Sam Shueh
Realty One Group
Campbell, CA
Awhile back during the Great Recession, the people stayed at home were told there was an automated value model from an Internet site launched call Zillow. By typing in the address they can get a value of the property worthiness. It is like do it yourself doctor without having to go see one. People are so addicted to a tool used previosuly accessible by the bank loan officer. It even has a property value showing the historical value over time. The practice was changed as the algorithm were often modified. It claimed a margin of error of 12.7% and improved to within 8.5% over the years (Zestimate-Improve) . Those consulted Zestimate has the Zvalue in their head. That is the market value. For sometime, it was the America's gospel to claim their neighborhood real estate specialists and appraiser are both wrong Z is accurate because it shows higher value than the professionals come up. Confusion and arguments arise often. The home sellers now do not provide appraiser report to justify a price. In fact, I have not seen one for years at open house to justify the asking price.
Source: information research
Zillow is a $6 billion dollar market capitalization public company with an annual earning of $600M company. Its CEO Spencer Rascoff this year sold a home in Seattle for $1.1 million that showed a Zestiamte at $1.75M dollars when it went into contract. After recording the sold value became public and the Z value showed as $1.575M (Z's CEO home sale). In late April he bought a mansion in Brentwood, CA for about $20 M with his Zestimate hinting he overpaid it. Perhaps it was worth just $18.4 M. His newer company acquisition Trulia missed it entirely thought the 12,732 sf mansion was estimated to be under $6M. So the authoritative Z model was off by 37.1% recalling they claim a margin of error of better than 8.5%.
Was Rascoff caught off guard selling it too low and overpaid for his new acquisition? No, one in the business is surprised.
Buyers do know arterial road, or irregular lot size or orientation of a lot have a price to lose. The home owners near a high power line or in path of airplane are not included in the algorithm. Neither is the new kitchen, green features included which can become very costly when implemented.
A real estate broker had an office in East San Jose and he sought me this year to help him to estimate his office building. I asked him what his opinion as he had 20 agents under his wing. "Sam, I don't know but Z says....". We both chuckled as we knew it was not accurate. These estimators whether it is Rascoff's Z, Trulia estimate, Homes, Realtor, Redfin etc. only was a starting point.
Rascoff or any one else still relied on the expertise of local real estate agent to help decide what is a fair price. Rascoff humbly admitted his flag ship estimator is less important once he was more serious in an acquisition or sales.
Actually the company derives its $600M revenue mostly from agents advertisements as premiere agents at several different levels by zip codes. They also place advertisements from mortgage and rental service providers by clicks or impressions. It also sells mortgage and services. It is not a profitable company after 5 years going as a public company. It remains to be seen whether its AVM stands or to be used as a starting point. Its listings depend on how may agents will want to advertise by zip code a premier agent or whether the site will be attracted or go to other sites that are better or more accurate. Rascoff or any other professional will tell you to consult with independent appraisers and realtors who work with sellers and buyers.
Z is supposed have added improvements on arterial road lately but professionals knowledge can not be replaced by technology. A model is as good as its assumptions. The assumptions is based on intimate local knowledge of neighborhood and what that property offers.
Hoak, Amy 9/15/2016 Zillow-thinks-you-should-ask-a-real-estate-agent-what-your-home-is-worth
Gassett, Bill 6/16/2014 Zillow Estate accurate? (video explaining different methods)
Shueh, Sam How is my Silicon Valley home worth? (Silicon Valley Home Values)
Silicon Valley Real Estate July 2016 (San Jose area real estate update)
Shueh, Sam (Real EstateBlogs)
Sam Shueh Realtor
I've called San Francisco South Bay home for over 30 years. We love this area and all it has to offer, and I enjoy sharing what I know about homes. I documented in several books about Silicon Valley history. I have much expertise in real estate...please give me a call. SamshuehRealtor@gmail.com
(Four-O-Eight) 425-1601
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