CyberHomes, Zillow still sucks. Can't Replace Humans

Reggie,

I don't mind trying new things. But I do sort of question more than $70,000 being off the target here. My point is simply this.

Online appraisals will never work and will always be an inaccurate science because you cannot BE in this neighborhood and take into consideration all of the factors that GO into an actual appraisal. 

a.) Actual Market conditions.

b.) Neighborhood (I am two blocks from a public school. Not a good thing).

c.) My neighbor has fifteen thousand pieces of Tonka trucks and tractors and crap in his yard (that your stupid satellite photo DIDN'T show) which makes me look like I live next to a real pig pen. Your photograph shows my neighbor's yard the way it WAS three years ago. How can you explain that one? 

d.) Unless you have actual specs on my home, you'd never know it WASN'T a stick built house with a real concrete foundation instead of a crappy, modular brought up in three parts on a truck crap house.

Until the banks fire thousands of professional real estate appraisers, no one is going to be able to walk into a bank, hand them your over priced appraisal and ask to borrow some equity. The market simply doesn't work this way.

Call me practical, but I sort of question why any company would want to hire a bunch of propeller heads to build the software that no one in the land of real estate is going to take seriously.  

If you REALLY want to do something useful -- BAG the appraisal thing.

Go to BankRate.com and look at their cool and slick mortgage calculators. I need lots of these on hundreds of broker and agent websites now. These are useful tools. Online Appraisal tools are not. BankRate.com's FREE content link isn't working and hasn't been working for months. I am not sure if they are about to fold their company or not -- all I can see is that their website isn't working and I've called and begged and have yet to reach a live human at their Florida headquarters. 

But back to the Cyberhomes report I just bought. I learned a lot for my new forthcoming book, Real Estate Warriors. Life at the Top of the Real Estate Food Chain.

But had someone else wanted to do a $9.99 report on my house, such as a next time homebuyer -- they would be in the for shock of their life. The problem is two fold.

1.) You cannot pretend to know, what you do not know about this property. Sure it LOOKS like a stick built house on site, but it isn't. So how can you give any kind of CMA blanket appraisal that would lump this house into the one across the street, which has no crawl space, and was built BETTER? You can't. And only a genuine real estate appraiser can do this sort of thing. 

Any other house on this street will appraise higher simply because their homes are NOT manufactured. They have real concrete foundations and were all built on site.

2.) The report of the last appraisal IS on file and is public record as I was going to get a loan on this property but I later backed out of the deal as the owner of the home owns several pairs of rose tinted glasses. He wanted more than $350,000 and I told him if he paid for the $42,000 in improvements, then we'd have a deal. 

We run our own annual surveys of next time home buyers and thousands of brokers and REALTORS because I just cannot stomach the sugar coated propaganda we get from the National Association of REALTORS.  I don't build heat maps and appraisal systems so I have nothing to gain or lose by asking REALTORS and next time home buyers what they think of firms who DO build these kind of systems. 

Last year, we ran a survey of 18,000 next time home buyers and 10,000 brokers. Out of the brokers we surveyed, more than 6,000 responses came back. Out of the next time home buyers, we had just over 12,000 come back.

We asked these questions:

1.) Do you find neighborhood heat maps useful on websites like Trulia?

87.5% reported NO

2.) What was the one thing that prompted you to contact the REALTOR about the home(s) you were interested in.

77.2% reported the 360 virtual tour they saw, or the video tour was the only reason why they contact the agent.

3.) With on line appraisal systems like Zillow, did you find them useful in helping you negotiate a price with the REALTOR?

68.5% reported NO. 

- bartman

Hi Sara,

I have to ask these things because Richard Barton managed to graft a few thousand people onto the rear end of the unemployment line when Expedia launched. Today, there are no more travel agents except a handful of people who specialize in cruise lines.  Today, we have Expedia. Hotwired. Priceline and I'm guessing there's more to come. 

Richard managed to replace a lot of humans with his last venture... so I have to question if the cornerstone of your mission statement is to take half baked technology that doesn't really work and replace more jobs.

I think there's a few million pissed off jobless Americans job that are asking the same thing:  Are we better off with some technology than without?  How much technology do we need to enhance our lives? 

The acid test is simple: Is Zillow's house valuation tools helping us or hurting us?  

When Voyager was a Gold sponsor at Inman connect three years ago in San Francisco, I met two young ladies who stopped by our booth and in the same breath they introduced themselves, they also added that not many REALTORS are going to like what you are going to do. 

Since the Introduction of Zillow, Allan Dalton, past president of NAR has asked you to leave the business if you could not provide accurate valuations. Over the past two years, I have tested Zillow numerous times and still can't come up with a single Zestimate that is anywhere near the accurate price of a home. You can sugar coat or blow as much smoke as you want. The fact remains, on-line house valuations are not working. 

Here is where house valuations are hurting and wasting everyone's time.

Not too many years ago, I worked for a luxury broker. I get an excited phone call from one of our clients who had a very nice luxury home in Las Campanas. Without naming names, the owner of the home was from Silicon Valley and was a successful entrepreneur of several start up companies. Educated at MIT, he was about as bright as they come.

He calls me and tells me he just printed off his home valuation on line. It was a Zillow Zestimate. He said he was going to take this to Los Alamos National Bank (LANB) and get some equity out of his house. This is the same person who I just sent an appraiser to who appraised his home at $1.7 million. Zillow showed his home at $2.62 million. 

I had to explain to my client that no bank is going to give you a home loan based on what you printed from Zillow. Suffice it to say, I've had several conversations with clients like this and my guess is that a few thousand other agents have had this very same conversation. 

Does this kind of incident cause any damage? Not really. But it does waste my time. It wastes the time of people using your service. And it sort of puts a bad taste in the mind of a very wealthy and smart man who will never use your on line services again. 

Today, you can Google Zillow and one comes up with hundreds of complaints, issues and jokes. 

I am not sure that creating an on line version of Kelley's Blue Book for Home values is ever going to fly.

If the technology doesn't solve a problem, if technology replaces thousands of jobs... someone needs to show me where this is good for our economy. Sure, it might put money into your pocket but when it comes at the expense of hurting thousands or millions of other people... it can never be a good thing. 

There are some things, that are best done by people -- not machines, not computers. The appraisal market requires humans with more than 2,000 hours of apprenticeship before one can become a licensed home appraiser.  

A human being stops by and looks at the inside and outside of the home.

They know the home is near or far away from a school.

They also know (as in MY case) if the home has a concrete foundation and was a stick built on site house, or a cheap imitation that was dragged up here on two semi-tractors and put together in parts. Ergo, homes like these look like the expensive one next door, but are nothing more than a cheap, artificial version of a real home. Therefore, the appraisals are going to be different.

The house appraiser knows the local market conditions and they take their brains and a sharpened #2 pencil when they start writing down numbers when they begin to pull comps from the local MLS. They take all of these things (above) into consideration. 

I do not see how Zillow, CyberHomes or any other firm can pretend for one minute their technology can do all of this. 

Because when a home appraiser provides their report and the homeowner takes it to the bank, the home can get financed or they can get equity out of their home.

When someone takes your Zestimate to the bank and asks for some equity, the banker just sort of smiles and explains that the system doesn't work that way.

So I rest my case here, Sara.

I don't see much NEED for Zillow and my guess is I'm not alone in my thinking. 

-- bartman

Hi Spence, 

Pleased to meet you. 

Nobody is going to be happy learning that technology just made their job obsolete.

Expedia, Hotwire and Priceline put a lot of people out on the street.

Cassette Tape manufacturers put the 8-Track companies out of business. CD Audio put the Cassette manufacturers out of business. Soon, a French company, [Z-disc] who makes a new kind of layered crystal that is scratch proof and re-recordable may soonput the CD Audio companies out of business. And after that... who the hell knows?

I have no fear that Zillow may put agents out of business. I am concerned about what you're thinking when it comes to home appraisers. 

The transaction of buying and selling a home remains a very high touch business. I don't see anyone creating a ROBO-REALTOR that will replace real estate agents anytime soon. I do see technology making the entire agent workforce shrink 40 to 50% by 2011 (about 510,000 brokers and agents) 

Every time I go to Priceline or Hotwire.com I do feel a bit guilty knowing that the website I am on, probably replaced a few thousand jobs. But at the same time I think of how many jobs this kind of technology might have created.

Expedia and Hotwire.com put XXXXXX travel agents out of a job. But, at the same time, the technology also created XXXXXX jobs.

If you can enlighten me by filling in the blanks above, I'll make sure this gets included somewhere in the last two chapters of my book I am still writing. 

Bottom line: I'm all for productive real estate tools. I'm all for progress. I'm deeply passionate about this business and I fight tooth and nail for the clueless, the ignorant and old fart real estate agents that just don't get it. This is what I do. I coach. I consult. I'm a hired gun for the little guy because many of them don't know how or are too scared to bark back. 

It has been said, this is not our father's real estate business anymore. But sometimes REALTORS need a swift kick in the pants to get with it or else they risk creating their own extinction. Too many of them are still sticking their heads in the sand and the rest need to get rid of their rose tinted glasses. 

Technology has given REALTORS more tools to work with and no matter how much REALTORS cry, bitch, moan or groan... nothing is going to take us BACK to the simpler days of the Book and driving people around town to look at homes.

You mention that Zillow makes money on advertising. This clearly seems to be the popular business model today to make money on the Internet.

1.) Create a website,

2.) Make a big stink about what you do, including adding a bit of Shock value (REALTORS are not going to like what we do - for example),

3.) Piss off Allan Dalton in public. Get him to ask you to LEAVE the business at a trade show if "...you can't get the Zestimates right, ..."

4.) Get lots of people making jokes about the Zestimate, which of course creates more traffic to the site by looky-loos. You have Google AdSense ads and this generates some money through clicks on the ads. 

But now back to the fundamental points of my questions that are still not getting answered. 

If you cannot replace a live human home inspector, why are you bothering to offer a service that is always going to be inaccurate?

Anyone who guesses enough times can win once in a while. You ever heard of the Lottery?

I'm pleased to know that your house is dead on accurate. Congratulations. But just like any numbers game, sooner or later one house is bound to be accurate just as one person is bound to get the Lotto numbers correct. This is called the Law of Averages. This is nothing special and its certainly nothing worth writing home to Mom about. 

I just don't see the need for torture here on any level. Why play head games? Is Zillow secretly being funded by the CIA or NSA to piss off people to measure demographic behavior? Why put next time home buyers through any level of false expectations when the SMART thing to do is to call your local REALTOR and get a broker opinion of your home? Or call the local home appraiser, pay the fee and get an accurate value of your home's true worth?  

If you want advertising dollars, here's my idea for free:

1.) Dump your Zestimate model. (insert lots of cheers from people here)

2.) Run a CraigsList ad (in addition to your own) stating that you will sell advertising space on Zillow to home inspectors and home appraisers and when they sign up, they all get 6 months for free with any paid 6-month banner or ad program. 

Do that, and you forever gain the admiration and thanks from a hundreds of thousands of people and you will see your bottom line grow with new ad revenues. 

I just don't see the value of Zillow if any portion of the house valuations are going to be wrong. I don't care about algorithms and neither do a lot of other REALTORS or people who read my columns. We need to get real here or not play at all. 

Can you imagine buying a car asking the dealership how GOOD the gas mileage might be on your new Saturn Zillow SUV?

"It might be 34 MPG. But it could get 52 MPG. It sort of depends on your neighborhood, our current computer algorithm and which way the wind blows today." 

What moron is going to buy a car with a sales pitch like that?

At the end of the day, the Zestimate is inaccurate MOST of the time and this is what concerns a lot of people -- because this is a huge waste of time for all parties concerned.

Because nobody at any bank is ever going to lend money or refinance a home based on someone handing their broker a copy of their Zestimate.

And this my dear Spence, is the only thing that truly matters. 

- Bart Wilson

So why are we bothering with technology that is flawed and inaccurate? Aren't there BETTER things to be doing with your time and your investor dollars?