're not in violation of any laws on real estate advertising and publishing. If we were, then we have to toss the management team at Trulia.com, Propsmart.com, ebay, Craigslist, Harmon Homes, #1 Expert, Homes.com and countless others into jail," jokes Wilson. "Oh, and we'd have to include a few thousand newspapers, because they publish MLS data in their monthly real estate guide, the Sunday newspaper. They also publish MLS data on-line too."
Wilson predicts that Realtor.com may for the time being, have the monopoly on the lion share of MLS listings all in one place, but the world is ready for change. "Brokers and agents are fed up with the MLS monopoly, we're fed up with being forced to pay MLS membership fees to multiple MLS organizations just to have access to the data. MLS consolidation is certainly a hot button topic for 2006, and I'm one of the companies helping dismantle the 'good old boy network' of the MLS," says Wilson.
Like comedians are mining Vice President Cheney's hunting accident in which he peppered a 78-year-old lawyer with birdshot, real estate professionals are having a grand time ridiculing Zillow's AVM.
"They think Realtors are overpaid?" says Jason Popkin of nextsteprealty.com. "How much do you think 10 percent of Rich Barton's home would be?"
